Happy F%*@ing Birthday, iTunes…Happy F%*@ing Birthday, iTunes…

Maybe we just need to have heroes; things to worship without the complicated realities attached.  Like Steve Jobs, who assumed God-like stature upon his death, despite distinct tendencies towards assholishness.  It was Jobs that molded a digital music platform that actually worked, while challenging P2P and raking in billions for Apple.  But the great iTunes savior is also one of the greatest piracy-enabling vehicles the music industry has ever witnessed, and its legacy is a complicated one.

So why are we still drooling over iTunes for saving the music industry and liberating artists?  If only it was that simple.

Closer to reality, iTunes is an extremely complicated player in the history of music, not a savior.  Apple transformed the music industry by figuring out the paid download, they figured out music portability and eventually led the charge into MP3s.  They figured out what the labels couldn’t, and offered a safe alternative to piracy.  But ten years later, it’s not clear that all of this helped the music industry, or the artists themselves.

fatheritunes

Blame the labels for not figuring out technological solutions themselves, but the rise of iTunes also meant a fall in control for content owners.  Jobs demanded 99-cents a track, for every track, for years, and refused to entertain bundling tomfoolery like album-only downloads.  This was a battleground for years, yet completely forgotten in all the iTunes hagiography of today.

In many ways, the lost labels needed a digital dictator.  Jobs clearly understood that a-la-carte, uniform pricing made sense in the early days; it was consumer friendly.  Labels were suing consumers at the time; their legacy was unapologetically consumer unfriendly.  That didn’t translate into the digital era, and it still doesn’t.

But iTunes wasn’t translating into enough revenues.  And the reason was that only a certain percentage of people were actually purchasing paid downloads.  Indeed, the IFPI routinely estimated that 19 out of 20 MP3s were pirated, ie, not purchased from the iTunes Store.  Yet, all of those downloads — free, paid, whatever — were feeding an iPod frenzy, with only limited restrictions on either side of the iTunes+iPod equation.  The source of the content didn’t matter; the consumer experience was everything.

Which means that for most of its history, iTunes has been a massive piracy enabler.  Not a solution or savior.

Because if the iPod could comfortably hold 20,000 songs, the next question was where fans were getting these 20,000 songs.  CD-ripping, sure, but also ol’ favorites like Limewire and BitTorrent.  On the most basic level, no one was paying $20,000 for a digital collection.

Fast-forward to the present, and Apple is still getting away with mass murder.  Because iCloud and iTunes Match are not only porting multi-thousand collections into the sky, they are also giving every pirated collection a pardon.  And $24.95 a year is all it takes to absolve your sins.

The ‘iTunes Music Store’ first launched on April 28, 2003.  

Written while listening to Obituary: The Complete Roadrunner Collection (1989-2005) on wooden LSTN headphones.

 

The image remixes an illustration from Waiting For The Word, licensed under Creative Commons Attribution 2.0 Generic.  

49 Responses

  1. Patrick McGinn
    Patrick McGinn

    Let me be as succinct as possible:
    Media – Scarcity = Depreciation
    Why do you think tech companies aggressively subvert “content”? If anyone who creates anything of artistic value can’t see the writing on the wall — they’re delusional. Let me put it in callous market terms. Artists are hoping to go “long” on the value of their craft — their qualitative talent to make something out of nothing. Tech companies, especially Spotify, are going “short” ,and though they would never admit it, want to devalue all content so their margins on turning users into a commodity they can sell back to advertisers is enormous.
    The real question, as a previous commenter put it, is how do we make people value the original creation? This question will be raised by millions more when they’re replaced by automation. To quote Postman, in reference to Huxley, “As he saw it, people will come to love their oppression, to adore the technologies that undo their capacities to think.”
    Music, literature, property, etc. will be the first obsolete relics in some sad distant future. I fear, the same reasoning used to create the very same technology we hoped would empower us, will silently render us into passive zombies with no capacity for deviation, dignity or humanity (art).

    Reply
  2. Champion
    Champion

    It’s refreshing to see iTunes Match get mentioned on this site. Like you said, $24.95 per year is all that it takes to clean up and bless an entire illegal library. iTunes and Amazon (who allow you to bless illegal libraries as well) are praised endlessly in the comments here, yet Spotify Premium gets criticized at $120 per year.

    Reply
    • Visitor
      Visitor

      “Labels were suing consumers at the time”
      No, they did what all industries do every day:
      They sued thieves.
      And here’s the truth: If you don’t sue thieves, they will steal everything you own.
      Simple…

      Reply
          • Visitor
            Visitor

            Hmmmm….wonder why they would stop doing something that was so effective? Are they really that inept?

          • Visitor
            Visitor

            “Are they really that inept?”
            Well, that’s one word.
            Cowards is another.
            The truth is they were bullied by the same peculiar alliance of pedophiles and 13-year old shoplifting Anonymous punks who stopped SOPA, PIPA and ACTA.

  3. GGG
    GGG

    Just out of curiosity, Paul, what does your realistic, ideal post-Napster world look like? I don’t disagree with anything in this article, I just personally find it hard to envision a digital world/digital music culture with the same sort of money flow as the previous decades. Would it be higher priced dls? No cherry picking songs?

    Reply
    • Paul Resnikoff
      Paul Resnikoff

      Glad you asked, GGG.
      I’d argue that the biggest problem the modern music industry has is its past. The constant, pressing, depressing comparison to what used to exist. It’s a heavy and loaded statement, for sure, but back when the physical music industry was being created by scrappy entrepreneurs and even scrappier labels, there wasn’t a comparison to some earlier, more lucrative era. Because it didn’t exist.
      It was all about building. And they were building from essentially nothing, and they continued to build the music industry aggressively for decades (actually, it only stopped last decade). Those stupid label executives actually knew how to make a ton of money in pre-digital times, they were a lot smarter than people give them credit. And it was all up, up, up (for the most part).
      Which means, the ‘new music industry’ is constantly compared to the ‘old music industry’. But the old industry was predicated and conceptualized around things that really don’t exist anymore – or, don’t exist enough to reasonably support the industry like it used to. I’m speaking of things like physical scarcity, larger amounts disposable income and free time, fewer entertainment competitors, and even higher barriers to artist entry (meaning, less clutter and decreased fan saturation/overload).
      Couple that with an entire body of law (copyright, or otherwise) built around this old business, and you have an extremely messy modern ‘situation’. And, it’s constant comparisons and struggles to adapt.
      Now, what if instead of all the old comparisons, we truly treated the modern music industry as something new. The expectations would be different, the mood would be more upbeat, the ideas flowing. Because it would be fresh, we’d be building something instead of constantly making comparisons to a now-mythical past.
      Perhaps we could accept a smaller music industry, or, better appreciate how decentralized and different this business has become.
      I don’t believe this is a business that will make $100 billion dollars a year, as Tommy Silverman postulates. I’m willing to accept something far, far smaller.

      Reply
      • GGG
        GGG

        Thanks for the response. I agree we need to accept a smaller industry, but I guess my question was less conceptual and more product-wise. As in, what do you think is a viable and realistic product or way to sell product in the digital age?

        Reply
          • GGG
            GGG

            There’s a difference between dreaming big, understanding the past, and accepting reality. At this point it’s pretty obvious that 1) people don’t like paying for music as much as they should and 2) music product is not going to be as expensive as it once was. Even if all of a sudden every single person started buying $9.99 albums again, it still wouldn’t reach the highs of the 90s.
            If you want to go through life upset Billboard’s #1 didn’t move 2M units first week, and one hit single doesn’t mean 3 million records sold, by all means go for it. I’ll just have much lower blood pressure than you.

          • GGG
            GGG

            Way to ignore the rest of my post, but ok…
            Culture has dramatically shifted in how it views stealing digital files because it’s not a physical thing. Stealing food, cars, and whisky are physical things most people don’t see an easy way to steal. Music, and all digital media for that matter, is easy to steal.
            Again, this is not defending or justifying piracy, just pointing out what’s happened to music’s value. And if we reverse this, it’s going to be with something like streaming, not $18 downloads. I get the noble argument you’re trying to make, but quite frankly it just makes you look like an idiot.

          • Visitor
            Visitor

            “Culture has dramatically shifted in how it views stealing digital files because it’s not a physical thing”
            Oh, really?
            And which culture would that be?
            The North Korean?
            Here are the facts from the real world:
            Constantly growing parts of global economy are based on the non-physical products we know as Intellectual Property.
            Here’s what the economists say:
            “Today, some two-thirds of the value
            of America’s large businesses can be traced to the intangible assets”
            http://www.sonecon.com/docs/studies/0807_thevalueofip.pdf
            “IP-intensive industries produce 72 percent more value added per employee than non-IP-intensive industries”
            http://web.archive.org/web/20080216195041/http://www.the-value-of-ip.org/

          • GGG
            GGG

            Ok….that doesn’t argue my point at all. Theft, and the apathetic view towards it, of IP has risen with advancements in the internet. I’m not even sure what you’re trying to argue. CD theft wasn’t nearly as rampant and “normalized” as digital theft is.

          • Visitor
            Visitor

            “Stealing food, cars, and whisky are physical things most people don’t see an easy way to steal. Music, and all digital media for that matter, is easy to steal.”
            It’s ridiculously easy to copy your own money.
            So why don’t you do it?
            Because you don’t want to go to jail.
            Simple…

          • GGG
            GGG

            you’re the same visitor or not, but again, yea…exactly. “Ease” of theft includes ease of getting away with it and threat, ro lack thereof, of punishment. Which torrenting has done in spades for digital media.

          • Matt V
            Matt V

            Ah yes, the 90’s – when you could spend $18.99 for a CD with 2 decent songs on it, because that was your only option. How I long for those days again….

  4. Rob H
    Rob H

    iTunes is hardly a piracy enabler, what with DRM, and the fact is doesn’t link to external sites for the downloads themselves. If anything, iTunes has done huge things for anti-piracy by bringing a relatively cheap, convenient and legal alternative to the mass market. It may not be the best solution, what with the likes of Beatport and Juno offering higher quality filetypes, and more flexibility in terms of contracts with labels, but it has certainly been a major player in encouraging people to actually pay for their music.
    People are going to pirate music anyway, regardless of wether iTunes existed. It’s not their responsibility to prevent P2P and illegal filesharing, like the conclusion of this article seems to insinuate. There were always other media players and mp3 players that had/have the same functionality as iPods and iTunes, take Windows Media Player for example. The only thing is, they DON’T offer the same integrated store experience that iTunes pioneered.
    Lastly, concerning iCloud library backups, there’s only so much they can do to maintain a level of legality in terms of the libraries they host. I have heard a number of stories where people have lost items from their library that weren’t legally purchased. Perhaps they have a filebank of known ‘altered’ tracks that are floating around in the digital aether, but they sometimes, they just won’t be able to tell if a file was legally purchased or not. In that case, they are forced to give the benefit of the doubt to the user.
    Rather than demonising Apple, perhaps we, as a music consuming society, should try and change the mindset of the users who feel they have the right to steal music in the first place.

    Reply
    • Visitor
      Visitor

      “Rather than demonising Apple, perhaps we, as a music consuming society, should try and change the mindset of the users who feel they have the right to steal music in the first place.”
      Good point.

      Reply
  5. Jeff Robinson
    Jeff Robinson

    Cloud problems aside, how this company has come to dictate the 10-song album as the standard is beyond me. $9.90 for a full-length (for the most part, regardless of length) has be part of the slippery slope of taking away profitability from the industry. For artists to consider putting more songs a record only to have it sold for $9.90, is to give away anything beyond 10 songs because no one will ala carte individual titles if they can get them all for $9.90. I’m really surprised more artist managers don’t talk about this fact with their artists. For that matter, record company A&R people should be discussing this openly too. At least iTunes opened up a somewhat variable pricing scheme for the major labels, but I’ve yet to see that kind of thing for the indie labels who have to go through CD Baby, The Orchard, or Tunecore.

    Reply
  6. Visitor
    Visitor

    Why aren’t people songwriter’s mad at apple, for making computers that have safari, from which one can access google, from which someone can access a pirate site, from which one can download an illegal file?
    let’s just go straight to the source…

    Reply
    • Visitor
      Visitor

      “Why aren’t people songwriter’s mad at apple”
      Because we can make a living from iTunes, and because they created a truly awesome ecosystem for us.

      Reply
      • Casey
        Casey

        Did they create it or did they simply get credit for it? They didn’t create the first digital music store. They didn’t create the portable music player. But they did monopolize the industry in short time.

        Reply
        • steveh
          steveh

          What is important is not who originated the very first instances of download stores and mp3 players.
          What Apple have created is to this date the only monetised digital music ecosystem from which music creators can actually make a decent living.
          In this respect iTunes is a giant and all the rest are pygmies.

          Reply
        • wallow-T
          wallow-T

          In the DRM era, Apple made all the pieces work together seamlessly and produced a customer experience which won the market. Apple was not first, but they solved the customer’s problems.
          In the DRM’d Windows Media Audio era, there tended to be a lot of finger-pointing between the WMA-download stores and the WMA player manufacturers when customers encountered difficulty. There was an old line that Microsoft “Plays For Sure”, didn’t.
          Apple solved the integration problem by bringing it all under its own roof, both players and music files.

          Reply
      • Visitor
        Visitor

        Only after they raped the previous ecosystem for you hauss. Napster might have made downloading pirated music easy… iPod more then anything made actually consuming that pirated music easy.
        Apple could have made it a lot harder to put pirated music on an iPod but they choose not to, in fact they made it easy and supported what was the pirate standard MP3 format before there was even such a legal place to get MP3s. They put music capacities that no one except the super rich could ever fill legally (why? because there was illicit demand for it). Hell early on they blatently advertised illegal behaviors as part of their iPod campaign, and they got called out pretty harshly by the record labels.
        Oh how easily musicians forget.

        Reply
    • Jeff Robinson
      Jeff Robinson

      This company looks promising. No annual fees. 10% is the same as CD Baby. Not sure what their service level will be like. TheOrchard has been doing indie distribution for years and has slowly closed offices and laid off staff and are way behind in terms of ergonomics of software analysis from their website. Their latest upgrade is pathetic.
      Perhaps this service will provide better analytics and reach.

      Reply
      • JTV Digital
        JTV Digital

        Thanks.CDBaby pays 91%, we pay 90%, yes it’s more or less the same rate.But our upfront costs are cheaper, especially since artists / clients have the option to select exactly the stores they’d like to deliver their content to.Let’s say you only target the big 3 like iTunes, Amazon, Spotify, it will cost you a few €/$ only, you are not forced to purchase a “Single” or “Album” packaged distribution.

        Reply
  7. Marc Jacobson
    Marc Jacobson

    So, Jobs launches iTunes 10 years ago. He creates a device, the iPod, to hold your tracks, allowing unrivaled portability, ease of use, and design excellence.
    He also decides to allow that device to hold MP3 files, which is what Napster and other sites used to distribute illegal files.
    That was a choice. In my opinion, it was that choice that made the iPod ubiquitous.
    Imagine if Apple chose to make the iPod incompatible with MP3 files. Jobs then would not be able to make his famous post in the mid-2000’s that Apple’s studies revealed that over 97% of the tracks on iPods were pirated.
    What would the music industry look like today if MP3 files were incompatible with the iPod? What would Apple look like today if MP3 files were incompatible with the iPod?
    Apple, rightly so, sought to maximize its shareholder value by ignoring the rampant piracy, and made its device compatible with MP3s so more people would buy them. If it was truly aligned with the music industry, it might have made the MP3 file incompatible. It was aligned with its shareholders, and no one else.

    Reply
    • wallow-T
      wallow-T

      Didn’t most Windows Media Audio players also play MP3 files?
      How did that work out for the Windows Media Audio player business, and for the stores which sold those files?
      (Are there even any WMA stores left?)
      Maybe SDMI (Strategic Digital Music Initiative) should have been allowed to proceed with its plan to sell portable players which would only play MP3 files for a couple of years, and then the MP3-playability feature would be nuked in a mandatory firmware upgrade. 🙂

      Reply
  8. Lance
    Lance

    Wow.
    This article is just really bad. Aside from being essentially an RIAA-scripted rant about how the current digital download marketplace that Apple architected doesn’t pay “enough revenues” (who says iTunes doesn’t generate “enough” revenues?), it’s riddled with innacuracies, inconsistencies, outright oxymorons and fundamental mischaracterizations – especially consistent mis-application of the effects of and/or responsiblity for iTunes (which is simply a digital music and media service) and the iPod (which is a media player) and a blatant misrepresentation of a fully paid, licensed music service as “piracy.”
    “iTunes savior is also one of the greatest piracy-enabling vehicles the music industry has ever witnessed…”
    As someone above already pointed out, between the relatively-proprietary AAC format, DRM schemes and other elements of the closed iTunes eco-system, iTunes does nothing to promote piracy.
    “Apple transformed the music industry by figuring out the paid download, they figured out music portability and eventually led the charge into MP3s.”
    Apple did exactly NONE of these things. They were not the first to offer paid downloads, not the first to provide digital music or protable players, and they were not involved (and still actively try to discourage) the MP3 standard. To be clear, what Apple DID do is offer an attractive, easy-to-use marketplace to consumers that integrated popular music and media player devices with a large library of top-line content.
    “They figured out what the labels couldn’t, and offered a safe alternative to piracy.”
    Um, didn’t you JUST finish saying that iTunes is “one of the greatest piracy-enabling vehicles the music industry has ever witnessed”???
    WTF?
    “But ten years later, it’s not clear that all of this helped the music industry, or the artists themselves.”
    I’d LOOOOVE to read your take on the specifics of what would have helped the music industry or artists more…
    “This was a battleground for years, yet completely forgotten in all the iTunes hagiography of today.”
    All of that “battling” is largely forgotten only because even the labels and artists NOW recognize that Jobs apparently had it right. Uniform pricing, a-la carte selection, portability, etc. Consumers have been demanding these features throughout the ENTIRE history of the music business. The labels were just too greedy to cater to those desires, when they held all the cards and could.
    “But iTunes wasn’t translating into enough revenues.”
    …. *cough*
    “Indeed, the IFPI routinely estimated that 19 out of 20 MP3s were pirated, ie, not purchased from the iTunes Store.”
    …you’ve been covering this beat long enough to know better than to parrot an IFPI assertion that songs that “weren’t purchased from the iTunes store” are necessarily “pirated.”
    Do you need a refresher in basic concepts of Fair Use???
    “Which means that for most of its history, iTunes has been a massive piracy enabler. Not a solution or savior.”
    Aaaaaaaand, we’re back again! First, it IS a “savior” but also the greatest piracy enabler ever. Then, it “offered a safe alternative to piracy.” And now, it is apparently NOT a “savior” at all, and is again “massive piracy enabler.”
    Geez… What are you trying to say?
    “Fast-forward to the present, and Apple is still getting away with mass murder.”
    Do you totally ass-rape, then kill, then dismember and shove the the remains of hyperboly through a meat grinder, much?
    “Because iCloud and iTunes Match are not only porting multi-thousand collections into the sky, they are also giving every pirated collection a pardon. And $24.95 a year is all it takes to absolve your sins.”
    Two things about this.
    Two VERY IMPORTANT things:
    1) The $24.95 a year “pardon” only lasts that year. So it’s NOT $24.95 a year to “absolve” your sins (please look up the defintion of “absolution” – the word istalf has kind of an “absolute” tone to it, dontchathink?). It’s $24.95 a year – EVERY YEAR – in order to maintain access to YOUR music, from Apple’s cloud (without uploading YOUR music to a cloud, yourself).
    2) If consumers pay $24.95 a year to have FULLY LICENSED access to thier music in Apple’s cloud – because (pleae read this part s l o w l y, Paul…) – the labels and music publishers all agreed to that price and to the license for thier share of it, that is NOT “priacy.” It’s not even CLOSE to anything remotely like “piracy.”
    That’s a fully licensed, fully paid up music service.
    Do you uynderstand the difference?
    If you don’t understand that distinction, please stop writing for the “Digital Music News” – because you don’t know anything about the business.

    Reply
    • thetruthdisseminator
      thetruthdisseminator

      Apple is where it is today because it was one of the major enablers of piracy…
      To make profit for the company and shareholder from selling hardware. Apple set out to make the iPod the dominant mp3 player.
      In 2000 Apple sales were in the doldrums. Sales of Steve Jobs iMac were not going well. So they began asking “What can we do to make more people buy Mac?”

      Music lovers were “sharing” tunes like crazy on Napster and other pirate sites. They were attaching speakers to their computers and ripping and burning CDs. This was especially marked in dorm rooms, a big source of iMac sales, but Apple had no software to manage this illegally downloaded digital music.

      To catch up, Apple licensed the SoundJam MP music player. SoundJam MP became iTunes which Steve Jobs introduced at Macworld Expo in January 2001.

      i Tunes was not a music store or file-sharing service or P2P software it was music file management software which allowed users to rip and burn CDs and only available for Mac users. The original software allowed users to rip-and-burn and “share files “on their iPods. Apple sold hardware. iTunes was the “free” music management software – where the thousands of files that their music software managed were obtained was not their issue. nor their concern. Furthermore, there were third-party software applications that interfaced between Napster and P2P software and SoundJam/iTunes, it too fringed on the illegal. This software enabled users to download from Napster and P2P sites and have iTunes automatically catalog and file their illegally gained music files. Music content drove the sales of iPod, Apple wanted to make music content available free (and no thought at that time was given to compensating rights holders or artists) to drive sales of Apple hardware. For two years iTunes operated in this way. The meteoric rise of Apple was driven by the iPod and all the “free” pirated music content. The iPod’s success was piggy backed on pirated music.

      The original concept of the iPod came from seeing how students were downloading and using their illegally downloaded music. Central to the concept was the idea of music servers, with thousands of music files. These servers could “share” and swap music files. The name iPod comes from sci-fi. The Mac is the mother ship and the iPod is the smaller vessel that leaves the mother ship returning to get fuel and food. Likewise the iPod returns to the Mac to get music files.

      There is plenty of anecdotal evidence that Apple users were heavily involved in distributing/downloading music illegally. 80-90% of the ZIP and RAR pirated music bundles contain A __MACOSX folder and The DS_Store file. This points to the fact that the bundles were created using Mac hardware.
      With regard to Artists compensation, because of a recent legal ruling on Diamond Rios Mp3 player, Apple’s IPod devices were not classified as “digital audio recording device” under the Audio Home Recording Act. This meant Apple did not have to pay a 2% royalty to the Copyright Office for dissemination into the two separate funds, the Musical Works Fund and the Sound Recordings Fund (distributed by the American Federation of Musicians and AFTRA), so there was no artist compensation in this manner.

      Apple’s intent was to maximize sales of their hardware. From Steve Jobs himself, iTunes was simply a loss-leader for Apple to sell Macs & iPods.
      The Shutting Of Napster
      Meanwhile the record companies had started lawsuits against Napster and eventually succeeded in shutting Napster and other pirate sites down. The record companies had shown they could get the source of the pirated music sites shut down. For Apple this meant two things:
      1/ The source of the free and cheap content could dry up having and impact of iPod sales
      2/ The record companies may come after Apple for helping to enable piracy.

      So in an effort to head-off both these they began negotiations with the record companies to set up the iTunes store. Apple’s aim was to make available “legal” music download available as cheap as possible, so that Apple hardware sales would have plenty of cheap and freely available content. “Legal” cheap available content in an enclosed Apple-Eco System which would also consolidate their market dominance.
      The record companies for their part had been badly bruised and beaten by the whole pirating saga, both financially and with the benefit of hindsight some PR nightmares in the way they dealt with the piracy issue. Furthermore in the main they still really did not understand the technological landscape.
      It was in this climate that Apple was able to “negotiate” with the record companies. They dictated their terms.
      1/ 99c download
      2/ No album bundling – Apple priced a 10 track album at the same price as buying 10 individual tracks.

      In essence the record companies were told take it or leave it. Rumors still circulate about the big upfront payments to the major labels and individual record company execs, in the form of cash or equity in the service to get them on-board to the agreements. The various lawsuits between the artists and record labels have revealed some of this information. .
      For example, from the Temptations Lawsuit paragraph 37

      “Some music streaming providers have paid large upfront fees to labels, such as UMG, to acquire rights to large catalogs of music. Due to non-disclosure agreements signed between music streaming providers and labels, artists (such as the plaintiffs and the class action herein) are not provided with any details about these payments, and there is little transparency about how – and if – that money makes its way to artists. On information and belief, UMG does not provide appropriate royalty payments to its artists from the licensing income it receives from music streaming providers.”
      In bringing a class-action lawsuit against Universal Music over digital music revenues, musicians trigger a big objection from Apple.
      “The musicians in the class action want to pierce the veil, but Apple contends that depositions given by Jobs and senior vp Eddy Cue, as well as other documents related to Apple’s business relationships with UMG and other record labels, are “highly confidential and proprietary trade secrets.”
      http://www.hollywoodreporter.com/thr-esq/apple-steve-jobs-deposition-universal-music-317999
      With the launch of iCloud the big upfront payments continued:
      http://www.nypost.com/p/news/business/apple_pays_music_bigs_OcxlGqT1E0P5P9vzosxtyK#ixzz1rHDEpy4g
      Two years after the record companies had shut down Napster and other major pirate sites, Apple’s iTunes became a full-service online music store in 2003. Unlike the record companies solutions it did not have to compete with Napster.
      iTunes Pricing Issue
      In the Apple iTunes negotiations with the rights holders, Apple insisted $.99 per track across the board was the deal, take it or leave it. Apple set the price – not the creators, the artists or the record companies. All tracks were to be of equal value, no bundling – a 10 track album was the same price as buying 10 individual tracks.
      With regard to bundling, generally in business terms it is better to give the consumer a discount on buying a bundle. The consumer can make the choice to buy individual tracks or buy a bundle. If they choose to buy a bundle of tracks they get a discount over buying individual tracks. The total price of an 10 track album is cheaper than buying 10 individual tracks. In the world of commerce we see bundling all the time. At your local supermarket you can buy for example paper towel rolls in packs of 3, 6, 9, etc., The larger the bundle the less the individual towel rolls cost. The consumer has the choice what to buy. It’s a standard retail/commercial proposition. The manufacturer (in this case) benefits by incenting the customer to buy more by giving them a discount on buying a larger quantity. But this standard commercial proposition was not to be the case on iTunes. Like saying all paper towel manufacturers must sell their paper towel rolls individually and all the same price regardless of quality or popularity or any other factor. Apple promoted pricing parity for singles and albums, and gave no discount for buying an album. While digital downloads continue to grow, overall album sales have dropped by at least half.
      Many commentators have pointed to “unbundling” as being a major cause in the value destruction of music.
      Harvard Business School professor Anita Elberse, looked at the clash between bundles and digital distribution, and the effect on media and entertainment
      firms. Interview with Elberse about her working paper, “Bye Bye Bundles: The Unbundling of Music in Digital Channels.”
      Tracks of My Tears: Reconstructing Digital Music
      http://hbswk.hbs.edu/item/6312.html
      The Needham report goes even further and asserts more value has been lost via iTunes than by piracy. From the report:

      “What Is the Problem? …the major issue with iTunes has been the value destruction lost by “unbundling” If there’s not a consumer demand problem, then what is the source of the economic problem? We believe that unbundling in the digital age is the primary source of value destruction. In the physical world, consumers were forced to about $15 for an album that packaged the A-title songs they wanted with many B and C titles that they didn’t want. The pricing of $7-8 for each song the customer actually wanted (assuming 2 songs on an album of 10) was too high a price umbrella when iTunes began offering individual songs at $0.99. The music industry had to accept the iTunes version of unbundling because between 2000 and 2003, the audience unbundled music by stealing the songs they wanted to hear. In the end, $0.69, $0.99 and $1.29 per song (x 70% to the music labels) from iTunes were better than nothing. We are a little more skeptical than consensus about the notion that 4 Needham Insights digital piracy is responsible for the destruction of the music business. Before people stole songs one at a time over the internet, they bought entire albums via CDs made offshore illegally. That value chain has been decimated by digital. Why pay $1 for an illegal CD if you can legally pay $1.29 for the only song you wanted on the CD anyway?””

      The Artists
      After the record companies had signed their agreements with Apple, they in turn got their artist to sign digital distribution agreements, within the light of what was agreed with Apple.
      One of the reasons the licensing took so long was getting agreement with each artist for digital distribution written into their contract in place. There were plenty of issues and the arguments that ensured between artists and their labels with what the labels agreed with Apple. But like the record companies had been strong armed by Apple, the record companies in turn strong armed their artists. Unfortunately, like royalties the issues are not simple and easy to understand. Like in the physical distribution model, Artists have little say in the pricing or how their music is distributed if they want to use sites like iTunes.
      All the B.S. talked on the internet about how slow the music companies were to come to the table, ignores how long it took for the music companies to negotiate all the necessary contracts and licenses with their existing artists. A record label has no legal right to license anything with anybody that falls outside the terms of their contract with the artist. Licensing took time to negotiate with every artist who did not have digital distribution written into their contract, which at that time was virtually everybody. The tech companies and their apologists have often been the last to highlight and respect these artists rights.
      Fast forward a number of years, Artists find their revenues are not what they expect and they have little say in how their music is sold:
      Pink Floyd wins out against EMI for song-bundling
      http://musiclawgirl.wordpress.com/2010/03/14/pink-floyd-wins-out-against-emi-for-song-bundling/

      In general terms a growing number of artists are accusing their record labels of accounting for downloads off of iTunes as “sales” rather than “licenses.” Generally revenues from “sales” after packaging deductions etc are significantly lower than that from “licensing” income. They don’t have contracts with Apple, only with record companies so this is where they are going after. As album sales drop, the income of musicians drops. Individual tracks do not make up for that loss. For example:

      The Temptations Join Chorus of Lawsuits Over iTunes Royalties
      http://www.hollywoodreporter.com/thr-esq/temptations-itunes-lawsuits-300733
      ‘Weird Al’ Yankovic Sues Sony Over Royalties
      http://www.rollingstone.com/music/news/weird-al-yankovic-sues-sony-over-royalties-20120402
      Tower Of Power Sues Warner Music Group Corp. Over Digital Royalties
      http://www.prweb.com/releases/2012/3/prweb9339519.htm
      James Taylor Suing Warner Bros. Records For $2 Million Over Digital Revenue
      http://www.billboard.biz/bbbiz/industry/legal-and-management/james-taylor-suing-warner-bros-records-for-1007949492.story#eSQvAHh4uib5WoyC.99

      REO Speedwagon and William ‘Boz’ Scaggs
      http://www.thecmuwebsite.com/article/two-more-artists-sue-sony-over-digital-royalties/
      Independent artists

      These lawsuits have revealed also the major labels license 80% of iTunes downloads sold in the USA. iTunes has meant that there are more independent artists music available than ever before. But independent music sales from iTunes is less than 20%, the majors still receive the majority revenue. This is approximately the same percentage as the “Brick And Mortar” stores such as Tower records, despite the fact that there is more independent music available. So despite the fact that independent artists have easier access to the market, they are not selling much more through iTunes. In fact the 20% of independent sales is shared out over a larger number of independent artists.

      Reply
      • steveh
        steveh

        “We believe that unbundling in the digital age is the primary source of value destruction.”
        Utter complete attrocious bullshit!!!
        0.99c per track is not value destruction.
        0.02c per track is value destruction
        0.002c per stream is value destruction
        “In the physical world, consumers were forced to about $15 for an album that packaged the A-title songs they wanted with many B and C titles that they didn’t want.”
        Yes and this was universally regarded as unfair by the music consuming public – and this was one of the chief factors driving people to Napster etc. This was a major enabler of piracy – not Apple.
        Why do people see it as unfair? Because it IS fucking unfair, by any objective judgement.
        And guess what, partly because Apple DO allow bundling of album-only bonus videos, exclusive tracks and pdf artwork actual iTunes sales of full albums have shot up!
        You are talking out of your ass!
        Apple just smartly saw where the wind was blowing and ended up, partly by accident and partly be design, creating the only – I repeat only – digital music ecosystem that, up to now, offers music creators a decent income.
        Where are the others? Spotify? Amazon mp3? They’re not even close!

        Reply
        • Lance
          Lance

          So much for “truth”
          Based on the tenuous justification you follow up with to suggest that Apple is ONLY where it is today as a result of openly supporting piracy, your post SHOULD start out:
          All of the music labels, terrestrial Radio, Sony, Panasonic, Samsung, 3M CISCO [insert your favorite company that had ANY business which might have even been associated with the distibution or playback of unprotected music] is where it is today because it was one of the major enablers of piracy…
          To make profit for the company and shareholders from selling hardware/their services. All of the music lables, terrestrial Radio, Sony, Panasonic, Samsung, 3M CISCO [insert your favorite company that had ANY business which might have even associated with the distribution or playback of unprotected music] set out to make their product the dominant music player.
          Like this…
          “Blah blah, blah …Furthermore, there were third-party software applications that interfaced between Napster and P2P software and SoundJam/iTunes, it too fringed on the illegal. This software enabled users to download from Napster and P2P sites and have iTunes automatically catalog and file their illegally gained music files.”
          Ooops! You mean iTunes DIDN’T itself pirate anything?!?!?!
          Thanks for making that point, for me.
          The only reason there was a delay in licensing music content for the store directly was only because the labels WOULDN’T AGREE TO IT.
          Jobs negoatiated with label execs for two years, before they realized they should probably take advantage of this “new” market.
          Do you have a source for the following assertion?
          “Music content drove the sales of iPod, Apple wanted to make music content available free …”
          If that were true, one would wonder why Apple spent 2+ years trying to sell the labels on a deal for 90% of the revenues from iTunes sales?
          And another baseless and innapropriately focused claim:
          “There is plenty of anecdotal evidence that Apple users were heavily involved in distributing/downloading music illegally.
          Again: “There is plenty of anecdotal evidence that All of the music label, terrestrial Radio, Sony, Panasonic, Samsung, 3M CISCO [insert your favorite company that had ANY business which might have even been associated with the distibution or playback of unprotected music] cutomers were heavily involved in distributing/downloading music illegally.
          Your whole analysis of the shutting Napster and other pirate sites causing Apple concern conventinetely omits several important points:
          1) As you yourself pointed out, the Rio case was a win for the portable music player
          2) Apple was – in direct contrast to your baseless assertions, above – never either directly, indirectly or vicariously involved with illegal file sharing/copyright infringment, and so was never in danger of being sued by the record labels, and
          3) The demise of Napster left in its wake ony INCREASED file sharing through other services.
          So, Apple was far from scared into having to take licenses, as a result of the Napster decision.
          I LOOOOVE this little characterization:
          “It was in this climate that Apple was able to “negotiate” with the record companies. They dictated their terms.
          In essence the record companies were told take it or leave it.”
          Yes. The record companies were “Dictated to” by Apple.
          To the contrary, they took the best deal they were left with, after having completely destroyed thier own business.
          Did you forget that they were offered license deals – and even equity in Napster – in an attempt by Napster to settle the lawsuits, and they refused?
          “In the Apple iTunes negotiations with the rights holders, Apple insisted $.99 per track across the board was the deal, take it or leave it. Apple set the price – not the creators, the artists or the record companies.”
          When does the wholesaler ever set the retail price?
          Is it your contention that the record lables set the prices at Towere and HMV?
          Do you have any idea what happened when the lables even tried to influence retail pricing? Do you understand basic principles of anti-trust and price-fixing laws?
          “With regard to bundling, generally in business terms it is better to give the consumer a discount on buying a bundle. The consumer can make the choice to buy individual tracks or buy a bundle.”
          Again, this was NOT the case in the music business. The record companies had stopped single sales years prior to iTunes (or even the popular adoption of the MP3). And they did it solely to force consumers into buying the more expensive album bundle. Once consumers wer able to download just one or two tracks they did so in overwhelming numbers. Even after bandwidth increases allowed them to DL at speed.
          This is a classic example of technology allowing consumers to break a market monopoly and choose a different (smaller) package of goods. Apple demanded singles because, as YOU yourself already observed, iTunes was modeled after observed actual customer usage.
          Right?
          You linked to two reports that actually discuss the forced bundle problem in the music industry and how it created an artifically high and ultimately unsustainable revenue model. Did you undertand the point of those articles?
          Amazingly, the recounting of the artist contract issue is even MORE flawed.
          NO record companies got their artists to sign retro-active digital distribution agreements, with a view towards what was agreed with Apple.
          There was absolutely NO correlation between the agreements with artists to have digital distribution provisions written into their contracts.
          If there WERE re-nogioations with each artist for the iTunes license, then you wouldn’t HAVE the cases that you cited, such as the Temptations, Wierd Al, Cheap Trick, etc., etc. cases. Do you understand that?
          Get some undertanding of the business and what is going on before you post a diatrible of dribble like that.

          Reply
  9. SHeezy
    SHeezy

    19 out of 20 MP3s were pirated, ie, not purchased from the iTunes Store.
    Piracy comes down to this one question:
    “Why should I pay $.99 for a song that I can get for free on BitTorrent/Napster?”
    That fundamental question has to be answered before ANYTHING!!!
    Before music, before media companies, you have to address the economic and moral standards of these people. Do they really have $.99 to spare? If they really don’t, then I don’t consider it piracy. I consider it a person that really likes a song, but needs an alternative way to listen/access the music.
    On the other hand, if the person is just a cheapskate and rather just “steal” music, then we have to look at why that person feels that “Why should I pay for music?”

    That’s the canary folks. Answer that, you bring the music biz back. you open the record stores back up.

    Reply
    • Visitor
      Visitor

      “we have to look at why that person feels that “Why should I pay for music?””
      That’s easy:
      There are no consequences if he steals the song.
      He would also steal cars, food and whisky if he could get away with it.

      Reply
  10. Visitor
    Visitor

    I HATE TO SAY I TOLD YOU SO BUT I DID IN 1998! YOU DIGITAL MUSIC NEWS SUPPORTED THE INTERNET…ARTISTS WERE NOW FREE (TO END THEIR CAREERS) TO PUT THEIR MUSIC ON iTUNES AND NEVER GET PAID AGAIN,OR NOT LOIKELY TO GET PAID MUCH AT ALL, AND YET YOU ALL PAY FOR THE PRIVLEDGE OF INTERNET EACH MONTH AND IT’S NOT PENNIES BUT BILLIOBS OF DOLLARS. DIGITAL MUSIC NEWS WAS A BELIEVER…NOW WHAT ADVICE CAN THEY GIVE SINCE THEY LOST IT ALL FOR EVERYONE…

    Reply
  11. thetruthdisseminator
    thetruthdisseminator

    ITunes 1.0 – “Rip. Mix. Burn.” Apple added CD-RW drives to their iMac desktop line and launched iTunes 1.0. The aim was to keep the Mac as the central repository of music, or server, to be synced to some other MP3 player, such as those that were available from Creative Labs or Rio. It was Job’s holding position pending the launch of the Apple’s iPod. Apple was still on the financial knife edge and Jobs was working at returning them to profitability. Rip: was the process of importing a track from an existing CD into iTunes onto the Mac which acted as the music server. In the first week of release of iTunes software, 275,000 Mac users downloaded the software. Let’s be real, everyone knows what was implied, and rest assured it was quickly integrated on networks with P2P software/Napster and the wholesale sharing of music files went exponential.
    Forgotten is that in the late 1990’s, the record companies did launch their own legal online download stores. But they were trying to compete with P2P/Napster. To placate the record companies, Apple and Roxio, the makers of Toast (the ripping/burning software for iTunes) made PR announcements/partnerships with the record labels to use these legal download sites., the first one was with EMI. Meanwhile the majority of music files were in reality being RIPed and file swapped using P2P and Mac sales were now growing.
    iTunes 2.0 – 10 Months later having propelled the iMac as the music server Apple’s first MP3 player, the iPod was released. The iPod seamlessly integrated into iTunes software allowing the mass portability of MP3 files. Apple sales went exponential, and Apple’s meteoric financial rise truly began…
    iTunes 3.0 – Enabled smart playlists and the ability to share playlists, and share play lists is pretty useless unless you share files too…..

    It wasn’t until iTunes 4.0 that iTunes became a store and not simply “Rip. Mix. Burn” file management software.
    If a company made fantastic master keys to banks which easily opened the doors, disabled the alarms and opened the safes, but said purchasers of the keys must not use them for anything illegal..pending the launch of their new financial instrument….. we could admire their innovation, but I suggest we’d at least ponder the implications….. quod erat demonstrandum.

    Reply
    • steveh
      steveh

      This is a very odd rant because in the period of which you speak PCs were outselling Macs by about 20 to 1.
      Now seriously, were not all these mp3 gathering and CD burning software options equally available for PC users?

      Are you saying PCs in the late 90s did not have CD drives?
      Why single out Macs? It’s bizarre!
      And also if you are treating iPods as a piracy enable because they stored and played unauthorised mp3s then surely you should equally attack TDK etc for making recordable CDrs and Sony etc for making the CD players that played them.
      Wierd!!!

      Reply
  12. reggie mantle
    reggie mantle

    Jeez, some of you have a lot of time on your hands. (Must be unemployed music biz folks.) I just think it’s a little sad that people used to be enthusiastic enough about music to actually pay $15-20 for a CD. Music has been seriously devalued. (For various reasons, sure.) How the hell can labels get into bed with companies like Spotify who have gotten people used to the idea that they can legally listen to pretty much anything that exists as many times as they want for free. Short-sighted, much?

    Reply
  13. David@indigoboom
    David@indigoboom

    A lot has been said about how the mp3 player full of songs was due exclusively to a huge wave of piracy.
    While I think it is true that the novelty effect around the year 2K was quite large. I also remember that round about that time i got my first useful mp3 player and sat right down to rip all my cd´s and put them in there. So even though there where no legal mp3 files to be had , I still had a full mp3 player and there was no stealing involved. Not all mp3 files can be attributed to piracy.
    Cheers
    David
    http://www.indigoboom.com

    Reply
  14. wallow-T
    wallow-T

    The industry did consider the ripping of one’s own CD to be piracy, so much so that portions of the industry attempted to covertly modify millions of customer PCs to stop such ripping. (The “Sony Rootkit” affair.)

    Reply

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