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Resnikoff's Parting Shot: iTunes Plus? Or iTunes Plateau?

Tuesday, January 06, 2009
by  presnikoff

In 2008, the industry learned just how insignificant DRM is to the average music fan.  Instead of tearing apart iTunes, AmazonMP3 remained a sideshow, despite massive advertising and label support.  But whether MP3, protected AAC, DRM or REM, consumers remained loyal to the dominant iTunes ecosystem - one that worked with their iPods, iPhones, gift cards, and on-file credit card accounts.  Apple was mostly unshakable, especially without any meaningful pricing differences. 

But give the labels some credit.  MP3s, or unprotected AACs in the case of iTunes, are superior to protected formats, and everyone is now getting licensed.  DRM-free means less hassle and greater compatibility.  A better product is a better product, though the advantages of DRM-free are often overstated. 

And just like AmazonMP3, a DRM-free iTunes will have little impact on the broader download market.  Great, songs are "DRM-free," whatever that means, and also "256kbps," sounds good!  And they have a "plus" sign next them, it must mean that they are better!

Pricing is a different story.  If AmazonMP3 had sold tracks at 29-cents, or cheaper, the results might be different.  Suddenly, the vagaries of P2P file-sharing would have had a low-cost competitor, and iTunes would have seemed like a rip-off.  But this is DRM, something most iTunes customers are less concerned about.  And, those that are aware are probably stealing music anyway.

So what about variable pricing?  Surprise, Steve Jobs is hardly attached to uniform pricing, and willing to horse-trade for an enhanced offering.  But make no mistake, the 69-cent price tag will be reserved for deeper catalog, and songs long on the Tail.  On the other end, the $1.29 tag will be used for fresher, more in-demand cuts.  Is this really that different than the current, 99-cents-for-everything strategy, or, simply worse for the music fan?

Meanwhile, iTunes Store song purchases are hitting a plateau, at roughly two billion annually.  Outside of a serious pricing shift, in the southward direction, the paid download sector may have already witnessed its peak.

None of this is really Apple's problem, and labels have been diversifying their digital revenue outlook for years.  But from a consumer perspective, doesn't this seem like a raw deal?  Those playing by the rules keep getting punished, even by Apple.

What if you purchased a download in 2008 or earlier, what happens next?  If you want a DRM-free upgrade, one that carries higher fidelity, you have to pay!  How much?  30 cents for an improved version, or 30 percent of the price of an upgraded album.  And what if your song is suddenly valued at 69 cents, do you get a rebate?

Of course not.  But isn't Apple supposed to put its consumers first, ahead of its backroom deals with labels and rightsholders?  All of this begs the question of what other changes, and surcharges, are ahead.  And, for that matter, how many people are willing to find out.

Conversely, if you never paid to begin with, you can always get a different or better copy at anytime - and DRM never enters the discussion.  Perhaps doing the right thing has never really made sense, at least in digital music.

What else?  iPhone users can now purchase songs over-the-air, from the AT&T network, instead of just WiFi.  The means true purchase portability, though the broader impact on sales is also likely to be negligible.  Part of the problem is that the iPhone often struggles on 3G, though in fairness, the issue is sometimes overblown. 



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