rumor revenge, apple, downloads, gadgets, itunes, music, portable media, rumor, universal

BusinessWeek: Apple Doesn't Give a Flying F$#! About All-You-Can-Eat iTunes

BusinessWeek can't leave a juicy rumor—that Apple's finally considering going down the iTunes subscription path—untouched. Whereas the NYT and FT seem to be getting their info from label execs, BW claims their sources on the Apple side of the things say "no such talks are under way." So, what's really going on? Here's how we're digesting this specu-flustercuck.

The labels, particularly Universal, are known to be hot on a subscription deal, since it'd provide more reliable revenue from iPods—BW notes the average iPod owner buyers "fewer than 30 than songs" and rips or steals the rest. Apple, on the other hand, is already balling with iTunes just the way it is—now the no. 2 music retailer in the country—and it's really just money icing on the wildly profitable hardware cake. And if it's not busted, why tinker with it?

Since the labels really want a subscription model, it makes sense that label sources would play it up to the press, giving them more leverage at the negotiating table by showing the heavy buzz/demand the rumor is generating. Apple-side sources would spin the opposite way, since—if they really were considering a subscription model—it would give them weight to push down the price, both what they'd give labels and what they'd charge us. And as both the FT and NYT have noted, price is likely to be the major sticking point.

Conclusion? Be hopeful, not wistful. [Businewss]

7:30 PM on Fri Mar 21 2008
By matt buchanan
9,163 views
23 comments

Comments

Simpsons-Movie-ruled at 07:49 PM on 03/21/08
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shenanigans
TonyTriple at 07:52 PM on 03/21/08
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Pfft, Apple has all the leverage. Itunes has the music industry by the balls.
snitch29 at 07:56 PM on 03/21/08
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Will this be like the zune market place where you can download all the music you want, but don't think you can just walk away when you want cause they will Nuke your entire music library as soon as your subscription is cancel. Nice business model ehhh
bobdobbs at 07:58 PM on 03/21/08
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Here's why it's in Apple's interest: With DRM-free music the norm now, there's nothing to keep people buying ipods. Any MP3 player will do. If they can bundle all-you-can-eat plans for a small premium on ipod hardware, they sell more ipods. Apple makes money on ipods, not music.
Sheemo44 at 08:03 PM on 03/21/08
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so many acronyms...
CutePuppyz at 08:04 PM on 03/21/08
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I thought as much. Apple is perfectly content with their business model at the moment.
Kaiser-Machead at 08:11 PM on 03/21/08
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Connectedness Index: 287
Brought to you by Acura TSX

Didn't a recent "study" somewhere already indicate that the majority of music on iPods are not derived from iTunes? If this is true, then what will really change?
ILikeMacsWhatAboutIT at 08:40 PM on 03/21/08
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@Kaiser-Machead: I don't buy stuff from the Apple store, but their sales figures say that a lot of people do buy music from there. When I can buy iTunes gift cards at the grocery store, there has to be a market for it.
sumocat at 08:58 PM on 03/21/08
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@bobdobbs: Exactly. Apple makes money selling devices, not music.
CarbonatedWater at 09:14 PM on 03/21/08
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@TonyTriple: Haha that's a nice way to put it.

I don't use the music store that much since I don't really listen to that much music. Torrents are better anyways.
coketown at 10:29 PM on 03/21/08
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Kaiser, it doesn't surprise me that most music on iPods doesn't come from the iTunes store. Most people I know have collections of MP3s dating all the way back to kazaa (holy crap remember that?), before iTunes was even around.

The only time I've used iTunes was during that Pepsi promotion a few years back. The experience was good. I can see why Apple sells so much music through their store, and when I'm stumped on gifts I usually look for an iTunes gift card. But for me, buying/ripping CDs is my primary source of new MP3s. The only benefit I'd get out of an all-you-can-eat service would be to check out new artists. The whole 30-second limit on previews gets annoying when browsing so I quit after a while.
Marty_MacFly at 11:14 PM on 03/21/08
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@bobdobbs: If the average iPod owner buys fewer than 30 songs from iTunes and rips/steals the rest, then it's not iTunes music sales that keep us buying iPods. Apple never had anything to fear from DRM-free music.

We keep buying iPods because we like iPods and, as long as Apple continues to innovate with products like the iPod touch, that trend will continue until the standalone DAP/PMP market is dead.
bitfactory at 12:13 AM on 03/22/08
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@Marty_MacFly: agreed. The thing that keeps people buying iPods? The new models. The Touch is amazing - and is now a true 'platform.' They've stretched out the popularity of iPods longer than I thought they ever would.
mcjake at 12:36 AM on 03/22/08
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@snitch29: No, that's what Microsoft would do. Apple at least has a little tact.
bobdobbs at 01:06 AM on 03/22/08
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@Marty_MacFly: " Apple never had anything to fear from DRM-free music."

Nonsense. The value-proposition for many ipod purchasers (not you, judging by your avatar) is the superior ITMS one-click music experience. However, you have to PAY for it. There's a set of users who certainly will pay for it, but there are far more who will not. Apple loses those customers who'd rather get their music for FREE. And their 3-year-old ipod plays music just as well as the new ones -- buy a new one because it's shiny and you can check your email from Waffle House? Don't think so.

So, how does Apple compete with free? By making things "free" after a one-time premium on top of the hardware. At least for a year. Then you gotta buy a new ipod to get another year of "free" one-clicky-music, which you'll gladly do because you've spent the last year in the ITMS ecosystem which you like totally like like and, "oh look! Now I can check email from Waffle House!"

Like I said, it's no skin off Apple's nose since they don't make money on music anyhow. Yearly ipod purchases, on the other hand...

Mark my words, it will happen. BusinessWeek is full of shit.
AndyMac at 09:16 AM on 03/22/08
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@bobdobbs: I disagree with the "ITMS one-click music experience". It has always bugged me that I must install iTunes software to buy music. I do not use iTunes to put music on my iPods nor do I use it to buy music. I really like the Amazon model. I see something I like, I press Buy MP3 and it's downloading. I don't have to install anything to do that. I use WinAmp to put the music on my iPod.

It could be that I am in the minority. I don't buy much music online. When I want to buy an album I purchase the CD and rip it myself. I am in complete control of the ripped quality and of course there's no DRM. I only use Amazon when I want to buy a single song.
klrobinson at 10:08 AM on 03/22/08
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Subscription models are nice, but haven't proven successful. The more important step would be to go to DRM-free tracks, like Amazon and others. I know Apple is dead set against that, but it is the wave of the future.

Their iPods also could use an FM transmitter, for heaven's sake.
MINI Driver at 10:29 AM on 03/22/08
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So just to be clear - Apple wanted DRM free music from the get go, and it was the 'evil' record companies that insisted that DRM was in place.

As has been pointed out - the iPod model assumes that most people rip a large proportion of their music, and only buy a smaller percentage on iTunes.
MINI Driver at 10:35 AM on 03/22/08
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@bobdobbs:

Actually, Apple make a whole lot of $$$ from Music

Read this weeks review of exactly this topic @ Billboard

[www.billboard.biz]
deadlizard at 11:01 AM on 03/22/08
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I don't understand why the music industry still wants to push this proven-failure of a business model.
Lloyd at 12:18 PM on 03/22/08
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@bobdobbs: True...but up until recently almost everyone bought their music not on iTunes. I think iTunes success is based on convenience and the iPod success is based on quite a few things, one of which may be iTunes.

Conclusion, Apple will dominate until they produce ugly players, or someone else out-Apples Apple.
Tim Faulkner at 02:16 PM on 03/22/08
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@MINI Driver: Besides a very flawed analysis (a comparison with an eight-year-ago Amazon that barely sold digital goods and didn't have to deal with 65-75% licensing fees, microtransactions, and a larger marketing strategy), they're estimating 161 million OPERATING profit on 1.7 billion in revenue. In other words, true profit is south of a 9% margin. In other words, Billboard is saying NOTHING. The profits described are in the range of a a week or two's worth of iPod sales. Apple has claimed for well over two years that the store operates at above break even.
donkill at 08:16 PM on 03/23/08
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Greed drives the record companies greed drives apple but apple is smarter and doesnt let greed make the choices for the buisness model.Most people steal their music so what makes the record execs think these people will pay to rent music?I have bought over 1200 songs from i-tunes and my only problem is drm i will not rent music ever.Also the music industry hates apple thats why amazon has all drm free music but apple doesnt they want apple gone and sooner or later they will win.