Wireless, the music industry's new saviour
For the most part, the labels have remained loath to push too forcefully against the company that still accounts for the vast majority of their new online sales.
Instead, they are turning hungrily to the mobile phone market, where phones are slowly gaining the capacity to play music. Executives note that there are many times more mobile phones than iPods in the world, potentially offering a far larger digital music market. Already full-song download services for mobile phones are operating in Europe and Asia, and are expected to reach the United States this year or next.
Part of the mobile market's attraction comes in pricing. Consumers around the world have shown they will eagerly pay $2.50 or more for a ring tone, a mere snippet of a song that costs just 99 cents for the full version at iTunes. Labels see these consumers as receptive to variable prices for different songs.
But some music executives also describe mobile carriers as simply better potential partners than Apple. Like the labels, the carriers' bottom line depends directly on selling content, while Apple's profit sheets depend on hardware sales.
The carriers' interests were underlined in the case of Motorola's iTunes-enabled mobile phone, announced nine months ago but now delayed. As described by the companies, the phone would let people transfer their iTunes-purchased songs from computers to the phone.
Publicly, carriers say they are interested in the idea and will offer the phone to their customers if there is demand.
"Ultimately, the consumer is the boss," said John Burbank, vice-president of marketing for Cingular Wireless. "We're going to create products that best match what the consumer wants to do."
But mobile industry sources say some carriers have been critical of Motorola's move, which would encourage consumers to buy music on a computer rather than over the phone network. Because most phones are sold with a substantial subsidy from the wireless carrier, their lack of interest has set back the release of the iTunes phone.
"Carriers subsidise phones and features when they drive network usage," said Iain Gillott, a wireless industry consultant. "Yet here was a phone that I was supposed to sync to my PC so I could buy music from Apple. Why would the carriers subsidise that?"
None of this means the labels are likely to stop dealing with Apple. Indeed, the companies continue to work closely behind the scenes discussing issues such as CD copy protection and new promotions. And label executives are quick to commend Apple for doing more than any other company to create the digital download business.
And any business relationship, particularly in new arenas, is bound to have its bumps, insiders say.
"The relationships are really better than ever," said Cary Sherman, president of the Recording Industry Association of America. "Everybody understands where the other side is coming from. Everybody understands that there is a market here, and everybody's trying to find a path. The dialogue is healthier and more wide-ranging than it's ever been."
Talkback
The music industry doesn't get it. People are sick of paying too much for their music. That's the reason people are swapping music on peer-to-peer networks. There is already a small minority that are buying their music from iTunes or similar services. I think I read yesterday that less than 25% of those polled in the US buy their music online. The rest use peer-to-peer. I also read that the phone comanies will probably charge $2 to $3 dollars per song. If the industry abandons iTunes for the phone companies with their outrageous fees, they will lose a huge chunk of that 25%. (It might also help if they gave us better music!)
Left to their own devices, the dinosaurs that run the recording industry will let their greed kill the golden goose that Steve Jobs gave them.
Jobs understands what they apparently don't; you've got to treat your customers with a modicum of respect if you want them to part with their hard-earned cash. Make it too expensive or the DRM too restrictive, and your customers will walk away from legal downloading. It doesn't matter how many laws the RIAA gets Congress to pass, you are not going to stop "illegal" downloading and sharing without a better alternative out there.
Dolts!
Nobody is going to use their cellphones to download music. Its stupid to even suggest that it will somehow become a more popular medium than iTunes and and iPod.
The previous posters are dead on. If anything, they aren't critical enough of the record industry. The record industry seems to be clueless in every phase of this phenomenon. They would rather be yoked to MS (champions of open standards?) They think phones can compete with iPods? (or vice-versa?) They think people want confusing pricing schemes? They think people will buy music in the same volumes as ringtones? They think people will be willing to pay $2 -$3 per tune? They still think people want to "rent" instead of "own?"
They seem to forget that the iPod phenom is really a three headed monster—the iPod, the iTunes software and the iTunes music store. Sure, someone can invent some phone which will play music but that isn't going to do squat compared to Apple and that's just one part of the equation.
The "mindset" for a Phone will always be to Talk. Not to connect to your stereo or computer. Once people understand this, Cell Phones present no threat to the iPod.
The iPod is where music will remain for the next decade.
Nuff Said.
You are so wrong!
You're repeating the propaganda put out by the music business. They think the carriers can save their broken business model. But they are wrong. The carriers think that music can save their aging business model as well. They are wrong too!
Here's what's going to happen:
1. Millions of people will be willing to buy the iTunes phone "without carrier subsidy". This will wreck the tradional carrier/handset business model and force change favorable to customers.
2. At least one perhaps more carriers in each market will see that partnering with Apple will give them a serious strategic advantage.
3. The carriers that do partner with Apple, will bring in millions of new customers in record time. Shocking the industry and forcing a business model change.
It's just what happened to music, it's going to happen again to the wireless market. Up until now, we've had to settle for handsets that were "feature poor", we settled because they are cheap. But now we want those features and we're going to be willing to pay for it. Screw the subsidies, give me the features I want!
I want my "fully functional" iTunes phone! The carrier that gives me what I want, will get my business.
Cell Phone & Music Labels - Idiots. Just like there were dozens of music stores pre-itunes but they were designed by idiots - just like 99.99% of cell phone interfaces- they can't even design it so you can change the time easily, how are they going to design it so you download, listen and move through your music library? that's right - they can't. Never mind that who's going to run down their cell phone battery so they can't use it to talk? The music industry also thinks if they can sell a $2.50 30-second ringtone, pro-rated, they should be able to sell a single for $6.50 ... how do you create a ringtone? Rip a CD, launch audio software, clip it (where to clip?), convert it to a ringtone format - figure out how to get it onto your machine or pay someone $2.50 ... expensive but CONVENIENT because the 2nd choice is for tech-heads and time consuming. $.99 might be an acceptable choice to download a track since you can start listening to it in about 8 sconds - VERY CONVENIENT ... but for $4 a track or $7 a track? You might buy one if your girlfriend leaves you in the desert and the next Amtrak is 8 hours away but on a constant basis? No - not to mention that other than old school journalists, everybody knows you can convert any itunes song to a CD - Downloaded tracks - what fidelity? What DRM?
Not to mention the other side, sounds like fun - but who's going to build the music store - every mobile phone company? Negotiate with 10 labels, get tracks labeled and loaded onto servers? Design a store - test it in every possible way? Hire hundreds of people for tech & CS support? How's that Wal-Mart online music store doing - how's the WORLD'S LARGEST retailer with nearly $275 BILLION in sales doing in cyberspace?
As well as the mobile companies and their premium services now? Wasn't there an article about low sales and high churn? And they want people to pay more? If they really do it - it will fail miserably because they cannot design interfaces, they have poor customer support already and poor batteries - they are a utility - the problem is they look at a powerpoint chart and think there's BILLIONS just for the plucking, they're wrong - if they really want to make money, they should sell the itunes phones AT FULL PRICE and then charge $5 a month for Bluetooth access.
Oh Gee, Jobs is Intransigent for not wanting to rip me off on music downloads?
Prediction: People will pay $3.00 for a ringtone because it is a unique and individualized application.
The same people WILL NOT pay $3.00 for a song because there is an established market price point - backed up by free filesharing. The carriers are going to be surprised and the record execs are going to be disappointed that they can't rip people.
...And to think they are paid hundreds of thousands per year to be dead wrong!
I have been reading similar articles between Apple and Carriers, but the fact is the view of the carriers are all very US centric where the phones are largely subsidized by the carrier. The carriers seem bent on recovering their misguided investments in data services, in anticipation of an explosion that did not happen.
As usual the rest of the world is ignored, which is a far bigger phone market, with the following characteristics.
* a far higher phone-change rate, an average is about one new phone a year in Asia. Barring Motorola every large phone manufacturer is from Europe or Japan/Korea.
* phones are not typically subsidized, except as part of loyalty program or to rid of obsolete models. We are speaking of less than 5% here.
* largest markets in Asia are way ahead of US in mobile phone technology - handsets, services, features etc. The markets are Japan, S.Korea.
* Fastest growing markets - China, India.
* Penetration levels are very high with many now adopting dual phones (biz + personal).
Let us face it, US is only a minority in the global cell phone market and the carrier business models outside of the US is very different.
To let the cat among pigeons, one of the following could upset the plans of these greedy US carriers
* Phone makers address a larger market and if there is a adoption for iTunes phone elsewhere, which is certain to happen, happenings in US is irrelevant
* An opportunistic carrier can use the iTunes phone to get new customers. With phone number portability, am hoping this will not be a big impediment
* Apple has demonstrated their understanding of the music business, with a resounding success of the iPod+iTunes+iTMS. Carriers are at the other end of their spectrum, they are best at confusing (call rate plans)
In digital-home future, the cell-phone is only one entity.
The others being a computer, home media server, portable music player, car audio etc. are the other pieces which a company such as Apple can address.
So, the choice is up to the music labels if they want to side with someone with larger game-plan or just a one-trick pony.
Don't we, the consumers, have some say in the matter. What incentive is there in paying more money for legal downloads? No sane person would do it. High prices are what got the music industry in the mess they're in to begin with. They're a greedy bunch and will get their just deserts again.
The cell phone music player idea is nice, but the only way cell phone carriers can make any money off of selling music on line is if they sell songs for more than 99 cents, or if the music labels cut their prices (yeah right).
Do the math. The only reason Apple sells music is to sell iPods, not because they can actually make money selling music on-line, thanks to the music labels.
The fact of the matter is that people want to own their music and the standard has already been set at 99 cents by iTunes. Anything over 99 cents will break the model and hey, consumers will just go back to file-sharing. Not that they've felt compelled to leave it, just yet, or ever.
Ringtones are one thing, but buying a collection of music at $2.49 a pop is never going to take off. Maybe they can make some money off of the impulse buyer, for the latest tune, but it will never match the volume of the iTunes Music Store at that price.
The only way for cell phone carriers to make money is to sell more cell phones and services, not music. Maybe this is where the subscription model could succeed, but again it won't match iTunes in volume. The iPod and iTunes are more about music "collections", as in hey, I want to hold my entire collection of music "on the go" (20, 40, 60GBs), and that won't happen on cell phones until the end of the decade. Nor can a cell phone be as portable (stick of gum) and disposable as an iPod Shuffle; maybe in the next century.
Cell phones may well over take the iPod (aka 21st century Walkman), but by the time they can hold 40GB of music and all of the cell services are in place to do it, the decade will be over and Apple will have sold the projected 100+ million iPods (2008) - that's three years from now. By then the bum rush will be over and Apple will have moved on to the next killer device, which may have nothing to do with music. Nothing last forever.
What happened to the Sony Walkman? Tape player, CD Player, MP3 Player, and the next killer device is on the way. Sony is still here thriving and so too will Apple, becuase they got it while its hot.
Some companies set the standards, like Sony and Apple, and the rest just follow to eat the scraps of giants.
Seems to me the mobile companies are beggining to hit the buffers. A phone is a phone. You talk or text. There is a mad rush towards muti-functionality in just about every digital device. An i-Pod scores because it stores and plays music. Design it to also make a cup of coffee, or blow-dry your hair, and it loses it's identity. You end up with a device that becomes far too complex to use. How many people still cannot program a video/DVD recorder?
Apple is brilliant when it found and serviced well what customers want. Why mess with success? Apple deserves much more credit for the growth and renewed interest in music than the criticism and hypocritical stand that the music industry is postering against Apple. If these executives are smart enough to recognize the huge demand for Apple products and it's
i!Tunes service, they should support and explore it to the max. Why find an alternative at this time? Mobile phones for music downloads? Sounds like a better deal for the mobile phone industry selling more phones and extra minutes than for the music industry selling more songs.