Apple has succeeded in keeping its 99 cent tune price policy after its distribution contracts with the music labels went up for renewal for the first time since the iTunes launch back in April 2003. The labels have been trying hard to introduce variable pricing with higher price tags applied for new releases. Analysts estimate that the labels already keep around 70 cent per song purchased on iTunes and that any price hike would simply result in the labels pocketing the difference.
The iTunes library currently consists of over 3 million songs and the music store accounts for about 80% of the market share. According to Nielsen SoundScan, throughout 2005 the store delivered 353 million songs within the US alone. It is unclear at this time how long the new contracts will run for, however the record labels have also previously insisted on reduced-term contracts.
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The recording industry and Apple had been at odds over Apple's insistence to keep its flat rate with some labels wanting variable pricing, including higher prices for new releases. "Apple has all the cards, and when you have all the cards, you can play hardball," said Ted Schadler, analyst at market research firm Forrester Research. |
With artists getting only getting as low as 4.5 cents per song sold on iTunes, it is nice to see that Apple succeed in keeping its track pricing from being forced up. Then again, if the labels did decide to leave iTunes as a result of pricing disagreements, it would likely have resulted in a major loss for both considering how well music download stores are catching on. Keeping a fixed price does have a drawback in that older music is likely being sold for a lot more than it would otherwise with variable track pricing.
Source: TMCnet
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