Your 99c per iTunes download belong to the RIAA
Posted on 09/11/03 02:14 by Seán Byrne                             
Your 99c per iTunes download belong to the RIAA
Quakester2000, GristyMcFisty and sorti all used our news submit to tell us that Despite Apple's legal download service being so successful and serving over 80% of the market on legal music downloads, Apple in fact makes no revenue from their online download service.  Even though the tracks are digitally encoded online without any CD-replication costs, CD delivery costs and shops to run apart from the iTunes store itself the tracks are still very severely over priced by the music industry.  Nearly all of the 99 cent one pays for an Apple iTunes download goes straight to the copyright holders.  The small portion that Apple gets just barely covers the iTunes hosting and running costs, the credit card company cost per transaction as well as the iTunes webstore & client software development. 

 

Apple would like to break even or make a little profit from their iTunes service, but instead have to rely on its sale of hardware accessories such as the iPod.  Unfortunately, Apple is also forced to protect their tracks and software with DRM restrictions in order for the labels to allow Apple to deliver their music.

Wasn't the Internet, this weightless kingdom of bits and bytes, supposed to make distribution costs just vanish? Apparently not.

At an Apple financial analyst conference on Wednesday CEO Steve Jobs admitted that Apple makes no revenue from the online download service, the iTunes Music Store, that he launched in April. As iTMS is the leading download service, with 80 per cent market share (or so Jobs claimed), where's your 99 cents per song going?

Well, although it costs nothing for the record industry pigopolists, this small ragged army, to make a digital version of one of its hoardings available to hear, somebody must pay. It costs Apple real dollars to provide the hosting service that delivers that digital file to you, and to write the sophisticated software that delivers it. Meanwhile, almost all the cash is flowing back to the copyright holders. Who, when you last looked, were a dinosaur oligopoly of five record labels, desperately seeking a way to preserve their copyright cartel into a new century. They were down, and they were out: but Steve Jobs rode to their rescue.

"Most of the money goes to the music companies," admitted Jobs.

"We would like to break even/make a little bit of money but it's not a money maker," he said, candidly.

So now we have it on record: the music store is a loss leader. Jobs said Apple would pay its dues to the RIAA, then seek to make money where it could, from its line of hardware accessories. When the conversation turned to rivals such as eTunes and Napster, Jobs said: "They don't make iPods, so they don't have a related business where they do [make money]".

Read the full story here.

 

We previously reported on what appears like Apple ripping off the musicians , but apparently Apple ends up having to pay out for all the running costs and the music industry are making a fortune from their 65% cut.  All the music industry has to do is provide Apple the tracks and even after paying the artists their 10% or so cut; they still get over a 50% cut in what a consumer pays on an iTunes song with very little work involved! 

 

Discuss about online music services and file sharing on our Music Downloads, P2P & Legal Issues Forum.

Source: The Register

Reactions
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By Redd Ears, Sun 9 Nov 2003 11:34
One more reason to stop using services that sponsor the RIAA.Frown Share your files or switch to services outside the US, like allofmp3 and weblisten. A good place for info about these services: www.museekster.com/legalmusic.htm
By Sherrif, Sun 9 Nov 2003 14:56
thats SIX reasons not to buy an iPOD player......cool
By chsbiking, Sun 9 Nov 2003 15:04
What the hell is apple's problem? This is why their hardware is so damn expensive. They make stupid ass decisions like this. Why do they go out of their way to sell another companies product. Then why they lose money try to turn around and put it off on the hardware buyers. If the RIAA wants it's product sold, then they should sell it. Why would anyone want to invest in equipment to sell another companies product just to break even. I wish someone would spend millions of dollars to help me sell a product and give all the profits to me, and they either lose money or break even. That would be great. Hey Apple my address is......
By emocean, Sun 9 Nov 2003 18:00
Because it SELLS IPODS. So Apple gets to be the apple of the public's eye for offering the music, they increase their 'cool' rating, and they sell more hardware. Why is that so tough to understand? ::
By Crabbyappleton, Sun 9 Nov 2003 18:20
CrabbyappletonApple had a chance to break the stranglehold of the labels and for whatever reason they couldn't do it. Apple could have said the label has to give them a better deal, ie free, to push the labels product for them. Or continue to get ripped off by P2P. I don't get why, other than greed, we have to pay anything for a darn lossy product. But I could see paying Apple for doing the work and providing a service by giving them some money. Damn, how many times are these labels going to get paid for the same crap over and over again. Now we are paying for lossy junk that is essentially worthless. D'oh! Frown
By joex444, Sun 9 Nov 2003 23:26
Hmm....now if you continue to loose money, and assume it is an equal loss, yet your total sales are apparently going up, then your not actually loosing what you think you are. Eventually, Apple would make a profit, but they have to sell more songs than they are doing. Without adding to equipment costs, and the credit card transaction is a constant % of the total amount, as is the amount off to the RIAA, then you are left with a constant amount of each sale. Increase sales, eventually you'll reach that point where you break even and show a profit. Take all your sales from iPod invest in more TV ads, and maybe people will buy more songs, thus you make a profit!
By chsbiking, Mon 10 Nov 2003 16:34
This is what is so tough to understand. Apple may come out ahead on this, but for an example that doesn't work. I state the following. I used to work at a movie theatre and for those that don't know. Basically the theatre keeps none of the money you pay for the ticket. All that money goes back to hollywood. The idea is that they get people in the theatre with the movies and once they're there the theatre will makes it's money off the pop-corn and food they sell. It seems like a good idea but in practice it doesn't work a lot of times. My town is down to one movie theatre. They all had to close up because they didn't sell enough pop-corn, and they couldn't keep any of the money from the ticket sales. The one that is left only stays in business because there's no other theatre to go to. Yet even with a monopoly over 50 miles they're losing money half the time, cause as ticket prices go up, that's less money people can spend on popcorn. They stay in business by raising their prices to like 4 dollars for a cola. Using someone else's product to sell your own may be a good idea, but in the long run you may end up spending a hole bunch of money to front someone else's product for them. Once that money is gone you can't use it to improve on the product your actually interested in selling. The one that makes you money.
By chsbiking, Mon 10 Nov 2003 16:34

[edited by chsbiking on 10.11.2003 16:37]
By MLS, Mon 10 Nov 2003 21:46
All your dollar are belong to the RIAA.

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