If Apple boss Steve Jobs has his way, 99 cent downloads are here to stay.
The CEO lashed out at "greedy" record companies on Tuesday during a speech at an Apple Expo in Paris, saying that their demands for a price increase for iTunes downloads is a money grab that could encourage piracy. The labels snapped back Wednesday (September 21), accusing Jobs of a double standard.
"Customers think the price is really good where it is," Jobs said, according to an Associated Press report. "We're trying to compete with piracy — we're trying to pull people away from piracy and say, 'You can buy these songs legally for a fair price.' But if the price goes up a lot, they'll go back to piracy. Then, everybody loses."
Jobs said that labels are already making a higher profit on song sales through iTunes than on CDs by eliminating or decreasing the costs of manufacturing and marketing the music. "So if they want to raise the prices, it just means they're getting a little greedy," Jobs said.
According to the AP report, as their contracts with iTunes begin to expire, major labels such as Sony BMG and Warner Music Group are looking to improve the terms of their deals, which typically call for songs to be sold for 99 cents each. Spokespeople for the four major-label groups — Sony BMG, EMI, Warner Music and the Universal Music Group — declined comment or could not be reached at press time.
Speaking on condition of anonymity, one label executive said Jobs' desire to keep pricing at 99 cents had a very simple explanation: "It helps him sell iPods. When he started iTunes, he broke through that psychological barrier that consumers had and made a lot of dough doing it, but it seems like he has a monopoly and he's become the Wal-Mart of the Internet, and he wants to retain that monopoly."
The source said the comment by Jobs was likely aimed at provoking a reaction from the music industry, which is generally in favor of variable pricing, i.e., higher prices for hot, current artists and lower ones for less popular or older material.
"Music is art; it's not a commodity," the source said. "Things that are more relevant command more money. The idea of saying it should all be 99 cents is absurd. Variable pricing is the norm in the music business and every business — even the iPod business."
Apple has sold more than 22 million iPods to date, bringing in nearly $6 billion, while the iTunes store has sold more than 500 million songs since launching in 2003 and accounts for 82 percent of all the legally downloaded music in the United States.
An Apple spokesperson had not returned calls for comment at press time, but another high-ranking label source said the desire for variable pricing is not about greed, but about Jobs' lack of desire to "add something more complex to the system. Any retailer should be able to lower or raise prices if they want to," the source said, adding that there is a "little bit" of money to be made selling songs for 99 cents.
"It's created a good option for consumers to get a legitimate form of music in a digital form," the source said. "And [Jobs] has done a great job of spurring that. But there are other options in the mix now and other ways of acquiring music legitimately. Just as he would reserve the right to adjust the prices of his hardware — which he has and which he's selling a lot of on the back of our content — why should we be denied the same opportunity?"
For complete digital music coverage, check out the Digital Music Reports.