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Engst: Apple Punished for iTunes Success
Wednesday, February 6th, 2008 at 3:00 PM - by John Martellaro
Steve Jobs once claimed that by the end of 2007, half of all the song on iTunes would be free of DRM. That hasnt happened, according to Adam Engst at TidBITS on Wednesday because the labels are using Amazon as leverage against the success of iTunes.
The music labels have had mixed feelings about iTunes. Despite the financial success of iTunes that has saved the music industry from the dramatic decline in CD revenues, they still want to have it their way, especially with pricing.
"...the labels are unhappy that the iTunes Store has become the dominant player in the online music world, and theyre desperately trying to help Amazon MP3 become a viable competitor," Mr. Engst explained. "To that end, all four major labels have signed deals with Amazon for DRM-free tracks, whereas Apple hasnt been able to negotiate similar terms from the Universal Music Group, Warner Music Group, or Sony BMG."
Its true that the labels negotiated terms that were agreeable to them in the past, and they benefitted. However, now they want more in terms of control and pricing, and they only way to get that is a carrot: if Apple wants DRM-free music, like that now being offered at Amazon, Apple will have to change its tune.
"The question is what Apple will have to do to get DRM-free tracks: return a higher percentage of the profits to the labels, abandon flat-rate pricing, or offer a subscription service," Mr. Engst wrote. "Or perhaps Apple will come up with another solution along the lines of using movie rentals in the iTunes Store to make up for disappointing movie sales and a limited selection - if life hands you lemons, rent a lemonade stand."
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