Music labels delaying launch of iTunes Music Store in Europe?
 

From this morning's Independent:

:(

There is a two-page feature version of this story in the Review magazine with today's Independent.

Re: Music labels delaying launch of iTunes Music Store in Europe?
 

A particular soapbox subject of mine this one - although I'm not sure of the accuracy of the Independent's journalism.

To sum this whole farce up in a nutshell, the music companies are bricking themselves over any online service that they do not run directly. Look at the info:

UK operated download services are likely to set the price, or have done so already, at around 99p per track. This reduces dramatically the margin the label will make on every title, as you would have paid 3.99 for a CD single. Of which, it's likely that the retailer would keep £1 of this, so the label gets £2-3 per copy sold.

Now they are offered around 50-60p of the 99p download fee, often less, depending on how big the song is. Deduct the manufacture and distribution costs from the £2-3 (circa 30p per cd) and there is still a shortfall of at least £1.70.

The reason that legal download sites are just coming about, is that the labels have realised that the 99p / 99c model is one consumers are happy with. They have been holding out for many years, becuase they saw downloads as an opportunity to make more money, not less.

Now it is clear that they cannot command the £3-4 market via downloads, they are looking at controlling the market directly, and in effect cutting out the distributers such as Roxio, OD2 and Apple.

Effectively they are trying to introduce a cartel, which some would argue the music industry has been for many years already.

I remember meeting, what must have been five years ago now, the then Director of New Media for a very large record label. They knew this was coming (although I'm sure they didn't predict the rise of peer to peer file sharing) and they knew they had to do something about, but greed, as usual, got in the way of progress - and now we're left in this stalemate situation as the labels are back on the search for the holy grail of 100% control with no legal implications to prevent anticompetetiveness.

What has also happened in the US is that the majors, faced with the facts that they were never going to be allowed to control the market in this way, Apple went along and said this was what their product was worth. They did the same thing a year or two earlier, and were sent away, but this time the labels knew he Apple was right - P2P was spiralling out of control and they had little option.

Over here, the labels have watched the model closely. We've seen incredible sucess of ITMS, but it has stopped short of the 100 million downloads anticipated. The labels will want additional sums for this, Apple and the like are unlikely to agree to less favourable terms than they have in the US. Another stalemate.

There is also some underground concern in the music industry about Apple's Digital Rights Management (DRM).

The iPod and iTunes can handle and rip in MP3 with no DRM. Even the AAC files with DRM purchased from iTunes Music Store, can be burned to CD, and effectively ripped in again, to an MP3, WAV or AAC file with no DRM.

The labels don't like this, but here comes another stalemate, becuase consumers don't like to be told what they can do with their music. I want to be able to take the tracks I've bought anywhere I like, the train, the car, the bathroom.......

Using Microsoft's DRM, users are not free to do this in the same way that Apple's customers are. And the labels want to be able to sell you one copy of one song to be played on device - another holy grail.

The labels made some very positive noises at this years' MIDEM conference, and everyone agreed that Apple's iTunes Music Store should be operational in the UK in the Spring.

This then fired up two more problems:

The UK isn't a big enough market on its own to sustain a large scale business model (based on high volume, low margin) that is ITMS.

The EU, by contrast is big enough, and of course as an EU resident, you're perfectly entitled to buy something in one member state and enjoy it in another without any further duty or tax or red tape. So it's obvious - make it a pan-Euro ITMS right?

Wrong! The music companies still insist on releasing identical product in different EU teritories on different dates - often months apart. The pan-EU ITMS would mean that it would damage sales of a product three months from now in Germany, for example, becuase those consumers could download the British release.

Clearly this is a pathetic excuse. The simple answer is, don't release stuff on different dates. Although it's quite legal for me to fly to Germany and bring back, or even have posted this song in a different location, there is no longer any need to have different release dates for the same product.

To sum it all up - the music industry is in a right state right now - low sales, lower margins, high amounts of greed. Apple and the like are likely to be treading a very fine line between constructive negotiation and careful consideration of a formal complaint to the DTI/OFT for their cartel-like behaviours.

The one thing I would say is that I predict that we may not see Apple's offer surface this year, if at all. We are likely to see one or two label owned services crop up however.