Top music labels try to raise prices for downloads

By Scott Morrison in San Francisco and Tim Burt in London
Published: February 28 2005 02:00 | Last updated: February 28 2005
02:00


Some leading music labels are in talks with online retailers to raise
wholesale prices for digital music downloads in an attempt to
capitalise on burgeoning demand for legal online music.

The moves, which suggest the labels want a bigger slice of the
fledgling market's spoils, has angered Steve Jobs, the Apple Computer
chief executive behind the iTunes online music store.

But music executives expressed caution about their ability to push
through unilateral price increases. Among the biggest groups, Universal
Music and Sony BMG are known to be particularly reluctant to disrupt
the market for downloads.

One top label said it would not raise wholesale prices now because the
market was not yet mature enough for an increase. The three other music
labels - which also include EMI and Warner - refused to comment.

Analysts, meanwhile, are warning that price rises could exacerbate
internet piracy, which is thought to cost the industry about $2.4bn
(£1.2bn) a year.

Music industry executives said introductory wholesale prices for
digital tracks had been set low to stimulate demand, but Apple's
success had prompted concern that they may now be too low.

The effort suggests several labels believe demand for online music is
robust enough to withstand higher prices, despite the fact that online
sales are estimated to account for about 2 per cent of total music
sales.

Michael McGuire, analyst at Gartner, said the move could backfire
because consumers who buy music over the internet are accustomed to
paying 99 cents or less for downloads.

Wholesale prices are thought to be about 65 cents. "It seems to me to
be singularly bad timing," he said, adding that an increase could send
fans back to underground services where they could get illegal music
tracks free.



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I wonder how many of you are actually RENTING your music from the "New
Napster" also LOL
Someone must be doing it...

I wonder who ? And it must be a lot of folks that are using Itunes as
well , although I suspect
still a lower number than P2P and it's many formats.

Don't worry , I'm sure you'll be paying 2 U.S. dollars a song before
too long. And then more...

The arrogance here is astounding -- openly discussing price-fixing and
fully expecting not to be smacked down by the Sherman Act?

As it is, the price per track of legal online services is comparable to
the price per track of CDs (~$1 for 1 track versus ~$15 for ~15 tracks)
and the costs are less (no physical media to manufacture; much reduced
distribution/transport costs) so it's difficult to justify charging even
one buck for a downloaded track.

There is no way they can claim to have been selling online tracks below
cost; giving them away with a free penny per track would be below cost,
but merely giving them away might not be.

Anyway, they have to compete with p2p whether they like it or not. You
don't compete with free by raising prices; you compete with free by
charging as little as possible while staying afloat and raising quality.

--
http://www.gnu.org/philosophy/right-to-read.html
Palladium? Trusted Computing? DRM? Microsoft? Sauron.
"One ring to rule them all, one ring to find them
One ring to bring them all, and in the darkness bind them."