October 6, 2008
Apple to pull iTunes plug?
American music publishers have issued a request for an increase in artist royalties to 15c per track from 9c per track – an increase of 66%. This has prompted Apple – reasoned protector of all things profitable - to threaten closure of its successful online music store, iTunes.
(Link)
iTunes VP Eddie Cue said:
"If [iTunes] was forced to absorb any increase in the royalty rate, the result would be to significantly increase the likelihood of the store operating at a financial loss - which is no alternative at all. Apple has repeatedly made it clear that it is in this business to make money, and most likely would not continue to operate [iTunes] if it were no longer possible to do so profitably.”
But with each track costing US$0.99, surely Apple could absorb a 6c increase?
Well it’s not that straightforward. Apple purchase each track from the record company at 69c, pay network fees of 5c, transaction fees of 10c, operating expenses of 5c and make 10c profit per track.
So a 6c artist royalty increase per song would cut their margin by 60%.
But you can be sure that the blast of cold air you’re feeling is not hell freezing over. The threat to close iTunes is merely a tool to put pressure on both the Copyright American Board, who will decide on the above request, and the record companies who license the music to come to some sort of agreement with the music vendor.
Who will blink first? Apple doesn’t want to pass any royalty rise on to the end-user as it would take the track cost over the 99c psychological price point. Neither do they want to cut their profits in any significant way, naturally.
So can they effectively blackmail the record companies to absorb the cost themselves? It’s very exciting.
But why should we pay?
We all know someone who rips off the music industry. Perhaps it’s you? But worry not - the music industry is getting the message.
Four major distributors - EMI, Universal, Sony and Warner – have signed a deal with social networking site MySpace to make free ad-supported music available online to all of us. It is plausible that the entire back-catalogue of artists like U2, REM and The Beatles will be uploaded for us to stream to our PCs. The Times writes that it is an acknowledgement from the industry that it is no longer possible to force people to pay for music and is an indication that they are willing to look at a different model.
(Link)
And in another threat to Apple’s dominant position, Nokia have announced a new music download package to be released with their Nokia 5310 handset. The “Comes with Music” package will allow users to download unlimited songs from the Nokia Music Store to their computer and sync with their phone for the duration of their 12 month contract.
The phone is due out in Britain in October but there are no pricing details available yet.
Tero Ojanperä, executive VP of the Nokia Entertainment & Communities business said:
"This is a new proposition that requires a new way of thinking from the music industry.”
And isn’t it about time?
The Apple Assault continues
One more piece of Apple-related news for you – or should I say one more “slice”? Of Apple? Eh?
Anyway, Norway is the unlikely source of its discomfort this time. A two-year campaign by the Scandinavian state, with able support from Finland, Denmark, France, Germany and the Netherlands, aims to force Apple to open its iTunes store up to other music players.
Currently, if you buy music from iTunes, you can only use it on a non-Apple player if you first copy it to a CD and then rip it back to your computer in an open-source format like mp3.
Norwegian consumer ombudsman, Bjoern Erik Thon, said:
“It’s a consumer’s right to transfer and play digital content bought and downloaded from the internet to the music device he himself chooses to use. iTunes makes this impossible or at least difficult, and hence, they act in breach of Norwegian law.”
I’m no Apple apologiser but surely, in a free market, a company can market music for whatever music player it likes?
Lots of surging as fraud losses increase
Let’s leave the music scene behind and turn our attention back to fraud. ClearMyMail have announced a 246% “surge” (which is a very urgent-sounding, fast-moving noun) in spam emails directly relating to troubled financial institutions. (Link)
Dan Field, MD of ClearMyMail said:
"This is a particularly cruel batch of phishing emails that are looking to target worried and vulnerable UK banking customers."
The news comes as the UK Payments Association, APACS, reports record fraud losses using UK debit and credit cards. Chip and pin was introduced in the UK to help reduce card fraud. But the United States have not seriously considered a similar system much to the frustration of APACS.
An unknown spokesperson lamented:
“We have worked with the Home Office to try to exert pressure [on the US]… It is such a fragmented market, with no one payments body.”
Plastic card fraud sat at £301.7m (about $530m) for January to June 2008 – an increase of 14% on last year. Online banking fraud figures are also on the increase with £21.4m ($37.7m) making its way to criminal’s pockets. Phishing attacks have almost tripled in frequency to over 20,000 reported instances in the first half of the year.
Compare these figures to losses in the (chip and pin-enabled) UK where retailers losses are down a third since 2005 and fraud on lost and stole cards is at its lowest level for ten years.
There is a blindingly-obvious moral to this story.
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