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Entries in iTunes (4)

Wednesday
Sep052007

Is the Party over for Apple?


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Recently NBC announced that it would not be renewing its contract with Apple to sell its video content through the iTunes music store. In a move that has surprised industry watchers, NBC has chosen to use Amazon's Unbox service as an outlet for some of its most popular shows. The Office, Heroes and 30 Rock will all be migrating from iTunes to Amazon's digital video download service on TiVo. These shows will be available for download on Unbox the day after they are shown on the network.

Amazon hopes NBC Universal’s inventory will give Unbox a much-needed boost. Unveiled in September 2006, the service is a distant competitor to iTunes and has suffered from scattered service problems, including lengthy waits for downloads. While Amazon has solved many of the problems, Unbox is still limited in one important aspect: It is not compatible with Apple’s iPods, which are by far the most popular portable video players.

NBC had been trying unsuccessfully to negotiate a new pricing structure with Apple before announcing that it would not renew its contract. Apple sells episodes of television shows for a flat $1.99, with movies priced at $9.99. While the prices on Amazon will remain the same for per episode downloads ($1.99), NBC plans to offer "deals" on bundled content for as yet unannounced prices. Taking an obvious swipe at Apple, NBC praised Amazon on the new deal:
“Amazon is a company that understands the value we provide as content owners to its business,” said Jean-Briac Perrette, president of NBC Universal Digital Distribution.

In addition to new episodes of returning series, NBC Universal said it would allow Unbox customers to download free — in advance of their network premieres — the pilot episodes of new series, including a “Bionic Woman” remake and “Journeyman,” about a man who travels through time to help people in trouble.
"We are excited to bring NBC Universal shows like the award-winning The Office, 30 Rock and Battlestar Galactica to our Amazon Unbox customers," said Bill Carr, Amazon.com Vice President for Digital Music and Video.

NBC video programming had accounted for 40% of Apple's iTunes offerings. It is not yet clear whether the move by NBC will result in iPod users moving to Amazon's Unbox and following the "content" or NBC will simply be depriving itself of the vast audience (and revenue) of the iTunes faithful. In a statement about the controversy with Apple, NBC issued a statement which in part accused Apple of a strategy designed to boost iPod sales.
"It is clear that Apple's retail pricing strategy for its iTunes service is designed to drive sales of Apple devices, at the expense of those who create the content that make these devices worth buying."

Whatever happens, one thing is obvious, Apple is losing its ability to get companies to go along with its pricing strategy. If NBC is willing to jump ship, will any of the others follow? Is the era of iTunes dominance coming to an end?

 


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Monday
Sep032007

iTunes Under Pressure


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Apple's iTunes is the undisputed leader in downloaded digital music with a whopping 76% market share. It is also #3 in overall music sales behind Walmart and Best Buy, having recently surpassed Amazon.com. It has sold more than 100 million iPods, which is the only device that works with iTunes, and has refused to allow other music players access to the iTunes music library. No other company has more influence over the delivery of digital music than Apple.

In order to sell music Apple has contracts with all the major music companies like Universal, Sony, Warner and EMI. Because of its dominance Apple has been able to make deals with these companies setting the price of digital downloads at 99 cents per copy. Many of its suppliers would like to see a flexible price structure that charges more for new releases and less for older songs. Apple has resisted this, claiming more complex pricing would discourage customers from purchasing music online and increase the temptation to look for free pirated (illegal) music. Now as some of these contracts come up for renewal there seems to be a reluctance to just do as Apple says.

Universal, the world's biggest music corporation, has announced that it will not renew its contract with Apple to sell its music through the iTunes music store. Instead, Universal said that it would market music to Apple at will, a move that could allow Universal to remove its songs from the iTunes service on short notice if the two sides do not agree on pricing or other terms in the future. This may just be posturing by Universal in an attempt to pressure Apple into making concessions or Universal may decide to look elsewhere to distribute its music. Apple however does have a deal with EMI to sell music without copy protection for a slightly higher price of $1.29.

Apple not only sells music online but it has a significant offering of video content as well. In a move that seemed to echo the actions of Universal, NBC also announced that it too will not be renewing its contract with Apple. NBC is the biggest provider of digital video content on iTunes, accounting for about 40% of all downloads. It offers popular shows like Battlestar Galactica, The Office and Heroes. In all, NBC offers some 1,500 hours of news, sports and entertainment programming and earns about $200 million a year from digital downloads through iTunes. Without a new contract Apple will no longer be providing these programs after the end of the year. As with its digital music Apple offers a simple pricing structure for video content. Episodes of television shows sell for $1.99, with movies priced at $9.99. NBC, like Universal, would also like to move to variable pricing which Apple has resisted.

In a move seen as challenging iTunes dominance, Universal has recently announced that it will sell online music without copy protection through existing digital music retail services like RealNetworks and Wal-Mart, nascent services from Amazon.com and Google, but not through iTunes. NBC has also announced Hulu.com, a venture in partnership with the News Corporation to build a video portal to compete with YouTube and presumably iTunes as well.

The big question is whether iTunes' virtual monopoly on digital downloads can be broken. It certainly seems improbable that Apple's current dominance in the market, through its sales of iPods, can be sustained over time. Apple is not a content provider, it only provides a medium for companies like Universal and NBC to sell its products. If the providers choose to leave Apple and provide their content elsewhere, where does that leave Apple? So far the contracts with Apple have been financially rewarding but as new technologies emerge and new alliances are formed, there is no guarantee that the status quo will be maintained.

 


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Thursday
May312007

DRM-Free Music comes to iTUNES


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Apple has released a new version of iTunes (7.2), its popular online music store called iTunes Plus. The big news here is that the new version now sells DRM-Free music. DRM or Digital Rights Management (better known as copy protection) is the software that is embedded into downloaded music which restricts how and where the music can be played. For instance music previously purchased from the iTunes music store could only be played on an iPod or an authorized computer. It could not be played on any other music player and could not be transferred to your friend's computer or a file sharing service because it would have to be "authorized" by you each time to be played. Apple has now removed this copy protection from a limited number of songs, those sold by the EMI group, and has urged others to follow suit. See the Apple announcement for complete details.

The new DRM-Free music vs the old DRM music:




  • Will cost more - $1.29 vs $0.99

  • Will be higher quality - 256 kbps vs 126 kbps

  • Will be upgradeable for $0.30 each or $3.00 per album from the old music


iTunes Plus is launching with EMI’s digital catalog of outstanding recordings, including singles and albums from Coldplay, The Rolling Stones, Norah Jones, Frank Sinatra, Joss Stone, Pink Floyd, John Coltrane and more than a dozen of Paul McCartney’s classic albums available on iTunes for the first time. London-based EMI, is the world's third-largest music company by sales. Barney Wragg, the global head of digital music at EMI, said the iTunes Plus launch capped six months of work to convert most all of the company's digital catalog into a DRM-free format.

"Our customers told us two things deterred them from buying digital," Wragg said. "They weren't 100 percent confident that the songs they'd purchase could play on their devices, and they wanted something closer to CD quality."


 


"We definitely think it's the right thing to do," Eddy Cue, Apple's vice president of iTunes, said. "In this case, EMI's a leader and we think others will follow."

Before you get too happy about the possibilities this new DRM-Free music is not a license to spread unlimited copies of your music all over the place. Apple will embedded inside each music file your full name and e-mail account. This information will be included in any copies made, allowing for a trail back to the original owner.

Earlier this year, Apple CEO Steve Jobs called on the world's four major record companies to start selling songs online without copy-protection software. He expects that more than half of the 5 million tunes sold by Apple will be DRM-Free by the end of the year.

One minor drawback is that the music sold on iTunes is in the AAC format which some players don't recognize, this would mean that some users may have to convert their music to the MP3 format which is universally accepted.

 


 


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Friday
Feb092007

Apple Wants DRM-Free Music


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In a surprising move Steve Jobs the CEO of Apple Inc. suggested that DRM (copy protection software) should be removed from music sold online. He said that ditching DRM is "clearly the best alternative for consumers, and Apple would embrace it in a heartbeat". He is joined in this sentiment by Dave Goldberg, the music manager at Yahoo! who has repeatedly called for the removal of DRM. Real's Rob Glaser said that "DRM-free purchases is an idea in ascendance and whose time has come."

The EFF(Electronic Freedom Foundation) an online consumer advocacy group "agreed wholeheartedly with Jobs" and even went one step further in suggesting that Apple remove the DRM on the independent label content in the iTunes Store:
We agree wholeheartedly with Jobs, since EFF has been making exactly the same points for several years now. As a first step in putting his music store where his mouth is, we urge him to take immediate steps to remove the DRM on the independent label content in the iTunes Store. Why wait for the major record labels? Many independent labels and artists already recognize that DRM is a dumb idea for digital music, as demonstrated by the availability of their music on eMusic. Apple should let them make that music available without DRM in the iTunes Store now.There are also bigger lessons here for policymakers. The harm done by DRM could be reduced by reforming the DMCA to allow the evasion of DRM for lawful purposes. Moreover, Jobs' remarks are another reason for policymakers to reject proposed government DRM mandates, which would only serve to further harm innovation, consumers, and artists. Clearly what's needed in the digital music world is less, not more, DRM.

This has put Steve Jobs squarely in the camp of those opposing the RIAA (Recording Industry Association of America) which uses DRM to protect its music from piracy. In response to the challenge by Jobs the Association fired back saying that Apple should open up its anti-piracy technology to its competitors:

Doing so, argued Mitch Bainwol, chairman and chief executive of the Recording Industry Association of America, would eliminate technology hurdles that prevent music fans from buying songs at Apple's iTunes Music Store and playing them on devices other than the iPod.

"We have no doubt that a technology company as sophisticated and smart as Apple could work with the music community to make that happen," Bainwol said in a statement.

The major record labels - Universal Music Group, EMI Music, Sony BMG Music Entertainment and Warner Music Group - control some 70 percent of the music market and have maintained that DRM safeguards are needed to stave off rampant piracy.

Most industry analysts agree that DRM is hurting digital music:

"Clearly, DRM is not working," said Ted Schadler, an analyst at Forrester Research. "It sends a message to the customer that 'we don't trust you."'

Phil Leigh, senior analyst at Inside Digital Media, suggested removing copy restraints would give the labels' music more exposure.

"Digital music has entered the mainstream," Leigh said. "The restrictions (the labels) require Apple and others to carry are preventing the market from developing to its full potential - it's retarding the growth."

Some however question the motives behind Jobs' statement. The iTunes store which sells music only for iPod users, because its built in DRM prevents other music players from playing those songs, has come under criticism in many European countries. They have been pressuring Apple to open up its iTunes store to manufacturers of other digital music players. Apple has so far resisted this. Steve Jobs could be trying to deflect the sentiment that Apple is engaging in monopolistic and anti-competitive behavior.

Columnist John C. Dvorak says: Jobs is no idiot and after already proving that selling music online is a money-maker you'd think the big labels would pay some attention to him when he tells them to get off this DRM nonsense. He argues that the music industry is strangling itself.

According to Boldrin and David K. Levine, both professors of economics in Arts and Sciences at Washington University in St. Louis:
“Imposing copyright protection and anti-piracy restrictions, such as the DRM software, on this flourishing economic activity is a costly, silly and eventually useless tentative to block economic progress. To preserve the old rents of a few incompetent people who cannot, or are not willing to, adapt to the new ways of doing business is not the goal of a good property right legislation.


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