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Apple and music label have high hopes that new music offerings will yield big profits.

There's some moving and shaking going on between Apple and the major music labels.  Preceding the release of the new 3G iPhone, Apple is looking for new ways to cash in on its growing popularity.  And music labels are hoping to get perks of their own, by haggling with Apple to loosen some of its long time policies which have irked the labels.

First, Apple and the labels are in talks for possible over-the-air downloads.  Previously, the iPhone could not directly download songs via its cellular broadband network.  However, thanks to faster speeds from the 3G networks, it should be possible at last to download songs on the go. 

Standing in the way are the music labels who are arguing that Apple needs to pay a higher price for over-the-air downloads, as opposed to standard downloads.  The labels current sell standard downloads wholesale for 70 cents, which Apple in turn resells on its iTunes store for 99 cents.

Both Apple and the labels are eager to cut a deal, though.  Apple's recent deals have grown the total number of users reached by its carrier networks from 153 million to 575 million.  Even if just a scant fraction of these users purchase the iPhone, it will represent an even more significant market to the labels as time goes on. 

And Apple has concerns of its own.  Many phone manufacturers are moving aggressively to push music compatible phones, many of which come with music packages.  If Apple falls behind in its quality of offerings, it will likely pay the price in market share.  Having already struggled with poor sales in the European market, Apple is eager to safeguard its back against competitors such as Nokia and Sony Ericsson.

Both Apple and the labels are also eager to expand their offerings for ringtones, a particularly lucrative market.  Currently Apple offers a limited selection of ringtones via a 99-cent ringtone upgrade to various tracks on its iTunes store. 

Apple also looks to expand its ringback selection.  Ringbacks are like ringtones, except they play for the person calling your phone, in place of the standard "ring ring" noise.  Ringbacks may command an even higher premium wholesale price than ringtones, raising the possibility of ring backs in the range of $2.49 or more.  Some complain about the recording industry's creative pricing tactics for ringtones and ringbacks, but they keep selling relatively well.

The labels say that Apple is very eager to work towards a deal.  Says one label executive involved in the talks, "They want a big launch in June."

Labels are taking the chance to use the negotiations as an opportunity to try to push Apple to let them adopt a more flexible price structure, as opposed to the current model, a flat price of 99 cents per song.  Some fear this would lead to price gouging, but the major labels insist they would only charge more for new hit tracks, and would charge less than 99 cents for older tracks.

Apple does currently allow the labels to set their own prices for full album downloads.  This allows the labels to employ a favored tactic, throwing in art, bonus tracks, and other content, in order to raise the price a few more dollars.

There is some evidence that Apple may consider loosening its price structure.  It has allowed HBO to charge $2.99 for its TV episode downloads.  All other TV downloads are priced at $1.99.

In a more unlikely side of talks, it is reported that Universal Music Group is pushing Apple to offer subscription music services.  Such a plan could allow iPhone users with unlimited music from the labels for a one or two-year subscription period.  Sources familiar with the talks say that the labels think the service is worth much more than Apple does, and they're unlikely to reach a compromise.  However, if they did it could provide a competitor to the similar Nokia "Comes With Music" service that offers unlimited free downloads to keep.  Apple will likely eye the success of this risky program, which has been criticized as unprofitable, before it makes any big moves.

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Apple has a runaway hit for now...
By amanojaku on 5/20/2008 10:59:18 AM , Rating: 1
If Apple falls behind in its quality of offerings, it will likely pay the price in market share.

Ha! I love many Apple products (still grieving over my stolen PowerBook G4 and salivating over a MacBook Pro) and even I have to admit iPhone owners are mindless zombies. My current girlfriend is one of many people who bought an iPhone as quickly as it came out and barely uses it. Doesn't stop her from raving about it; just don't ask her if it's "useful."

It would have to take some SERIOUS screw-ups from Apple to loose potential customers who are already dead set on getting one. To paraphrase a reviewer of Indiana Jones 4:

"I can say what I want about it and you'll still buy it anyway because it's an iPhone."

By Locutus465 on 5/20/2008 11:04:38 AM , Rating: 5
I have to admit the iPhone is quite the sexy device and I would like to see more devices on the market integrate some of the design idea's... That said, I still find my self glad I use a PPC smart phone rather than an iPhone.

With my PPC phone I've been able to use multiservice chat clients, have any mp3 be my ring tone, check my email yada yada you name it for long before there even was an iPhone. While I'm sure there will be many more apps coming down the pipe for iPhone, the fact is there are already just so many more available for Windows Mobile it's not even funny. Plus being a programmer by trade, already owning a copy of Visual Studio.Net 2005 if I feel the need to write my own PPC app I can go ahead and do that with no need to buy extra SDK's (or a mac).

The iPhone is a good well thought out product... But at least for me Windows Mobile makes so much more sense :)

RE: Apple has a runaway hit for now...
By masher2 on 5/20/2008 11:10:09 AM , Rating: 3
> "just don't ask her if it's "useful."

Oddly enough, I've never had an iPod, and haven't owned an Apple computer since the early 1980s, yet I consider my iPhone to be by far my best tech purchase last year. It's far more useful than previous Smart Phones I've owned.

If you send thousands of text messages a month, you'd probably be better served by one with a fixed keyboard, but for the rest of us, the iPhone is the best product in its class.

RE: Apple has a runaway hit for now...
By Brandon Hill on 5/20/2008 11:15:19 AM , Rating: 2
I have to agree with you there. I've had a 5G iPod and a 5.5G iPod. They were both pretty "meh" to me... nothing spectacular.

But my iPod touch simply blows me away and is simply one the best pieces of tech I have ever purchased. In fact, I've been so impressed with my iPod touch and its user interface that I have been increasingly anxious to try out a Mac OS X system for desktop use.

And that is EXACTLY what Apple is betting on...

RE: Apple has a runaway hit for now...
By peritusONE on 5/20/2008 12:02:02 PM , Rating: 2
I find it weird that you not only purchased a 5G iPod, but a 5.5G iPod, and both were simply "meh", and then you decided to spend even more money with Apple.

My first mp3 player was the Nano a couple of years back, and it was definitely "meh", so I moved to Creative, and eventually to the Zune.

RE: Apple has a runaway hit for now...
By Brandon Hill on 5/20/2008 12:12:21 PM , Rating: 2
Steve Jobs works in mysterious ways... ;)

That being said, if you can't see the huge leap from a traditional iPod to an iPod touch, and why someone would be attracted to such a package, then I don't know what to say.

RE: Apple has a runaway hit for now...
By xsilver on 5/20/2008 1:02:53 PM , Rating: 1
Hey brandon, you actually never say you "purchased" said ipods you might want to make that clear before someone starts crying "OMG Toms hardware cash for comment!"

Also with people using the ipod touch, are you using it mainly still as a music player? I've ditched my ipod for my phone for at least a year now. I can only see the benefits for viewing video but then I would think the space limitation would get in the way?

RE: Apple has a runaway hit for now...
By JasonMick on 5/20/2008 1:08:01 PM , Rating: 2
I think when most people say they've "had" something it implies that they purchased it. DailyTech has obviously made its stance clear on those kinda shenanigans. Its pretty ridiculous of you to try to infer such a thing.

As to your actual points, the iPod Touch at 32 GB should be plenty of memory for most people (well okay maybe not for my music collection!). Can't comment on the other aspects, since I don't own one.

By xsilver on 5/20/2008 1:17:30 PM , Rating: 2
I never inferred it, I just wanted to make it clear so that no one else would infer it. One of the posts above reminded me of the article you guys wrote about it. (co-incidently it was nvidia trying to score brownie points by giving away ipods if i remember right)

RE: Apple has a runaway hit for now...
By Brandon Hill on 5/20/2008 1:23:03 PM , Rating: 2
Yes, I purchased all of my iPods -- and I purchase ALL of my electronics, computers, printers, mice, keyboards, etc. I didn't know that I had to preface my posts with every item that I purchase, but there it is for you in writing.

And yes, my 32GB iPod touch is my sole music player. I take it with me in my car and hook it up to my audio system via an AUX cable. And I use it around the house (or wherever I'm at) to check email, browse the internet, play games, chat on AIM/MSN via Meebo, and post in the DailyTech comments section ;)

RE: Apple has a runaway hit for now...
By xsilver on 5/20/2008 1:51:30 PM , Rating: 1
Are you saying the benefits of the touch come from the WiFi and not the UI?

My phone has WiFi and I do exactly the same things you mention doing on your touch albeit with a smaller screen. Also only has 8gb, but I can swap over unlimited sd cards if I want.
Basically I'm trying to understand why small media devices arent dying off and being taken over by phone + ipod type devices. Everyone has a cell phone these days so carrying too many devices isnt really nessesary.

Also just to re-iterate about the cash for comment quip. I dont think the DT staffers need to preface any comment they make about a product with an obligatory disclaimer but you did mention 3 ipod products in a single sentence and ending in super praise. Knowing the apple haters, they would probably attack anything they can.

By Brandon Hill on 5/20/2008 2:03:23 PM , Rating: 2
The UI is the key, not the WiFi. The UI is what makes the iPhone and the iPod touch superior to similar devices IMHO.

Everything is so simple and intuitive that a beginner could jump in and feel right at home. I thought that typing would be a chore on the device, but I find it to be very easy and I actually prefer it to typing on my Eee PC most of the time.

The implementation of email and the Safari browser also get big thumbs up from me.

RE: Apple has a runaway hit for now...
By isorfir on 5/20/2008 12:35:43 PM , Rating: 4
Pfft, you guys with your 5G iPods and iPod touches. I still have my original 32MB Diamond Rio PMP300. It does everything I need it to, like play music and run out of room after 8 songs.

RE: Apple has a runaway hit for now...
By xsilver on 5/20/2008 12:58:30 PM , Rating: 5
Why have the luxury of 8 songs when you only need 1?


By Omega215D on 5/20/2008 11:50:03 PM , Rating: 2
you're horrifying.

By djkrypplephite on 5/21/2008 5:11:58 AM , Rating: 2
I agree. iPods are nice, but the Touch is great. Nice screen, great battery, solid audio quality. I rarely watch movies on it simply because it's a pain in the ass to rip them and then format them to mp4 and take up more hard drive space in the process, but if I want to, it's definitely there. The storage doesn't bother me too much, either. I've found it's fine for the music I listen to.

I have about 30 gigs of music, but I only ever listen to a select few of my favorite bands, so it's not really a big deal. Anyhow, I have been very impressed with the touch as well. I didn't go the iPhone route mostly because it was stuck on AT&T and I've been quite satisfied with my $99 everything plan on my Palm Centro, so I carry them both and I can do just about anything. Plus the storage on the iPhone is pretty weak. If AT&T wasn't such a sucky carrier and lowered their outrageous prices, (and I pay $100 a month) I would probably get one. But we'll see when that day comes. I wait for AT&T to develop a cheaper and better plan than Sprint and a 3G iPhone with 16 and 32 GB storage options, and then I'll consider. (I know there's 16, but 32 would be nice, we'll see the price difference.)

RE: Apple has a runaway hit for now...
By amanojaku on 5/20/2008 11:23:20 AM , Rating: 2
Good points. I didn't mean this as an attack on the iPhone, but on the owners who want it just because it's an iPhone. Those owners seem to outweigh the people who actually make the most of it. Most people I've seen use it as an MP3 player and phone, either of which can be had for as little as $100 (probably less, if you don't mind skimping on features and design.)

The informed consumer who shopped around, weighed the advantages and disadvantages, and then bought an iPhone did the right thing.

By Master Kenobi on 5/20/2008 12:42:47 PM , Rating: 2
Indeed. While I can not get an iPhone (Doesn't work on corporate network, and for personal I use Verizon) I do have an iPod touch (Compliments of Best Buy warranty replacement for my G2 Nano). It's ok, but I find its use is severely limited until you start ripping your own movies and what not to work on it.

By afkrotch on 5/20/2008 12:48:47 PM , Rating: 2
Move to Japan, buy one of their phones. iPhone, the trash.

RE: Apple has a runaway hit for now...
By kamel5547 on 5/20/2008 11:25:43 AM , Rating: 3
even I have to admit iPhone owners are mindless zombies.

You know its funny, this made me think of our office's die hard mac person. He pushes and pushes macs, and yet he dual boots Windows XP because he can't do his work without it.

It just cracks me up that with all his raving about how much better Apple products are, they don't meet his actual needs.

RE: Apple has a runaway hit for now...
By amanojaku on 5/20/2008 11:44:32 AM , Rating: 2
He pushes and pushes macs, and yet he dual boots Windows XP because he can't do his work without it.

What are you talking about? What can't he do?

I can use a Mac do do every work related function that I need. My long-ago stolen PowerBook replaced four Windows desktops; damn thief left those and they were Shuttles (maybe he was picky.) MacOS has office productivity suites, a UNIX shell for software development and server daemons, and multimedia applications. The Achilles heel is Active Directory; MS refuses to open that up to other operating systems, including Linux. The only thing missing is wide support for games, but you were talking about work...

BTW, I was ragging on certain iPhone owners, not Mac owners.

By Locutus465 on 5/20/2008 11:51:27 AM , Rating: 3
At my office you'd never be able to do everything you need to do on a mac... The job requires connecting to remote servers using random obscure VPN clients that don't nessisarly (and often do not) have mac ports, also a good RDP client is required (perhaps mac has one?) as well as compatibility with other remote admin apps like vcn (ok, mac has that), PC anywhere (probably mac has that), Radmin (not sure here, didn't care to find out if there's a port). Additionally some of our VPN's actually require specific versions of antivirus to be installed on the client PC (annoying, but true).

If all of this doesn't trip you up, we're a medical software company. Obviously as part of the job your PC needs to be compatible with all of our utilities and applications... Mac's aren't and won't be any time soon. Oh yes, there's a lot a Windows PC can do in a business enviornment that a mac can't...

By theapparition on 5/20/2008 12:02:16 PM , Rating: 4
Not all businesses use "just" an office suite (Wordprocessor, Spreadsheet, etc). Many have custom ERP systems, databases, and software that won't run on either Linux or Mac.

So what can't you do.........where do I begin! I can probably list over 100 apps just from memory.

Until Macs can achieve lower TCO over Windows based PC's, you really won't see them make any inroads.

By afkrotch on 5/20/2008 12:56:32 PM , Rating: 3
Just cause you can do work on it, doesn't mean others can. We use Namis, Visual Weather, MarkIVB, TAWS, N-TFS, RAOB, AOS, ModCV, and a slew of other weather forecasting software built around Windows.

I buy no means use those programs myself, I'm a Sysadmin. I need access to AD.

By Magnus Dredd on 5/21/2008 4:01:45 PM , Rating: 2
I have a work-issued Tmobile Dash.

The web browser is so horrible that I lug a laptop around to use for web browsing.

The push email has NO setting for the number of emails you want to retain. This means that it's not uncommon to want to view a particular email and it's no longer on the phone. This means that I have to use exchange webmail, which is nearly unusable on the phone.

After spending 10 or 15 minutes trying to view an email using Outlook Web Access (exchange webmail), using the web browser on the dash, I walked into an AT&T store and pulled it up on the display iPhone in like 1 minute.

The Dash's buttons are probably easier to use than the iPhone, although since I use the Dash all the time and have only used an iPhone for 10 minutes I might get used to it.

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