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Amazon will get preferential treatment from the music business

Link: Daring Fireball Linked List: January 2008.

Jeff Leeds, reporting for The New York Times on Pepsi’s upcoming billion-song giveaway promotion with Amazon, on why iTunes only has DRM-free music from one major label:

"A senior executive at another record company, who requested anonymity out of concern about irritating Mr. Jobs, said he was prepared to keep copy restrictions on his label’s songs on iTunes for six months to a year while Amazon establishes itself.
"

Mmm, smell that spite.

And that, unfortunately, is why in the long-term iTunes Store will not be the dominant player in music. Music industry executives are not like computer industry executives: unlike the computer industry, they have no long history of having to partner with people they don’t like. Music companies will gladly give Amazon preferential treatment for years simply in order to stop Jobs.

Comments on this entry are closed.

  • http://stefpause.com/ ManxStef

    Hmm, I’m not so sure.
    The rumours of Apple setting up their own label are true, I think. If they can get a few major artists to switch, which I’m sure they will, then things get interesting.
    The fact is, the major four are having a tough time of it and have been for the past few years. (Certainly, EMI’s in the process of destroying itself, with a little help from Guy Hands.) Artists are realising that the whole distribution chain has evolved from high-street chains to online retailers for CDs and Apple (plus others) for digital, so why exactly do they need a major any more? The majors are feeling the squeeze of this; because they no longer control this chain tightly, their bankrolling of weak artists who they used to be able to pump up and force shelf space for no longer holds true, so they lose a huge amount of money if they bet on the wrong horse. And those who say that majors have a knack for always betting on the right horse are entirely wrong. They used to be able to limit the damage, now they can’t.
    The majors entire disastrous handling of widespread copyright infringement hasn’t helped, either. The fact that they feel spite against Apple, who saved their asses completely, won’t help them in the long run if they keep losing relevance with their inability to deal with the changing market. Going with Amazon may be a good fit, but how they’ll handle this in the future remains to be seen.
    There’s no doubt that Amazon’s in a good position, in that they control both physical and digital distribution, and the majors better be careful in this respect, as their petty attempts to hamstring Apple mean that Amazon may have them over a barrel for the foreseeable future. (Unless, of course, they’ve already signed-off on the flexible digital pricing gambit that Apple refuses to budge on.) However, there’s still nothing outside of the US for Amazon digital downloads and they need to sort this out fast, before Apple get their action plan together.
    Which leads to what I think will be Apple’s next moves. In combination with Apple setting up its own label, I think they’ll sort out some sort of “micro label” distribution channel. In fact, I’ve got a feeling they’ll buy out, or create a competitor to, TuneCore. Indies big and small were clamouring for years to get onto iTunes, CDBaby and TuneCore made it happen and they’re reaped the rewards. They’ve made some artists a hell of a lot of money: with Tunecore’s flat annual fee plus full royalties to the artist, people like Frank Black and Ziggy Marley have chosen to go this route with excellent results. Deals with the AIM and similar indie label associates would help cover the middle ground, which is where the battle will really be fought. Get these guys onside and the majors will struggle, they’ve typically been “breeders” for major talent and this channel will become more important now the major labels have less insulation when they bet their financial investments.
    That leaves Apple’s own label to handle the big ticket artists and to assist the emerging artists from the indies. Hmm, I wonder whether there’s music in the air?
    I think if Apple play this right over the next few years they’ll have the pleasure of finally laying the majors to rest, completing the shake up of the industry while making themselves a ton of money. We will see.