Big Music's Way-Way Factor

By Jon Newton 8/23/05

More than anything, “labels want to see the iPod become interoperable with music services other than iTunes” and "It's a monologue with them," a label executive who asked not to be identified says. "They pretty much say, 'This is what we want to do,' and if you disagree with them you're an idiot. It's like dealing with a cult."

The above is from a Reuters/Billboard story that goes on, “Apple's successful combination of sexy design and elegant usability has propelled the iPod to the top of the digital music market as the undisputed king. Every move Apple makes these days results in victory. As the rest of the flash-player market floundered, Apple took over the category in a day with the release of the iPod Shuffle. It turned podcasting from a cool-sounding technology that nobody used to a legitimate format …”

Jon Newton

That podcasting was a "cool-sounding technology nobody used" is, of course, rubbish. But that today, “Apple commands 80 percent of the MP3 player market and 75 percent of online music sales” is inarguable, although, “many believe Apple's reign will last only another 12-18 months before the playing field levels out”.

“Privately, record company executives say they can't wait,” the item goes on. “Not because they want to see Apple stumble but because a less dominant Apple means a more robust market for digital music. The company by itself cannot bring digital music to account for 25 percent of all music sales, as labels hope it will by 2009.”

“Apple points to the 500 million tracks downloaded on iTunes to date as a milestone,” says Reuters/Billboard. “But dividing that figure by the more than 20 million iPods sold indicates that each iPod owner has bought an average of fewer than 30 songs from iTunes. Piper Jaffray estimates that only nine tracks are bought per month per iPod user.”

'Don’t amount to anything'

One needs to include download statistics from the p2p networks for an accurate picture of what's going on in the real world of online music, as opposed to the heavily skewed and distorted image created by the cartels and relayed by the mainstream media as though it's based on credible information from credible sources.

The truth is: the corporate online music services aren't even noticeable in online music events.

Compare the 500,000 million Apple downloads (which don't necessarily amount to total sales) accrued since 2003 to the factthat well over a billion files are shared online every month. In July, 2005, alone, in the US an average of 6,872,768 people were logged intio the p2pnetworks at the same time. Globally, the number was 9,496,203, says p2p research firm BigChampagne.

And here, hot off the presses, are BigChampagne's numbers for August so far:

For the US, up to and including yesterday (August 21), 6,790,567. Against that, the figure for August, 2003, was 2,630,960, and for the whole of August, 2004, it was 4,549,801.

Globally, an average of 9,439,513 people were logged onto the p2p networks simultaneously up to and including August 21, 2005. In August, 2003, it was 3,847,565, and in August last year, 6,822,312, says BigChampagne.

And yet Big Music continues to claim, and the mainstream media continue to repeat, that its sue 'em all marketing campaign is resulting in "significant" reductions in the number of people who are sharing files with each other.

Moreover, the way in which the cartels continually refer to iTunes as an example of what's possible for the so far virtually non-existent coprporate music services is in and of itself something of an innacuracy.

iTunes isn't a dedicated music service, and nor was it ever meant to be. It started out as a loss-leader for iPod and although it's now making money, it's doubtful if current sales do very much more than cover the many and various costs. It would be educational to see the figures stacked against downloads from the p2p networks. Because even at 500 million, they clearly don’t amount to much. And one should remember that Apple started the count as far back as 2003.

Meanwhile, music lovers in their hundreds of millions use commercial and non-commercial peer-to-peer file sharing applications to acquire mp3s, condensed tracks derived from music that’s already been bought and paid for via CD and DVD sales.

Mp3s are no use for hi-fidelity home systems, but they’re fine for low-end, lo-fi reproduction on mobile players.

But this doesn't mean sales are being lost. A shared file is a shared file, not a stolen one. There's no money invovled and nor are people who use the p2p applications criminals, as the members of the Big Four music cartel, EMI, Sony BMG, WMG and UMG (who themselves have repeatedly been found guilty of cheating their contracted artists) charge.

'Non-MP3 world'

Hundreds of millions of music lovers delight in sharing with each other, but that doesn't mean they've stopped buying CDs and DVDs. To the contrary, business in that area has never been so good as people continue to buy their important music from retail outlets, just as they’ve always done and always will do - until the Big Music cartel wakes up and switches its attention from trying to sue former ‘consumers’ into buying releases and starts seriously examining ways to use new and emerging p2p technologies to supplement, if not replace, physical product.

"The mass market still is entrenched in a non-MP3 world," Piper Jaffray senior research analyst Gene Munster is quoted as saying. "Until that changes, there's just too few iPods out there to move the needle for the overall music industry."

However, iPods are not, of course, the key, or anything like it.

"Some people at labels are acting like all this is over because Apple has it,” the story has Gartner’s Mike McGuire sayibg.

But, "There's a whole lot of green field out there. Guys, 98 percent of music purchases (are) still coming from somewhere other than online."

Flexible pricing

The grass may indeed be green, but the Way-Way Factor is stopping people from purchasing mp3s from the corporate services.

“Label sources say Apple stubbornly disregards their suggestions for drawing in new digital music customers,” the story states. “They say they would like more flexibility on track pricing and promotions. But more than anything, labels want to see the iPod become interoperable with music services other than iTunes.”

For flexible pricing, you need flexible wholesale rates which currently start at 65 cents per track and go up. And we’re told the members of the Big Four record label cartel would like to see them go even higher, to $1.25 cents per and beyond.

If Apple indeed has only 12-18 months of market dominance left, “Anticipated [new] developments include a music subscription service and subsequent advertising blitz from MSN Music, the long-anticipated relaunch of the Sony Connect store, several new MP3 devices and the introduction of mobile music services from several wireless carriers,” says the Reuters/Billboard piece, adding.

“No one assumes Apple will go without a fight. It is expected to introduce a video-capable iPod in September and finally unveil its iTunes-compatible mobile phone with Motorola. It is also rumored to be working on a subscription service with the help of a former Xbox Live executive.

" ‘They have shown, based on prior performance, that they have the capability to remake themselves,’ McGuire says. ‘They have the flexibility to seize opportunities as they're presented’."


Jon Newton is the editor of and is a regular contributer to MP3 Newswire. Jon's site is devoted to the politics of digital music and his insights as well as those of his co-writers can be read there. We urge you to explore it.


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