Blog Post

Record Labels Court Mobile Carriers

OK, the title’s fairly obvious, but according to this article its not just because mobile phones offer a new marketing channel. The record labels are unhappy with Apple’s policy of pricing everything on its iTunes store at 99c — they want to be able to offer variable (read, higher) prices for different songs, something the mobile carriers are happy to go along with. Apple’s not too concerned with complicating its song prices to increase revenue because it makes the vast majority of its money by selling iPods — many accounts have Apple making just 4c for every song that is sold on iTunes, with record labels getting at least 62c. In contrast, the mobile carriers normally subsidize the cost of the mobile handset in order to make money back in services and content…which is why they’re not keen about offering Motorola’s iTunes phone

In a recent interview P. Diddy also argued that $1 was too little to pay for a single: “I can understand when we were happy to get a dollar, but as the technology catches up and as the wireless business catches up to tech, I hope things will even out. [Charging more] is not in any way to overcharge the customer. It’s just to do whatever is fair.”

In the short term I expect full songs bought over a mobile phone service to be at least as much as ringtones, possibly more. However, as time passes more and more hacks will be bought out that will allow people to transfer songs to mobiles from their computer, undermining the mobile business. Then the mobile music industry will have to lower its prices to compete. That’s unless the record labels can convince Steve Jobs to let them offer “variable pricing” on iTunes…they’ll have to keep dealing with Apple because its likely to maintain its dominant position because it offers the best service.

Related stories:
Of iPod Killers and Mobile Dreams
Apple’s IPod Faces Challenge From Mobile Phones (Sub required)
Law To Make iTunes Compatible With Microsoft?