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In the music industry, one thing hasn’t changed, and it’s that the record companies can’t get their products across to potential buyers without an intermediary. Once it was radio and retail, later it was MTV, now the preferred way to get new music in front of people is iTunes. Today’s Wall Street Journal looks closely at how record labels are working with Apple. The WSJ reports that Apple isn’t demanding the pay-for-placement and “co-op deals” that are traditional in the industry. Instead, it appears as if the Apple staff is more interested in performing something more like an A&R/tastemaker function, giving extra attention to performers and records they actually like. There are still costs for record companies, but this time it goes toward producing exclusive tracks and lowering prices.
Apple is extending its usual level of control to its music store, but that may have more to do with taste and branding than short-term revenue. It’s important for the record companies to play ball with Apple — but not so important for Apple. As the piece notes, “Apple isn’t under as much pressure to squeeze profits from iTunes because of the money it makes on iPods. In fact, it earns little from iTunes after paying fees for the music and credit-card processing.” As with the iPod, iTunes has been so successful and is so dominant in its category that “Apple is being fawned over by much of the music industry.”
At the D conference in 2005, Apple CEO Steve Jobs joked that the mobile carriers were “orifices” that content and application providers were forced to go through if they wanted to garner an audience. He said that disparagingly. His apparent solution, as iTunes and early reports on the iPhone show: turn Apple into just such an orifice. Will Apple treat its partners better?