Blog Post

Why iTunes Isn’t A Digital Vampire

Pete Townsend from The Who has called iTunes a ‘Digital Vampire’. As much as the claim makes for nice headlines, it is misplaced and poorly informed criticism.

In a BBC 6music lecture, Townsend went on to question whether in fact iTunes should “provide some aspect of these services to the artists whose work it bleeds like a digital vampire, like a digital Northern Rock, for its enormous commission?”.

iTunes and other digital stores might be guilty of many things but ‘enormous commission’ is not one of them. The simple fact is that Apple (NSDQ: AAPL) is one of the few companies that can actually make digital music pay and even then only at the level of being ‘largely break even most quarters’. Digital stores and services take less commission than high street CD retailers and that record labels take a larger direct cut.

Let’s be clear about the remits of retailers and of record labels

Another crucial flaw in Townsend’s argument is that iTunes is a retailer, not a record label. If iTunes should be providing ‘financial and marketing support’ to artists, then the same should apply to all retailers. And let’s not stop with music, Best Buy and Dixons should be helping fund software developers, Carphone Warehouse handset developers, Amazon (NSDQ: AMZN) should be funding authors and directors (….er…actually…..). But I don’t remember anyone arguing that HMV (LSE: HMV), Tower, Virgin, Fnac, Saturn or El Corte Ingles should be providing record label services to artists nor do I recall them being called Vampires. The bottom line is that labels (traditional and new digital alternatives that play a similar role: TuneCore, PledgeMusic etc) do artist development and marketing best, retailers do selling music best.

Does Apple’s dominant position build a case for corporate responsibility?

Perhaps what is different though, is Apple’s unprecedented dominant retailing position in the digital arena. But does that dominance make a case for artist-friendly corporate responsibility? I am not convinced it does. What there is a rock solid case for though, is an evolution of the artist-label relationship.

But for sake of balance let’s be clear, Apple is no angel. There are indeed a raft of criticisms which can be squarely levelled at Apple, most notably its failure to innovate digital music services at anything close to the rate that it has innovated devices (see my earlier post for more on this). Apple’s role – from an industry perspective – in digital music is first and foremost selling music, and secondly innovation. The problem – from a music industry perspective – is that Apple doesn’t have any pressing business case (nor an ROI case) for investing in innovating its music service at the same rate as its devices. The role music plays for Apple is wholly different to hat Apple plays for the music industry. Apple is not in the music business, it is in the business of selling music sells to sell i-Devices, and the iTunes Store does a perfectly decent enough job of achieving that aim as it is.

The brave new world needs a lot more work yet, and Apple will be an important part of that work

Pete Townsend’s comments illustrate the angst, uncertainty and fear that the analogue-era music industry feels in the face of digital-era change. That isn’t a criticism, there are many very well founded concerns. But Apple is one of the few parts of the digital music market that actually works. Apple have achieved what few have: converting a large share of their installed base of customers into digital content buyers. The case for revolutionizing how artists, fans, labels and services all interact is incontrovertible, but thrusting a stake through iTunes’ heart would be as short sighted as it would be suicidal for the music industry. Compel Apple to shoulder more of the music service innovation burden, yes, but look to the labels (traditional and non-traditional) to help build futures for artists, not Apple.

» For 11 years, Mark Mulligan was a vice president and research director at Jupiter Research (later acquired by Forrester Research). He now blogs at The Music Industry Blog

This article originally appeared in Music Industry Blog.

8 Responses to “Why iTunes Isn’t A Digital Vampire”

  1. Jonh Ingham

    Retail stores do handle marketing aspects. Think of all those window displays and end of aisle CD stacks for starters. Negotiated and paid between store and record label. The home page of the iTunes store is nominally the same, but appearance there is not negotiated in nearly the same way as the “old style”. Also, I would guess Townshend’s vampire comment is aimed at iTunes 30% commission. Way more than retailer mark up.

  2. For God’s sake people. The point of the post is about why Pete Townshend’s comments missed the point. So what if the author of this said he was the bassist? Yeah it’s a mistake, but beside the point of the post.

  3. Apple is the business to provide the cheapest content in order to profit from the sales of their digital devices. iTunes was their”cover” to prevent criticism of enabling piracy. For an artist (and I am one) the iTunes is a revenue disaster. Unfortunately superficial analysis from a consumer perspective rather than from an artist perspective does little to illuminate the issue. Apple is “one of the few companies that can actually make digital music pay” is not specific enough, we have to look who gets paid, how much is paid etc., If you are seriously interested in why I suggest start your reading musicians’s blogs like start with steve-jobs-in-shades-of-grey

  4. Hear, hear! I almost spat out my cornflakes on reading his daft comments. Not sure I agree though with your criticisms of Apple over rate of music service innovation. As a company, yes, it surely could have done more but for the digital music industry overall, it’s probably a good thing because as Apple lags others can lead with impressive levels of innovation e.g., Spotify with their link with Facebook and with VMedia yesterday

  5. Mark, Pete Townsend was not the bassist.  He was lead guitar and composer of most of their material.  Shouldn’t use the term poorly informed when you don’t know his bio.