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A Finextra member
A Finextra member 14 August, 2008, 07:59Be the first to give this comment the thumbs up 0 likes

Have you asked the artists how much they get?

The problem with the itunes model is that itunes take a rather large slice for their service.

The average for an artist is about 40-45% of the retail price. This means itunes are charging 55-60% to put it on the net and sell it to the consumer. The IT guys out there will be able to tell us how much the web and delivery cost itunes, leaving a rather big and profitable fee on the transaction. This will attract competitors and even sites which are presently resellers of itunes have the opportunity to switch their consumers to another 'supplier' in the future.

I personally don't like the sound quality you get from the ipod, but I know what it should be like, unlike the average teen who's generally partially deaf after a year or two of ipoding their ears with music pumped up loud because it's lost all it's substance.

I don't think the price model is sustainable, given the financial climate we are entering. It certainly isn't sustainable for micropayments. The transit operators will never wear that sort of fee for ticketing for instance. It may not be easy for Apple to have one fee structure for one thing and a lower fee for another product. Eventually someone will wake up. Digital goods and widgets maybe but real world stuff, I doubt it.

Having lived through the 70's, I had a walkman etc, and saw them come and go and I'm sure podding will lose some of it's appeal as times and consumer habits change.

In case you think I'm a fuddy duddy, I was the first to make the connection between the internet and the music CD and the concept of online sales(mid 90's), but alas the record companies were worried about how much I'd make rather than how much they'd make. I told them they'd lose billions if they didn't go with my plan, and of course they thought they could do it themselves when they 'needed to'. I guess we know who was right there.

The question I'd ask in regard to itunes - it's not how many who are buying the tracks and downloading them, it's more about who isn't. I believe the latter group outnumbers the former by a factor of thousands. Musicians will eventually realise this.

Steve Jobs is making nickels and dimes trying to make dollars when he could be making real dollars charging nickels and dimes, if you get what I mean.

I guess he's stuck in the Apple premium marketing mindset and that's the only customers he's going to get. It isn't the way to succeed in these other mass market arena's.

 

Paul Penrose

Paul Penrose

Head of Research

Finextra

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