The chief executive of Apple Computer on Tuesday said he would resist the “greedy” demands by some of the world’s leading music companies to raise the prices on the popular iTunes online music store, adding that such a move would encourage piracy.
“If the price goes up a lot, [people will] go back to piracy. Then everybody loses,” said Steve Jobs, who has propelled Apple, which also makes the hit iPod digital music player, to the top of the digital music market.
Mr Jobs comments to reporters prior to opening the Apple Expo in Paris mark the first time he has acknowledged that some leading labels have pressured him to increase the price of music downloads. His comments also highlight growing tension between Apple and record labels, some of which privately say they deserve a larger share of the spoils.
The rift suggests several music labels believe demand for online music is robust enough to withstand higher prices, even though online sales account for a tiny percentage of total music sales. The number of illegally downloaded music tracks still far outstrips legal online sales, in spite of the growing popularity of internet stores such as iTunes, as well as an aggressive industry campaign to sue pirates. Music downloads on Apple’s iTunes music store, which commands more than 82 per cent of the US market, cost 99 cents regardless of the track. Prices are typically higher in Europe and Japan with a single track costing 79p ($1.43) in the UK. The company has sold more than 500m songs and about 22m iPods.
Some record companies say that introductory wholesale prices for digital downloads – thought to be 65-70 cents per track – were set low to stimulate demand for online music sales. But they argue that the computer maker has become so profitable and powerful they should push to raise wholesale prices to capture a larger share of the market. It was not clear by how much the record companies were seeking to raise prices.
At least one major record label said it had already raised its wholesale prices for digital downloads, an increase that has been absorbed by Apple. “I don’t buy the idea that charging, say, $1.29 per download will turn everyone into music pirates,” said an official at the label.
The official also said it was ironic that Mr Jobs would discuss the record industry’s margins while declining to discuss the “huge” margins Apple was making on iPods.
Several industry sources have said they want to introduce “variable pricing” to the download market, so they can charge higher prices for the latest hit songs and offer discounts on older catalogue material. Mr Jobs argued that record companies already made greater profits on digital downloads than CDs because online distribution enables labels to cut out manufacturing and marketing costs.
Apple launched its Japanese iTunes site last month without music from Sony BMG, a sign to many observers of a growing rift between the two companies. Industry watchers expect continued friction between Apple and Sony BMG as the contract covering iTunes US nears expiration. At least one other music group is understood to be pushing for higher prices.