iTunes price increase: the story behind the story

So, the labels want more for their songs.

It’s well known that many record labels aren’t happy with the ‘one price fits all’ approach to digital music sales taken by iTunes, and there is speculation that when the contracts come up for renewal early next year some labels may not renew them unless Apple changes its pricing strategy.

Well, there may be a little more to it than that. Jonathan Schwarz posted the following:

I was with the Chief Executive of a music company recently, who told me how thrilled he was to have a growing percentage of his revenues being derived from digital distribution. But there was one caveat – 95% of the digital distribution came through one vendor’s product and service (guess which), the owner of which had let him know his royalty stream was being radically reduced, unilaterally, in a new contract. No negotiation.

It’s not too hard to put 2 and 2 together.

Jobs is unhappy with getting only 4 cents or so from each song downloaded from the iTunes music store. The labels are already raking in the dough by getting the lion’s share of the 99 cents, but they also want more, especially the ability to charge more for popular, in-demand, recent music.

Two groups I’m not sure are in the negotiations are the clients – everyone who buys music – and the artists. One thing’s for sure: this is the wrong time to be increasing the price. Paid digital music is very young yet, and increasing prices could stifle the newborn.

I have to say I trust Jobs more than the labels, which have proved themselves time and again as souless profiteers. And 4 cents a track for the retailer is ridiculous.

But starting a fight right now is in nobody’s best interests, which is why my prediction is that this will all blow over. The two positions are likely just initial bargaining points, from which both parties can devolve into something fairly similar to what exists right now.