Have a read of the joint fruits of working with Andrew Orlowski: Record labels still on top despite online revolution.
A few details: Figures obtained by The Independent show that the labels take home the lion’s share of the cost of a digital download – making more money per track than they do with CDs in shops.
And: many of the burgeoning online music stores will go out of business, experts warned yesterday.
Apple gets to keep 4c from every 99c download on the iTMS; the record companies, 62; credit card companies 25c. Publishing rights, 8c.
Interesting thing is that earlier this year, at a meeting at the British Phonographic Institute, I echoed Steve Jobs’s comments – that Apple makes little, if any margin, on track sales – to a high-up from one of the American labels. “That’s just marketing,” he said roundly. “Jobs is a great marketer. They get to keep plenty of money.”
Sort of puts a different cast on the gnashing of teeth about Apple having differential pricing across Europe (although Andrew calculates that the difference between European sites is probably down to Apple).
For an example of how you can easily get the numbers wrong if you don’t include everything, see this blog post by someone in the US. Assumes that Apple makes shedloads of profit on songs (er, no) and similar on iPods (um, sort of).
The overall story is the same for the online stores, though: they aren’t going to survive by offering one-off downloads. Which then leads to the obvious conclusion: they’ll have to survive by offering subscriptions. (Like paid-for radio, isn’t it? As in, advert-free paid-for radio. Hey, Americans are discovering their own licence-fee model. Could we well them Chris Moyles?) Fortunately for them, Microsoft has just the right software to do that. (I suspect Apple doesn’t have the resources to write “Janus”-style DRM software.) So we’ll see some online stores surviving by offering subscriptions, and a few by being just downloads. The latter category could be just one.