UK music service 7digital today beat Apple and Amazon to the punch, introducing a fully DRM-free music service featuring tracks from all four major labels - and announcing plans to open for business in the US and Canada.
The company this morning announced a deal with Sony BMG to offer music from that label DRM-free in MP3 format, meaning it now offers music free of rights restriction from all four major labels - Sony BMG, Universal Music, Warner Music and EMI Records.
7digital is therefore the first digital music store in Europe to offer downloads from all the majors unencumbered by DRM, even while Amazon inks the deals for the European expansion of its DRM-free service, and while Apple continues to seek permission to offer more music through its DRM-free iTunes Plus system.
7digital's music quality is also high. Tracks are sold as high-quality 320kbps MP3 files - they're better quality than available elsewhere and will play on any device.
Clearly the UK company has support from the labels - it will launch its service in the US and Canada before the end of the year, the company said.
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Comments
This is good for Apple!
RE: "European service beats Apple"
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Apple iTunes is a breakeven service provided by Apple. iTunes is really the "loss-leader" to sell Apple mobile music devices.
Downloads from this service will play on Apple iPods and the Apple iPhone. This new service, 7digital, only expands the music download options for iPod and iPhone owners.
iTunes Music/Video breakeven ... are you sure?
I'd like to get a reality check that iTunes is "Breakeven". My readings indicate fairly steep profits. The iTunes APP distribution was setup to be break even, but the iTunes music and video service were not.
Ok, close to break-even, but making money
The company has never revealed how much money it makes on each song or video it delivers; it claims to run the iTunes store at “just above break even.” Independent estimates put its profit margin on music sales at 10% to 30% percent.
Looking at traditional CDs,
Looking at traditional CDs, you see the typical product margins: "CDs don’t leave a store much of a profit margin...Even if a nearby chain store isn’t selling a CD at $9.99, they’re usually selling...around $12 or $13. However, a store pays around $10.85 to $11.40 for those records" (From Third Edition of "Music Is Your Business")
Doing the math this means 14% margin on CD sales to traditional retailers. That means a 10% to 30% profit margin for iTunes isn't so out of line with others. And given the way Apple reports things that is profit after expense, which is far different from Best Buy making 14% gross profit before deducting operating expenses (which probably says they sell CDs at a loss).
7Digital prices are pretty high
Per song is .79 pounds. Per "Album" is 7.79 pounds. This is the equivalent of $1.40 for a song, or $13.81 for an Album.
It is great that they are DRM, but the prices are very high. 7Digital will have trouble competing against Amazon at those prices.
Hopefully Apple and Amazon continue to expand their DRM-free music for $0.89 and $0.99 per song ($9.99 per Album).
Prices are high in a direct conversion
I would imagine that if 7digital is planning to make a decent break in the US, they know they'll have to keep the price lower.
If you look at the cost of an iphone in the US and in the UK, you'll notice there is not a direct conversion.
I imagine, that the .79 pounds price is affordable there...maybe they'll be able to make a .79 cent price here -A lot of people mistake the foreign pricing as direct conversion when it is brought overseas, but it usually is not.
I really hope they keep it less expensive, it will KILL the competition! woohoo!!
More options = good news for consumers and music industry
More options emerging for different types of consumers is definitely a good thing and congratulations to 7digital for getting the four majors onboard and DRM free. For our users at We7,we also believe in DRM free music but we have found that whole track streaming and the ability to make and share playlists is as important as the facility to buy the DRM free tracks and albums they really love from major record labels and hundreds of independents too.
Steve Purham
CEO - We7
http://www.we7.com
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