Apple is a tough negotiator in the music industry

Chauncey Dupree
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February 02, 2009
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According to the New York Times, Apple, led of course by Steve Jobs, is now pushing its weight around in negotiations with the record labels.  They admittedly are a bit afraid of Apple

In interviews, several high-level music executives, who spoke on the condition that they not be named to avoid angering Apple, said they operated in fear of Apple’s removing a label’s products from the iTunes store over a disagreement, even though that has never happened. The labels do not have much leverage in negotiating with Apple.

Of course even in vacation mode, Steve Jobs is still running the show.

...All the labels agreed except Sony Music. Its chairman, Mr. Schmidt-Holtz, wanted the pricing to go into effect right after the announcement, while Mr. Jobs wanted a longer time horizon. According to a person briefed on the telephone call, Mr. Schmidt-Holtz and Mr. Jobs had a heated exchange by phone on Christmas Eve. Eventually, Sony gave in and agreed to a longer waiting period. (So much for spending the holidays relaxing with the fam?)

 

Even without Jobs, in the negotiating, Apple still holds the upper hand and plays their cards well.

Even if Mr. Jobs does not get personally involved in future negotiations, music executives still fear dealing with Apple. One chit the company holds is the power of the iTunes home page, where it promotes music. They also say that the entire Apple staff, including Eddie Cue, the vice president in charge of iTunes who handles the relationships with the record labels, do their best to follow Mr. Jobs’s style in their own negotiating.

 

The final results seem to be pretty good for consumers.  Higher quality songs without DRM.

via Apple2.0

Comments (6)

daPrinz (not verified) | February 02, 2009 - 9:48am

The music industry afraid of Apple?
The enemy of my enemy is my friend! This definitely proves that without iTunes music would be much more expensive.

Attk | February 02, 2009 - 12:26pm

 As someone who makes a majority of my income from creating and selling music, I have to give MAJOR kudos to Steve Jobs and Apple.  The record companies have grown excessively greedy over the last decade, and iTunes has completely broken the mold and paved the way for independent artists to make a comfortable living without being signed to a major label.  As a former major-label signed artist, I have seen both sides of the fence...  As an independent, I can make just as much money selling 50,000 CDs as a major-label artist does for selling 250,000 CDs with the crappy royalty deals labels give artists these days...  More artistic freedom is never a bad thing!!!

DW (not verified) | February 03, 2009 - 3:05am

Kudos to Apple for making music more accessible and convenient! Bravo!

Now, here's the question that a lot of people are going to hate me for asking: Have we defeated on giant bully (the record labels) just to create another (Apple/iTunes)?

I can't say whether or not we have for sure right now, but if some artists like Lily Allen are to be believed, we may have. (She and others argue that musicians shouldn't be forced to give iTunes exclusive content among other things.) Only time will tell, though.

Attk | February 03, 2009 - 6:18am

 The only way this could be bad is if the artists' label makes them do exclusive releases on iTunes.  However, iTunes and Apple do not have an 'exclusive' requirement...  My music is on about 50 different download sites with no pressure from Apple to be 'exclusive'.  But, honestly, iTunes is the only one that matters... it blows all the others out of the water as far as sheer sales go...  If you could be sold through only one avenue, iTunes would be it for me!

DW (not verified) | February 03, 2009 - 1:39pm

I'm totally explaining this incorrectly, so you'd have to forgive me. But, the way I've read it, you're right: Apple pressures labels for exclusives, thus labels pressure the artists. It's a wretched chain and I'd totally hate to be part of the major label machine. Granted, it has some nice benefits... like funding :)

I'm not sure how popular your music is, but I've only heard this from platinum and multi-platinum artists.

I'm just wondering if we're supporting the new Walmart of the music industry. (For more explanation about what I mean, see the documentary "Is Walmart Good for America?" on pbs.com). I think it's too early to tell. But, if true, it's the exact same tactic Walmart uses.

It's a really tough question.

Attk | February 04, 2009 - 5:14am

 There you have it...  "platinum" and "multi-platinum" artists are typically puppets of a major label and have absolutely no choice in the matter.  The label OWNS them, no question about it.  And the funding isn't all it's cracked up to be, since it's always in the form of an advance that has to be paid back out of your royalties.  Guess who the very last person to get paid by the label is?  The artist, of course!!!  And, in a majority of cases, the songs on an artist's CD were picked/written by someone else (thanks Mr. A+R guy and Mr. Producer!!!).  John Mayer has outwardly stated that his 4th album was the first one he had any choice on... Yikes!  It's all the same story, really... the labels are just evil and greedy, and want to force-feed what they think is "good" to the public.  Boy, am I glad not to be part of that crap anymore.