Capitalism At Work: Will An Apple Music Bundle Really Be Anti-Competitive?
By Bryan Munson

New York, NY (March 25, 2008) – We reported last week on the Financial Times article that revealed Apple was in talks with the Big Four about a device with access to the entire iTunes library.  While it would most likely prove a windfall for Apple, on paper, the discussion has anti-trust violations written all over it.

In the wake of the announcement, most agree with that assessment.  Even as EMI announced that it would likely be part of Nokia’s own “Comes With Music” program (which gives users a free music subscription to Universal’s entire catalog and allows them to keep whatever music they downloaded even if they were to cancel), competition against an all-inclusive Apple device would be near impossible.

With iTunes controlling the lion’s share of the market, a device giving the user unlimited access to the entire library, even with some sort of extra fees attached, would be too much to pass up for most music heads already enveloped in the Apple universe.  The Coolfer had an insightful op-ed on the situation last week, noting that “the only way to make this equitable to labels is to make them tethered downloads.”  Read more:

…”Owners of sound recordings would get a percent of revenue. Publishers would get a percent of revenue. Allowing for unlimited downloads -- or even a high, set number of downloads -- would be problematic for a number of reasons, the most obvious of which is plain old dollars and cents: Labels could lose their shirts paying mechanical royalties on downloads unless some other royalty structure is magically agreed upon. (I won't get into whether or not labels would get a fair return for all the music downloaded. Some people would be gluttons. Some would download sparsely. It's hard to say how it would turn out.)

But another problem is political: If unlimited downloads were allowed, labels would have to endure the wrath of every other online music store and service... the very ones labels have hoped would rise up and challenge iTunes' dominance.”


The article goes on to cite another op-ed from Michael Gartenberg at JupiterResearch.  He envisions the Apple deal more a subscription-based model and how that might work.  Details in the Financial Times report were rather scant, so indeed, it’s hard to say how any of it will work.  But irregardless, the monopoly-talk Apple has done so well to deflect in past instances would certainly become the central focus in any deal that’s inked.  Here, CNet News takes a look at how problematic that path would be.

So: how might an unlimited Apple deal affect you?  For space and sanity’s sake, lets assume this new model exists in a most extreme-case-scenario.  And that piracy has gone the way of the do-do bird...

For starters, if Apple succeeded in closing this deal, you’d be paying a premium on whatever new generation of iPod they developed to house the technology.  It could be exorbitant, it could be reasonable.  What would be clear though, is that, if people want the music enough, they’ll pay the money and Apple will charge as much as they can get for it.  Capitalism at work; get busy livin or get busy dyin.

Secondly, you’ll see a chance in the way each competitor does business, and probably the industry as a whole.  It would be the next logical step in dealing with the above stated effect.  In order to compete, places like eMusic and Amazon (and Verizon and Nokia if they choose to go forward in the space) will have to offer major labels a sweeter deal, driving the aforementioned price point down.  Which will be both good AND bad.  Good because any device is now cheaper, but bad because to make back their money on the now "free" (read: cheaper) music, you might see a Nokia-sponsored tour with tickets for Bow Wow upwards of $200 dollars - just for mezzanine seats.  Maybe you get a gift bag for that price, but the point is, everyone’s got to make their money back somehow, and by tying together entertainment and service goods/products, the smoke and mirrors get more elaborate.  360 deals would be affected, and the artist may very well lose out to the labels.  Again. 

Oh, you’ll get your free music; but you’re still going to pay for it.  Would it inflate the dollar?  That I don’t know, you’d have to ask an economist.

But lastly (for the purposes of this article, at least – there could be a hundred other outcomes), you will see a change in terrestrial radio.  As more music is made available to people, the independent channel already being carved will bust out of its walls like a broken dam.  Radio will become less heavy-handed, catering instead towards a particular sound, perhaps even more localized to the region, giving equal time to both mainstream and underground artists.  You’ll still have your pop stars, but the entire scope of the music industry’s economics will change.  Clear Channel’s influence will fade.  Artists will no longer have to pigeon-hole themselves to get airplay because they’ll be a market for them somewhere; and that will allow them to flourish in other aspects of their career: acting, writing, business development, etc.  We’re talking a completely new revenue stream into the American economy.

Well, I mean, maybe.  Who the fuck knows what’s going to happen?  We don’t even know if this idea made it past lunch. 

I’ve always maintained that the way the music industry responds to it’s financial problems could very well change the way all businesses go about… business.  In all likelihood, we’ll get a model somewhere in the middle of these outlined extremes and $free.99.  Despite any new approach to creating wealth, the market will only allow so much.

It’s both the beauty and the beast of our system.