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Apple Is Now the #1 US Music Retailer
Posted by
kdawson
on Thu Apr 03, 2008 09:06 AM
from the nose-bleed-ascension dept.
from the nose-bleed-ascension dept.
Quantrell writes "A leaked e-mail shows that Apple hit the #1 spot for music sales in January. The article speculates that consumers cashing in their holiday gift cards may have played a role; but of course Wal-Mart and the other retailers sold gift cards too. The news is a mixed bag for the record labels. 'For the music industry, there is a dark side to Apple's ascension to the top of the charts. Buying patterns for digital downloads are different, as customers are far more likely to cherry pick a favorite track or two from an album than purchase the whole thing. In contrast, brick-and-mortar sales are predominantly high-margin CDs.'" We recently discussed Wal-Mart's role in the music business, back when they were selling nearly 20% of US music. For January Apple was at 19% and Wal-Mart at 15%.
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Must a CD Cost $15.99? 586 comments
scionite0 sends us to Rolling Stone for an in-depth article on Wal-Mart and the music business. Wal-Mart is the largest music retailer selling "an estimated one out of every five major-label albums" in the US. Wal-Mart willingly loses money selling CDs for less than $10 in order to draw customers into the store, but they are tired of taking a loss on CDs. The mega-retailer is telling the major record labels to lower the price of CDs or risk losing retail space to DVDs and video games. (Scroll to the bottom of the article for a breakdown of where exactly the money goes on a $15.99 album sale.) "[A Wal-Mart spokesman said:] 'The record industry needs to refine their business models, because the consumer is the ultimate arbitrator. And the consumer feels music isn't properly priced.' [While music executives are quoted:] 'While Wal-Mart represents nearly twenty percent of major-label music sales, music represents only about two percent of Wal-Mart's total sales. If they got out of selling music, it would mean nothing to them. This keeps me awake at night.' [And another:] 'Wal-Mart has no long-term care for an individual artist or marketing plan, unlike the specialty stores, which were a real business partner. At Wal-Mart, we're a commodity and have to fight for shelf space like Colgate fights for shelf space.'"
Submission: Apple now #1 US music retailer by Anonymous Coward
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And that means (Score:2, Insightful)
It's Apple iTunes with DRM Forever!
Re:And that means (Score:5, Insightful)
Parent
So what? (Score:3, Interesting)
It's nice to see RIAA power fading but Apple is still a digital restrictions enabler. We shall see what they do with their power. Right now, the artist still gets the RIAA shaft from Apple the same as they do any other music store money wise. Has Apple even been able to break the RIAA, "our way or the highway" rule and sell both RIAA music and independent music?
Re:So what? (Score:4, Informative)
Apple will sell just about anything. Several talk radio hosts have regular iTunes paid downloads, and none of them have RIAA contracts.
Parent
That's not good enough. (Score:3, Insightful)
I thought about this for a while and don't like it. Replacing the RIAA with Apple is not the equivalent of creating a free market for music. With digital restrictions, Apple will be in charge in a way that the RIAA was but worse. You say:
Apple will sell just about anything. Several talk radio hosts have regular iTunes paid downloads, and none of them have RIAA contracts.
It sounds good, but I can replace the words like this:
Future_monopoly will sell just about anything. Several talk radio hosts have
Re: (Score:3, Informative)
Re:So what? (Score:5, Informative)
Actually, artists got it worse. Theoretically artists should have benefited financially from digital downloads but the opposite is occurring thanks to the labels. Apple takes their $0.29 from every $0.99 track to pay for the hosting, distribution, credit card fees, etc. The remaining $0.70 goes to the label to take their cuts before passing the royalties to the artists. However, the labels are taking their cuts as if the sale was a physical medium and are still charging the artists for manufacturing and distribution costs. Manufacturing costs no longer apply, and Apple handles the distribution. But I'm sure somewhere in the fine print of the record deal that allows the label to charge for whatever they want.
I'm not sure the amount of independent artists that Apple has but a few years ago they signed some major indie labels. [apple.com]
Parent
Re: (Score:3, Insightful)
Apple takes their $0.29 from every $0.99 track to pay for the hosting, distribution, credit card fees, etc. The remaining $0.70 goes to the label to take their cuts before passing the royalties to the artists. However, the labels are taking their cuts as if the sale was a physical medium and are still charging the artists for manufacturing and distribution costs. Manufacturing costs no longer apply, and Apple handles the distribution.
As a consumer buying something I know to be digital (with presumably lower distribution costs than a physical product), I'd expect at least part of the cost to be passed on to me. Given the choice of a CD or a DRM free digital download for the same price, I'd usually take the CD. Maybe that will change in future when more and more releases become digital only.
Also, don't forget that a lot of advertising costs can probably be saved using the iTunes store. Consumers get to try before they buy, find track
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Re:So what? (Score:4, Interesting)
Spoken like someone who never ever worked in the record business, specifically retail & shipping. Ever heard of warpage, bro'? Like, due to 60 shrink-wrapped'records being jammed in every box (standard), high heat, back of the UPS truck? No? Well, back in LA and all over the South we had tons of records that never made it to the shelves. Did they 'break'? Well, no, not exactly. They warped, to an unplayable state. Period. In the early 70s some of the Indie labels and European exporters started using 'loose' wrap, to avoid a a lot of the warping. But that took up space in the standard boxes, so the Big Labels (in the US, UK & Germany) never did get on board with that.
CDs? I wouldn't know, I went back into stagework and studios about 3 seconds after CDs started moving in the shops.
Don't get me wrong, the labels are the most organized gang of corrupt cocksuckers you ever want to know, but the 'breakage' thing did have real relevance after the vinyl content dropped, and the use of tight shrinkwrap became dominant.
I know the allowances for 'returns' on cassettes was much lower than the percentage on LPs, also.
"Breakage" was a concept that retailers had to fight for. The Big Labels didn't just cough it up out of the goodness of their hearts, and it was only after the fact that the Labels realized they could cut corners on inventory & accounting, by just giving all the jobbers and retail chains the same deal. But the retailers were 'caught' between US, the music fans, and THEM, the artists... and as a result, people used to hate the retail chains (I know I did, I worked for a few big ones), but the reality is, we the fans, AND the artists, had the same, common enemy: The Labels... not Sears, or Tower Records... not The Whorehouse (Oops, I meant 'Warehouse'), and not even Apple or Amazon.
Parent
Re:So what? (Score:4, Informative)
Independent artists get what their distributor gives them. If you go through CD Baby, which anyone can do and is non-exclusive, you get about $0.63 per download.
iTunes sales through CD Baby are very, very favorable to the artist. But then, that's just the way CD Baby's always been.
Parent
Re: (Score:3, Interesting)
I am an indie musician with music on iTunes (Score:5, Interesting)
Parent
Re:And that means (Score:5, Insightful)
Parent
Re:And that means (Score:5, Insightful)
Apple sells DRM free tracks. But how many people do you know that buy from iTMS that have a DRM free collection? Even if you bought just one DRMed album, you'd have to keep using Apple's products to maintain that investment.
Don't get me wrong. I have an iPod. But I refuse to buy from iTMS. I'd rather give the same money to Amazon and get my tracks in plain unencumbered MP3.
Parent
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Re:And that means (Score:4, Insightful)
If Apple licenced their DRM it would only have the affect of PROMOTING it. Look what's happening now - more and more tacks on iTMS are drm FREE, and will work with any music player you want.
Parent
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They didn't force Apple to do anything because I'm not aware of any other successful DRM-free ventures and Apple were already doing well with their DRM stuff at the time. It was never any benefit for Apple to have DRM -- they don't need to lock people in as they seem to have no trouble selling iPods based on their good points alone.
Do you honestly believe the labe
Re:And that means (Score:5, Insightful)
You should be thankful for Apple and the fact that they are #1. It's because of Apple that the labels have allowed Amazon to sell MP3's without any kind of DRM whatsoever. If Apple had never gotten such a stranglehold on the digital marketplace, most of the labels would have never allowed Amazon to sell DRM free music. I'm glad that Apple is where it is and I hope that people continue to buy music from them. I won't be among them but as long as Apple keeps doing what it's doing, the labels will allow Amazon and others to sell music without DRM as a counterweight and smart consumers will be able to purchase legit, DRM free music.
Parent
Re: (Score:3, Interesting)
1. Apple has the market share for MP3 players, namely the ipod.
2. That makes it impossible to sell music that won't play on the ipod.
3. Apple refuses to use any DRM scheme but its own, and refuses to let other people use that.
4. It's impossible for anyone else to sell DRMed music.
I think that's a good thing. I think Apple has, ironically, killed DRM on music forever.
Re:And that means (Score:4, Interesting)
There's nothing ironic about it: it's one of their stated goals. Simply because they have better gamesmanship than to outwardly admit that restricting their DRM has this effect doesn't mean it hadn't occurred to them.
Parent
one future of music distribution (Score:3, Insightful)
i say "one future of music distribution" because i am also leaning towards this idea [arstechnica.com]
Re:one future of music distribution (Score:5, Insightful)
Do you really think it shows that? I don't.
I think it shows that people are ever more shallow in their music tastes and now only want those one or two big hits, ignoring the rest of the material. How many times have you listened to an album, or an artist's entire catalogue, and come to love one of the b-sides or album tracks more than the one or two big hits? For me it's a lot.
But then I suppose I'm not buying Britney or whatever the big thing is that the idiot children listen to these days.
Parent
Opposite for me (Score:3, Interesting)
iTunes has let me buy single songs from albums and if after repeated listens I still want to hear it, I buy the album. But I will buy the album on a CD rather than a download.
You pays your money, you takes your choice...
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I think it's something else entirely.
The way in which we think about music is completely changing. The notions of albums, singles, B-sides and EPs are disappearing because m
Re:one future of music distribution (Score:4, Interesting)
The industry grew used to being able to bully consumer, and now digital music is forcing them to accept that many consumers want to buy singles again. However, this means that their profits are going to be lower. Possibly on the level of what they used to make before they stopped selling singles.
For all of this, this does not mean the death of the album. Bands that want to produce albums still will. Most people who truly appreciate music and don't want to hear the stuff on the radio, or whatever their friends like will likely not have a problem finding albums of songs. However, those people are rarely the huge money makers for the industry (there are exceptions). Most of the money makers are the flavors of the week that they market endlessly, and end up selling millions of CDs. This practice of the industry's will end up being hurt as the sales end up being reduced due to "cherry picking".
Phil
Parent
Hopfully (Score:5, Interesting)
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Re:Hopfully (Score:5, Informative)
Parent
Except Walmart is now the #1 US Music Retailer (Score:4, Interesting)
I hope you're right and Apple manages to positively influence the market. Probably some truth to it, but Brick and Mortar is still king.
Parent
Correlation and Conjecture (Score:5, Insightful)
Not so much a mixed bag as it is further evidence that the RIAAs business model is flawed.
Here they have the worlds largest brick-and-mortar store and the most influential online music retailers moving ungodly units of their crappy products and still they cry poverty.
Dark Side for Both Apple & Wal-Mart (Score:5, Interesting)
Furthermore, Wal-Mart has also done the same thing by basically dictating that it will start selling CDs at $9-$10 or it won't sell them at all. I'm kind of shocked the music industry just sat back and let that happen (even though it joys me to see people able to buy Beatles albums at a decent price). I mean, why should Wal-Mart be able to dictate MSRP? Oh, that's right, they are the all-encompassing Wal-Mart
Either way, I find it humorous that what seems to be a 'dark side' for the RIAA is actually beautiful for the end consumer. I wish the RIAA would step back and look at how they could maximize profits now that distribution could be digital. Would I still be spending ~$20 a month on music if each song were ten cents? No, I'd probably go nuts and be spending $50 a month and I bet people that spend no money on music would start to slowly $5 or $10 for some popular albums. Just a though, I really wish they would look more at maximizing profits by lowering cost on something that can be copied for free and distributed cheaply.
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Wal-Mart is
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Frankly, I could care less about the top 40 or flavor of the week singles as that is not something I'd ever want to listen to. But I could see how someone like Britney Spears would feel the punch of fans just getting "Oops, I Did It Again" and not being forced to pay for the filler crap that barely passes as music on the rest of the album.
Not that I'm a Britney fan, but let's build on this logic. I'll simplify the numbers for the discussion.
The price is $12 for album B. If they make it available separately, the price is $2 for the mega-hit cut three or B3, and the price is also $2 for the lame stinkers B1, B2, B4, B5... B8. In aggregate, buying B is cheaper than buying B1...B8 a la carte. However, if buying B is the only way to get B3, and nobody wants the other cuts, then the value proposition is too low. The labels decry this sort
Article is wrong .. M (Score:5, Informative)
What the article is talking about is a 1 week period in January (most likely caused by all the people using their Christmas gifts of iTunes gift cards) where the store sold more music. Overall though, it still remains number two.
Uh-oh (Score:4, Insightful)
Re:Uh-oh (Score:4, Insightful)
Parent
Why no album discount? (Score:2, Interesting)
I don't want the album to go away. I think it's a great conc
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As an aside, I'd appreciate iTunes letting me easily select blocks of music I could keep in the same order, even when listening to randomized music. "Sgt. Pepper's Lonely Hearts Club Band" should always be followed by "With a Little Help from My Friends" (and maybe the album's entirety).
I stumbled across this yesterday, and I haven't had a chance to try it out personally.
Maybe put the songs you want played together in the same grouping, then change your shuffle preferences to shuffle by grouping?
For all of you griping about Apple's DRM (Score:5, Insightful)
It's the recording industry, stupid. (Score:4, Interesting)
Apple's sales are so high because it is simply selling a lot of music that isn't available in any Walmart - the recording industry has no idea how to sell less popular tracks in a brick-and-mortar store. So they go unsold. Stupid.
No wonder Walmart is thinking less and less of the recording industry.
Could be. (Score:3, Interesting)
If the CD and other restrictionless media goes away we will all be media poor again. It will be like going back to pre taping life where only special people with expensive equipment could make and sell recordings.
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Re:Could be. (Score:4, Insightful)
No, no it won't.
You or I can still make recordings and distribute them with or without DRM if we wish.
It'll just mean we can't (easily) make copies.
I agree, it's a worse situation than what we have now, but it's not like pre-taping days in that the tools are available to all to distribute media.
Parent
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Re:That's what Amazon is for (Score:4, Informative)
Parent
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