Music Labels Charge Too Much For Microsoft

Bret540 writes "Yahoo is reporting that Microsoft has ended license talks with four major music labels. From the article: 'The paper [the Wall Street Journal] reported negotiations broke down Friday over what Microsoft considered high royalty rates.' How much more can the music labels demand when even Microsoft won't go to market? With other recent developments, one must wonder how long the music industry can keep pushing."

Re:Music Industry?

[dgatwood]

UImm... third-party performances are licensed by ASCAP/BMI/SESAC, not the RIAA. The day the RIAA starts going after that market, I and other ASCAP members will be calling for the RIAA's proverbial head on a platter.

:-D

Re:Yahoo!

[Alex P Keaton in da]

Music is a loss leader for Yahoo. A loss leader is when you sell something at a loss in order to get customers into your store, hoping they will buy other things while they are there....
Yahoo composing music download plan
http://news.zdnet.com/2100-3513_22-5152860.html [zdnet.com]

Re:Where'd that price come from?

[Anonymous Coward]

Seems rather high, considering you still have to pay $1 or more for each song you download, and the song is likely to be encumbered with DRM, and the quality is usually less than a rip from a CD. One would get the feeling the music labels don't really want to sell songs via the Internet...

Uhhh........you don't pay for the downloads when you pay a montly subscription. The music companies wanted $6-8 per month out of the subscription fee a user would pay.

There is nothing for Microsoft

[ericdano]

Why should the industry listen to Microsoft? They don't have a share of the portable player (ie: iPod) market. They basically want to push subscription services (which most people seem not to want).

Basically, the industry needs to deal with Apple, not Microsoft. Microsoft is not a player in the game anymore. Microsoft is a a Johnny Come Lately [bartleby.com].

Re:Gotta love the music industry

[yabos]

WTF are you talking about? That's not what this is about at all.

Re:When..

[the arbiter]

The contracts aren't guesses. The going royalty rate is 5% of net sales, minus expenses. Put another way, one million albums sold at twenty bucks a pop returns about 20 million gross dollars.

Of which the record stores get about 2-3 million.
Of which the artist sees 1 million, BEFORE all the expenses (promotion of every kind, recording of the album, mastering of the album, artwork on the album, videos (realize that a video typically runs $500,000 by itself) payola, 'promotional tours', etc.)

The record company makes at least 17 million and all their expenses are covered out of pocket by the artist.

There's some good reasons I don't play for a living anymore...it's not much of a living, making 30,000/yr before taxes.

Facts on the profitability of online sales.

[goombah99]

AP reports [iwon.com] online digital music sales have tripled in the last year, accounting for over 6% of sales. But there's more than meets the eye here. Profit margins on on-line digital sales are rumored to be much higher so that is much more than 6% of profits. Not only did this more than offset the decline in physical unit sales but, more importantly physical unit sales have also declined in price as well as volume, further increasing the advantages of on-line digital sales (6% gross price decline, 3% volume decline). Note that a 6% gross price decilne means an even larger profit margin decline assuming manufacturing, distribution and marketing costs are not decliniing.

The article further points out that there are 500 million iTunes songs sold and 22 million ipods sold. Averaging this gives one only 23 itunes sold per iPod: thus one can hardly say that iTunes sales are the motivating factor for iPod sales but one could neccessarily say the reverse. People are clearly filling those Ipods with their purchased CDs, borrowed and pirated music. The record industry rants about selling music too cheap and iPods leveraging their IP for sales would seem dubious.