And they buy most of the hit music that drives the industry.
Apple announced that variable pricing -- the thing the big labels have been screaming for since iTunes caught on -- is coming in a few months.
There will be three tiers of pricing to replace the single 99 cent standard that Apple has just as strenuously fought to keep.
Until now.
Starting in April the least popular songs on iTunes will cost 69 cents. Others will be priced at 99 cents and the hottest hits will go for $1.29 cents proving once again what knuckleheads record execs can be in a world where digital downloads are dropping even at 99 cents a song.
Where else but in the record business can they come up with a strategy that says -- our sales are declining so let's raise the prices of our hottest inventory.
That's the ticket.
Paid downloads have declined in a major way in the past year -- only increasing 27% compared with 45% one year earlier according to Nielsen's SoundScan. Plus, Amazon has been chipping a few pennies off the 99 cent legal download standard set by Apple and they've been doing so without copyright protection on board.
So it seems that the labels finally pulled one over on old Steve Jobs while he is fighting to gain some weight from a hormone imbalance.
Or so it seems.
Jobs has made chumps out of label execs -- not very difficult, at that -- for years starting from the time he talked them into letting him sell music for 99 cents legally online while they were obsessing about Napster.
Good timing?
Good luck?
Good grief.
Jobs is doing it once again. The labels just haven't figured it out.
Remember over a year ago when Jobs came out with his manifesto to rid the world of digital rights management protection on downloaded songs? The labels challenged him and said, you go first -- drop Fairplay (the proprietary Apple security system). Yet, Jobs was simply giving a signal that he knew paid downloads would soon be a thing of the past.
After all, he's a computer guy in spite of the fact that he has been leading record execs around by a dog collar as if they were wandering around Ozzfest.
Jobs gives in -- in his weakened state -- on variable pricing.
Not like him.
Then is happy to junk Fairplay to get DRM-free music for iTunes.
He must be sick. Start those rumors again.
No.
Steve Jobs is the healthiest one in the music business -- at least when it comes to strategic thinking.
He knows that paid downloads are a thing of the past. Music will be free or cost next to nothing -- as I've been saying all along. He's not going to win the battle and lose the war because Jobs knows what the record buying public wants -- iPods, iPhones and free music. And you still have to pay for his products or get arrested walking out of the Apple store with one in your pocket.
Let the labels have variable pricing -- he must be thinking.
Why would young people pay even more than the 99 cents that they are paying in decreasing numbers when they can get music for free on bit torrent sites.
And with all music DRM-free, it is the record label execs that seem to have contracted a fatal disease -- not Jobs, a survivor of pancreatic cancer and subject to frequent rumors about his untimely demise.
Label execs have contracted a more deadly malady -- terminal myopia.
The dictionary describes a person who is myopic as "unimaginative, uncreative, unadventurous, narrow-minded, small-minded, short-term, shortsighted".
Does that sound like any record executive you know or have heard of?
Nah!
Jobs is simply cooperating with the inevitable and he, unlike the label execs, knows what is inevitable.
A decline is legal downloads -- at any price.
And free music or music that costs so little consumers can buy tons of it without consideration to their finances. And as I have often proposed -- then, labels could sell monthly bundles to consumers allowing them to download and keep everything they wanted. But first, they must create the habit -- hard to do when they are raising prices and consumers are enjoying "free".
I mentioned radio in my headline. Why?
It has always stuck me as odd that a computer company should have hijacked the music business from the record labels -- in hindsight, we see how Steve Jobs, his iPod, iTunes and iPhone did it.
But it is radio and the record industry that made the biggest error of omission.
Now, don't tell me what I'm about to say could never have happened, because I'm going to agree with you before I say it.
Still, it should have happened.
The record labels and the radio industry should have done iTunes -- not Apple.
They should have done this before radio declined and just about when Apple was selling MP3 players. Remember, lots of companies had clunky MP3 players on the market. It took Apple to make them cool and intuitive. Then, they had to do something so consumers could fill them up with music.
Radio would publicize the music with on air play -- to create the demand. And as online commerce grew, the website would be there for consumers to buy.
The labels -- giving radio a piece of the sales (see, I told you it could never happen. I know. I know) -- sell the music online without DRM on every type of MP3 players or computers.
The partnership would have remained in tact -- labels make the music, radio sells the music -- and instead of selling only CDs, the online radio & records store would be generating big profits.
Instead, the labels went off and decided to sue Napster out of existence -- while other resources simply enabled more piracy.
And radio companies went about their business of consolidating in spite of the fact that it's not how big you are but how much pleasure you give -- to the public, that is.
So -- they goofed.
It was as predictable as what Steve Jobs is doing now by tuning in to the next generation.
The radio and records industries are suffering today not because it is filled with stupid people, but because they refuse to listen to the marketplace.
Jobs has a history of thinking differently -- and that's why he's loosening up on iTunes (and letting the labels hang themselves when they can't sell a hit song for over $1.29).
The sorry state of radio and records -- to use an Apple genre -- could be described as -- iGoofed.
But for Steve Jobs, just you watch.
For Apple, it is -- iWon.
Again.
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