Apple threatens to dump iTunes if music prices rise

September 30, 2008

Apple threatens to dump iTunes if music prices rise Apple has earned a reputation for dramatics and bold moves with its approach to introducing new technology and marketing slick new products. Those dramatics are now serving well as it threatens to destroy it’s own brainchild, iTunes, if proposed hikes in the prices to download music become a reality.

With over 80% market share in the legal music downloads industry, iTunes has a huge footprint that would impact the lives of many people who rely on the software to find new content for their iPods. Of course, that probably doesn’t bother Apple terribly because it’s more interested in selling iPods than music. iTunes may be a major hub of activity for digital downloaders, but they would probably find other sources for entertainment.

The key problem is that companies haven’t found a way to add significantly more value to consumers who download music legally. It’s much easier to motivate people by rewarding good choices rather than punish and condemn undesirable habits. That could be a lesson the RIAA and music industry will never learn.

iTunes Vice President Eddy Cue says,

If the [iTunes music store] was forced to absorb any increase in the … royalty rate, the result would be to significantly increase the likelihood of the store operating at a financial loss – which is no alternative at all," Cue wrote. "Apple has repeatedly made it clear that it is in this business to make money, and most likely would not continue to operate [the iTunes music store] if it were no longer possible to do so profitably. According to CNN Money.

This battle has been a consistent sore spot between the music industry and Apple especially as CD sales continue to spiral. Record companies and copyright holders are looking to replace that revenue and digital downloads is the most likely candidate.

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