Digital music's angel gets record industry scorn

Apple's Steven Jobs is girding for a showdown with at least two of the four major record companies over the price of iTunes songs.

Two and a half years after the music business lined up behind the chief executive of Apple, Steven Jobs, and hailed him and his iTunes music service for breathing life into music sales, the industry's allegiance to Jobs has eroded sharply.

Jobs is now girding for a showdown with at least two of the four major record companies over the price of songs on the iTunes service.

If he loses, the one-price model that iTunes has adopted--99 cents to download any song--could be replaced with a more complex structure that prices songs by popularity. A hot new single, for example, could sell for $1.49, while a golden oldie could go for substantially less than 99 cents.


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Music executives who support Jobs say the higher prices could backfire, sending iTunes customers in search of songs on free, unauthorized file-swapping networks.

Signs of conflict over pricing issues are increasingly apparent. This month, Apple started its iTunes service in Japan without songs from the two major companies --Sony BMG Music Entertainment and Warner Music Group--leaving artists like Avril Lavigne, Beyonc? and Rob Thomas out of the catalog because the companies refused to license their music to iTunes, executives involved in the talks said.

That gap in the Japanese music market, the world's second biggest, is considered a harbinger of what may await American consumers as the contracts that record companies have with Apple in the United States come up for renewal early next year.

Jobs in the past has cast himself as an innovator battling established media giants like Disney and Microsoft. But these days, allies and adversaries both agree, he has more power online than Wal-Mart has in the bricks-and-mortar world.

Apple commands an estimated 75 percent of digital music sales, and roughly 80 percent of sales of MP3 players, with its market-leading iPod. While many still admire Jobs' touch--iTunes quickly established a market for paid downloads after the industry wasted years on misfires--he also inspires enmity or jealousy from others in the industry, which is back in a slump after a modest rebound last year.

Jobs' vision of simple, uniform pricing for songs and a policy of limiting Apple's music to Apple's devices are increasingly under attack.

"He'd like to continue to define the rules of the game," said Paul Vidich, a special adviser to America Online and former executive vice president of the Warner Music Group. Vidich said the digital music market, while growing, was still a fraction of the music business, but added, "I just think the music companies are now at a point where there's too much money on the table not to insist" that Apple accept variable prices.

"The question is," Vidich said, "what do they want the profile of the business to look like going forward?"

A sore point for some music executives is the fact that Apple generates much more money selling iPod players than it does as a digital music retailer, leading to complaints that Jobs is profiting more from tracks downloaded to fill the 21 million iPods sold so far than are the labels that produced the recordings.

Andrew Lack, the chief executive of Sony BMG, discussed the state of the overall digital market at a media and technology conference three months ago and said that Jobs "has got two revenue streams: one from our music and one from the sale of his iPods."

"I've got one revenue stream," Lack said, joking that it would require a medical professional to locate. "It's not pretty."

In a more conciliatory statement yesterday, Lack said: "I look forward to sitting down with Steve in the fall when we are scheduled to discuss Apple and Sony BMG's relations going forward. I think Steve has done a great job on behalf of the industry and in the months ahead we have lots of challenges to conquer together."

Apple has long allowed different prices for full albums sold on the service, though it believes that maintaining the 99-cent price for each song on an album acts as a natural cap. The service, which is available to consumers who download iTunes software to their computers, allows users to choose from roughly 1.5 million songs from major and independent labels. The songs, once paid for and downloaded, can be transferred to an iPod device, burned to blank discs, or

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