mac.column.ted: The iTunes Music Store 4.5: Win one; lose one

mac.column.ted: The iTunes Music Store 4.5: Win one; lose one

Ted Landau
May 2004

The recording music industry continues to act as if it believes in time travel -- or at least an ability to stop the clock. File lawsuits against enough teenagers, bully enough companies, lobby enough congressman and pass enough DRM (digital rights management) legislation - and their reward will be a to return to the glory days of decades past, when sales of CDs seemed headed to an altitude higher than the peak of Mt. Everest.

News flash to the recording industry: Time travel only works in science fiction fantasies. It's time to live in the real world. When a technological advance (such as downloading music over the Internet) comes along -- trying to reverse or prevent the advance of the technology is never the solution. Instead, learn to accommodate the technology and turn it to your advantage. Remember when the movie industry was terrified that videotapes would be the death of movies? Now many movies make more money in DVD sales than they do in theaters! And the movie moguls could not be happier. That's how it's supposed to work.

All of which brings me to Apple's recent release of iTunes 4.5 and QuickTime 6.5.1 - and especially the related changes to the iTunes Music Store (ITMS). With these updates, the recording industry handed the "rest of us" a significant defeat on one issue and offered a stay of execution (which I hope becomes a permanent victory) on another.

ITMS protected files: a change for the worse. The defeat is that (as reported here on MacFixIt) QuickTime 6.5.1 makes it much more difficult to use protected AAC files (which are the type of files you get when you download music from the iTunes Music Store) with third-party applications. In fact, once you update to iTunes 4.5, you will need QuickTime 6.5.1 plus the latest updates to other iLife software to use iTunes Music Store songs even in these other iLife applications (see this Apple Knowledge Base article). Previously, you could access these songs from virtually any application that could talk to QuickTime.

The reason for making this shift is to close a potential piracy loophole. Specifically, when protected AAC files are "imported" to third-party applications, the protection can be stripped off (for example, you can convert the AAC file to an unprotected AIFF file) -- making it easier to violate the digital rights management (DRM) restrictions of the iTunes Music Store. It is pretty clear that the impetus behind this change is not Apple itself, but pressure from the recording industry. Apple probably recognizes it for the smelly fish that it is. It's one of those changes that won't stop determined pirates (see this news item for the latest proof) but just makes life more difficult for those who would not use the songs illegally anyway. But if Apple did not agree to something like this, it might have lost its license to post songs in the iTunes Music Store altogether (remember, the one year contract with the music publishers was up for renewal last month).

For me personally, the biggest annoyance about the change is the inability to use Toast to burn music CDs that contain ITMS songs. If you try, you will just get silence where the ITMS song would otherwise be. A couple of work-arounds have been reported (one involves importing the music to iMovie and then exporting it again). But even when they work, they still add a major layer of hassle to the process. I use Toast, rather than iTunes itself, for burning all my music CDs. Toast is faster and has more features. Now I have to choose between abandoning Toast, using inconvenient work-arounds, or giving up on the iTunes Music Store. Giving up on the iTunes Music Store pushes me to consider file-sharing alternatives such as Acquisition. To the extent that I (and other users) do this, it has exactly the opposite effect that the music industry wants - which is why I think this whole move is ultimately self-defeating. [On the other hand, I may be overestimating the potential backlash; Given that Apple just announced that it sold a record-breaking 3.3 million songs in the first week after the release of iTunes 4.5, many users thus far appear unconcerned about these new restrictions.]

Songs still stay under a buck. The stay of execution was in holding the price of individual songs to 99 cents. For weeks, Mac Web sites were abuzz with rumors that pressure from the recording industry would force Apple to raise the price of individual songs -- to as much as $2.50. If this seems completely insane to you, don't forget that buying a CD single in a store can cost as much as $5.00! So maybe recording executives deluded themselves into thinking $2.50 would be considered a bargain. When asked whether there had been pressure to break the 99 cents barrier, Steve Jobs refused to "go into details" but simply asserted that the price was staying the same (see this MacObserver page for a transcript of the iTunes conference call where Steve was questioned).

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But there is still trouble brewing here -- when you look at the prices for downloading an entire album. As noted in Steven Levy's article in Newsweek, some albums cost about the same (or even more) when purchased from the iTunes Music Store than they would if you purchased the physical CD at a retail outlet! Talk about shooting yourself in the foot! Why would anyone pay to buy an album on the ITMS, with its now more onerous restrictions, when you can get the restriction-free CD for less? Such a pricing structure also makes the ITMS less appealing as an alternative to downloading the music from the quasi-legal free file-sharing services.

In the iTunes conference call, Steve Jobs defended this situation, claiming that the "vast majority of albums are $9.99 or below" and that album prices are not "creeping up." He also acknowledged the importance of keeping album prices competitive, given that album sales represent close to 50% of all sales on ITMS. I assure you that this percentage will drop radically, if prices start to head any further north.

[Update: The above was completed on May 7, with the intent that it be the "final" draft of this article. Within hours, an article appeared in the New York Post indicating that the price of single songs on the ITMS might soon go to $1.25, with album prices creeping up as high as $16.99. (The Post cited N.E.R.D's Fly or Die as already selling for $16.99; but when I checked it was listed for $13.99.) Alas, it looked like the stay of execution had already been overturned! However, later that day, Apple denied the Post's report, stating: "These rumors aren't true. We have multiyear agreements with the labels and our prices remain 99 cents a track."]

That this situation exists at all is entirely due to the approach-avoidance conflict regarding online sales that continues to plague the recording industry. At one level, it realizes that online sales represent the future of the industry and wants to board the train while it still can. At another level, it is loath to make the adjustments to prices, profits and policies that would make this future a success -- preferring instead to engage in suicidal attempts to blow up the train they just boarded.

I am not really surprised by any of this. It is consistent with what the industry had previously done with CD pricing. During the entire transition from cassettes to CDs, CD prices remained significantly higher than cassettes -- even though (by the industry's own admission) the manufacturing costs of a CD were significantly less than a cassette. The recording industry's defense here is similar to the phony one that drug companies use to defend why their drugs cost so much more in the U.S. than in other countries: the high costs of CDs were needed to pay for all the royalties and related expenses necessary to make producing an album profitable. Nobody really believed this. But, until downloading music from the Internet came along, we did not have much choice but to grumble and pay up.

It was bad enough that a CD could cost as much as $18.00 (if you were silly enough to buy a CD at its suggested retail price, instead of on sale or from a discount vendor). The industry sometimes forced you to buy 2 CDs when only 1 was needed. In particular, there was a time when Nashville would not allow more than 10 songs to appear on a country music CD. This was the reason, for example, that Randy Travis' Greatest Hits collection had to be released as two separate (10 song) CDs instead of one (less expensive) single CD. Happily, this restriction has since been lifted.

More generally, I believe we are in a period of transition for albums -- possibly witnessing the demise of the album format as we have come to know it. There are two reasons for this.

First, the days of the "concept" album, when it was important to listen to an entire album to appreciate it, have largely ended. The classic example of the concept album is the Beatle's Sgt. Pepper album. People did not buy this album to get the hit singles that were on it. They bought the album for its entire content, including the cover art and liner notes. Even today, virtually every track on the album remains well known. Such albums may not have been the rule even back then, but they are almost non-existent today. Instead, we have returned to the days where a typical album features a few hit songs (at best) and a bunch of filler. The result is that people, even fans of the artist, are less inclined to want to purchase an entire album. They prefer to just get the songs they want. This has led to the popularity of albums such as the "Now that's what I call music" hits-only anthologies.

Second, the ability to download songs from the Web has completely freed buyers from the need to purchase an entire CD to get the songs they want. Yes, as noted above, many people still purchase an entire CD on the ITMS. But most sales are for single songs - and I doubt that will change.

Imagine that, a few years from now, online sales have grown to represent 75% or more of all music sales. In such a situation, why should an artist wait until they have 10 or more songs before they release an "album" (sometimes forcing them to record songs of inferior quality to meet the album quota). Instead, it makes more sense for an artist to release a song or two whenever they are ready to go. Or they might choose to release a smaller collection of songs (a half dozen at most) packaged into online "mini-albums" (sold at a lower price than buying each song individually, of course). This may not be a future that the recording industry is looking forward to seeing. But it is where things are headed.

Bottom line. My strong belief is that individual users should have almost total freedom to do what they want with music or movies that they purchase, as long as it is just for their personal use. If I want to extract the audio from the DVD of a concert, so that I can make it into a CD to listen to in my car, that should be OK. If I want to extract a scene from my copy of Casablanca, to incorporate it into an iMovie that I am making for my wife's birthday, there should be no problem. If I want to make a copy of a TV show so that I can watch it later - and zip through the commercials, I should have no trouble doing so. And if I want to make a CD of music that I own, I should be able to choose what software I use to make the CD. For that matter, I believe I should be able to load a software program onto both my desktop Mac and my PowerBook - without having to pay for two copies of the software. Anything less will be met with resistance and a search for ways around these prohibitions.

Now, I understand that, in most of these cases, the relevant industries have no real objection to what I am asking. The problem is that opening the door for these legitimate activities also opens the door to various sorts of piracy. The Holy Grail is to find some solution that allows unrestricted personal use but that blocks copyright-restricted piracy. In the end, there will be no solution that perfectly achieves this goal. The best we can hope for is a policy that reduces illegal use to a level that allows the companies to make a decent profit, while still retaining a reasonable level of restriction-free personal use. This is admittedly a delicate balancing act.

I can't say that I have the perfect solution, although the original iTunes Music Store was as close to perfect as I could have hoped.

I can say that the recording industry appears to have no clue - nor even a clear desire - to achieve this balance. Instead, they appear intent on trying to kill a goose that could lay golden eggs for them, if only they allow it to live.

Ted Landau is the creator of MacFixIt and author of Mac OS X Help Desk (Peachpit, 2004). Check it out at www.macosxhelplne.com.

This is the latest in a series of monthly mac.column.ted articles by Ted Landau. To see a list of previous columns, click here. To send comments regarding this column directly to Ted, click here.

Resources
  • reported here on MacFixIt
  • Apple Knowledge Base artic...
  • news item
  • announced
  • MacObserver page
  • Steven Levy's article in Newsweek
  • article
  • denied
  • Now that's what I call music
  • www.macosxhelplne.com
  • click here
  • click here
  • More from Mac Musings
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