Apple vs Music Industry on Song Pricing

Businessweek recaps the recent exchanges between Steve Jobs and Edgar Bronfan - chief executive of Warner Music. At the heart of the matter is the debate between fixed $.99 pricing for music downloads vs a tiered model.

"There's no content in the world that has doesn't have some price flexibility," Bronfman pointed out. "Not all songs are created equal. Not all albums are created equal."

Steve Jobs has insisted that the $.99 price point is appropriate and feels that higher pricing will turn consumers back towards piracy.

Businessweek reports that Apple's licensing agreements with the Music Industry runs out in early 2006. Apple may continue to hold the advantage in these licensing negotiations as it cements its hold on the music player market. Meanwhile, Apple's recent entry into the Flash-based MP3 player market with the iPod nano may provide it with an even wider lead.

Apple's lock on large quantities of flash at a substantial discount will make it difficult to other companies to compete, and provide Steve Jobs and Apple the leverage to keep music prices where they are. Apple is rumored to be securing more flash supplies with a deal with Hynix Semiconductor.

The new flash memory from Samsung is a new Multi-Level Cell type which is 30-40% cheaper than the more common SLC type that many competitors use. Samsung defends its established deal with Apple:

It's true that the company that has the largest market will have the edge. Buying 100 units and buying one can't be same.

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