Apple may soon deliver a free iTunes
SAN FRANCISCO (AP) - March 20, 2008 Some analysts threw cold water on the plan outlined in the
Financial Times, however, saying Cupertino-based Apple would risk
creating an "accounting nightmare" and alienating some artists if
it started giving away songs on its /*iTunes*/ online store.
Rumors have buzzed through the industry for a couple years that
Apple might open iTunes for free downloads. Meanwhile, Apple's
rivals are experimenting with new ways to distribute music online -
including giving it away.
The newspaper cited unnamed music industry sources in reporting
that Apple is negotiating with record labels over a deal to offer a
monthly music subscription for the iPhone, as well as an unlimited
music bundle for both the iPod and iPhone.
The cheapest iPods - the Shuffle model - currently start at $49,
and the cheapest iPhones start at $399.
The Financial Times didn't say how much the prices of those
devices would jump if the proposal were to go through. But it said
the sticking point in the discussions how much Apple will pay the
labels for access to their music libraries, with Apple currently
offering to pay just $20 per device.
Apple did not respond to requests for comment.
Some analysts said the iTunes store is too valuable to Apple for
it to give away the music in it.
"I think it's a little far-fetched at this stage," said Tim
Bajarin, president of technology consulting firm Creative
Strategies in Campbell, Calif. "The studios still want to be
compensated. And the artists, especially the independent artists,
still want to be compensated. I'm skeptical that carte blanche,
free access to any music may be in the works."
Only about 10 percent of Apple's revenues come through iTunes -
about $2.5 billion in 2007. But the store has been a critical tool
for driving the more-lucrative iPod sales and helping musicians get
paid for their work.
Apple sold $8.3 billion in /*iPods*/ last year, an 8 percent
increase over the year before.
The success of iTunes has helped Apple become one of the world's
biggest music retailers - it's currently the No. 2 music retailer
in the U.S. behind /*Wal-Mart*/ Stores Inc.
But it's also exposed Apple to criticism over how the company
protects its content and prompted Apple to campaign for new ways to
distribute music legally online.
The criticisms center on the inability to play songs bought on
iTunes on rival products to the iPod, such as /*Microsoft*/ Corp.'s
Zune player.
To free up online music, Apple CEO Steve Jobs says the major
record labels should strip protections known as Digital Rights
Management, or DRM, technology, which prevents unauthorized
copying, from their songs sold online. Apple, meanwhile, has
refused to abandon its own copying protections.
Some of Apple's rivals are already trying out new approaches.
Nokia Corp., the world's largest mobile phone maker, announced a
deal with Universal Music Group in December that gives buyers of
certain Nokia phones unlimited free downloads of songs from the
Universal catalog.
Seattle-based RealNetworks Inc. and Redmond, Wash.-based
Microsoft both offer music subscriptions that cost $14.99 per month
that the companies believe will appeal to customers who are more
interested in discovering new music than owning old favorites.
Neil Smith, a vice president of marketing for Rhapsody, said its
subscribers delve deeper into back catalogs and check out more
independent artists than typical in-person music store shoppers.
Subscribers also buy more MP3s than non-subscribers.
"We believe that this kind of approach, where unlimited content
can flow seamlessly across different devices and media, is the best
thing for the consumer and the industry," said Microsoft spokesman
Jason Reindorp. "It brings the focus back to where it should be -
the music."
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AP Technology Writer Jessica Mintz in Seattle contributed to
this report.
