Apple’s 2006 Problem And The Future Of ITMS

Apple has had tremendous success involving its iTunes Music Store and its iPods. However, next year might be different because the license agreements that Apple has with the major music label expire. Many of the labels have wanted to raise the prices of each track, which Apple has resisted.

But Apple has just opened the iTunes Music Store in Japan, and the tracks there are sold for 150 to 200 yen, according to the Apple press release for the Japanese ITMS launch:

With one million songs priced at just 150 Yen and 200 Yen per song, plus Apple’s legendary ease of use and pioneering features such as built-in support for Podcasting, the iTunes Music Store in Japan is the best way for Mac and PC users to legally discover, purchase and download music online.

This pricing structure might occur here in the U.S. if the labels have their way. The labels want higher prices for the newest released tracks and smaller prices for the catalog tracks/albums. Apple doesn’t want a two-price system, and wants to keep a uniform pricing structure, according to Digital Music News.

Specifically, labels have been pushing Apple to increase its current fixed a-la-carte pricing structure in the US, Canada and Europe. And a two-tiered pricing model in Japan will add fuel to that effort, with Apple unexpectedly breaking its uniform pricing approach. Negotiations over the closed FairPlay DRM system will also be important, with tracks on new copy-protected CDs from both Sony BMG and EMI incompatible with iTunes and the iPod.

Although Apple has pretty much revolutionized the way music is both bought and played, the labels aren’t too happy sitting on the sidelines as Apple makes most of the decisions on the direction of the music industry. The labels might not also be happy with the fact that Apple has raised the royalties that it gives to indie labels, which makes the royalties comparable to that of major labels (“iTunes Music Store Gives Indie Labels More Equal Share” article here).

Apple looks to do some fighting in 2006.

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