Apple’s (AAPL) iTunes service has been invulnerable, at least until now. The consumer electronics company has alienated its music publisher partners by dictating pricing and revenue sharing. That would only makes sense. Apple does have over 70% of the digital music download market. It ought to have things its own way.
The big four music companies are now conspiring with Amazon (AMZN) to break Apple’s death grip. Amazon has gotten all of the major record companies to sign up to its new music store which delivers content without copy protection. Only one of those firms, EMI, has a similar deal with Apple.
At this year’s Super Bowl, Amazon, the record companies, and Pepsi (PEP) will launch a huge free music promotion which could lead to one billion songs being downloaded from the Amazon store. It is an audacious marketing plan. Amazon risks little. The music companies risk alienating Apple by siding with a competitor.
Apple may be in for more trouble that it imagined. If Amazon gives record companies a far cut of royalties for their content, they do not have to sell as many downloads as they do at iTunes where the cut is modest. Amazon has a customer base large enough to promote a service which can rival Apple’s in numbers.
A little greed on Apple’s part may be costing it down the road.
Douglas A. McIntyre
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