Record Labels Greed Summed Up

For the past few weeks, we’ve been seeing an interesting war of the words played before our eyes between Apple and the recording industry. Steve has called it greedy and the labels have said they’re barely making much money.

Everyone knows Steve’s right and the labels must be taking in the extracurricular - and illegal - activity of their acts if they think anyone will swallow their heap of dog doo-doo. Digital Media Thoughts breaks it down pretty darn well for all to see the math, and numbers don’t lie:

…gross profit to the recording studio is only $3-4 per album.

iTunes, on the other hand, pays recording studios between 60-70% of gross revenues (60 to 70 cents per 99 cent song). For each $9.99 album, that’s a gross profit of $6-7. [Source]

Some commenters point out that most people won’t buy an entire album now that ala-cart is available, which is true; however, the high profit margin still exists either way with iTunes. In fact, overall, the labels are going to have an increased sales revenue because the reason for the poor CD sales of the late ’90s won’t be a factor here as consumers won’t have to be cornered into purchasing an entire album for three songs. Back then the consumer said “forget that” and got those three songs via Napster, the then free p2p software program.

Really, what it comes down to is Apple isn’t making squat on iTMS downloads and the record labels are cashing in. they don’t have to deal with any tangible item at all and they let Apple do all the work. They just show up for the big fat check and then go to the bank and whine about how they want more to the media on the way.

Part of me hopes the labels pull out and yank their deal with Apple and then we can all watch the epic repeat of falling sales for the labels once again. Now with more people on broadband and BitTorrent here to help, the labels will probably wish Metallica never killed off Napster and they never gave the finger to Steve. But we all know the labels will never learn; they’ve got clouds in their coffee.

[tags]apple,itunes,record industry,labels,greed,riaa,itms[/tags]