Is it curtains for iTunes Music?

Apple has been engaged in meetings with record label execs in an attempt to work with them to develop an iTunes-based music streaming service, reports have claimed. But music industry chiefs have been hesitating at this, because they think Apple's music service has too much industry power.

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Apple has become the biggest music retailer in the US, coincidentally the world's biggest music market. The company holds a similar slice of other key music-loving territories, including the UK.

EMI's latest annual report warns that the company is too dependent on Apple: "The substantial dependence on a limited number of online music stores, in particular the iTunes Store, for the online sale of music recordings, and the resultant significant influence that they can exert over the pricing structure for online music stores," that report said.

As CD sales continue to wane and digital accounts for a higher percentage of music industry sales, it's no surprise label executives want to stimulate a diversity of digital store fronts.

Meanwhile digital music industry insiders mutter that labels charge these new digital store fronts so much for licensing the right to sell their music that most smaller services simply can't succeed.

Music industry is a distorted loop

The labyrinth of music industry politics, territorial licensing and baroque organizational practices in which one business unit can be posting video to YouTube only for another division of the same firm to take the clip down underscores the nature of this fragmenting industry.

That fragmentation and lack of unity is part of what led Radiohead to reclaim as much of their music publishing and recording rights as possible in advance of the radical 'pay-what-you-want' 'In Rainbows' release.

A person connected to Radiohead's publisher, Warner Chappell which handled much of the royalty collection for the release told an industry forum in 2008 that the project wouldn't have been possible without the attempt, and that the band made more cash out of the release than any previous album as a result.

Faced with a move toward consensus the industry faces a tough challenge, infested as it is with ego and hubris. Old business and new business models sit together uneasily as music labels try to change.

Artist relations

For all the attempt, high-profile casualities continue to emerge. Pink Floyd, one of the world's biggest-selling album acts, have now removed some of their biggest releases -- including The Wall and Wish You Were Here -- from sale by iTunes and other digital music services following termination of a deal with EMI.

In any case, Pink Floyd argue they should be able to sell their music as whole albums only. iTunes does not agree -- its model demands artists allow fans to 'cherry-pick' their music.

The Beatles remain another high-profile iTunes hold-out. Music from that band still isn't available for reasons which are never plainly described.

Rocker John Mellencamp is anxious about the Internet, saying this week, "I think the Internet is the most dangerous thing invented since the atomic bomb. It's destroyed the music business. It's going to destroy the movie business."

Labels still fear the Internet itself. Most recently, Universal Music put pressure on Apple to kick popular music streaming app, Grooveshark, off of iTunes. That's despite the fact Universal had never once asked Grooveshark to remove any content.

"In the app world, a mere complaint issued from one multinational corporation to another, rather than through the legal system, is enough to delete a mobile app that contains the same functionality that's tolerated, for now anyway, on the open web," Wired remarked.

Music is valuable

Radiohead producer, Nigel Godrich, once told me, "I think Apple sees iTunes content as software and doesn't give it enough respect. You are dictated the terms of how you sell things, which is a little weird. And when you buy all your music through this small door, suddenly you're no longer going to a record shop and hearing things and looking at the artwork."

Peter Gabriel recognises things have changed, saying, "Many young people don't seem to be buying music legally but even so, the culture and passion for music both new and old has never been greater and this is partly down to the internet."

He sees it as a creative challenge, "I'm excited at using the internet to do new things with my music – inviting people to remix my songs, or my Full Moon Club, where I try and do something for my fans when there's a full moon," he says.

Happy to listen to a major label complaint, Apple last year did make some small shifts to restore the balance of power to labels.

After years of negotiation, it finally permitted labels to offer music at variable prices, though admittedly these were split into just three price bands.

Apple said, "based on what the music labels charge Apple, songs on iTunes will be available at one of three price points-69 cents, 99 cents and $1.29-with many more songs priced at 69 cents than $1.29."

Music labels see streaming music services as the future. Executives have been spewing the idea of music as access rather than ownership for years and years. Even before Napster. They want to embrace the internet, but only on their own terms.

It is all about control.

It is understood that hugely succesful music streaming service Spotify is finding it challenging to secure the permissions to stream music in the US. Odd when you consider the labels own a slice of that service.

iTunes faces similar challenges. When it acquired music streaming service, immediate speculation emerged claiming the company would introduce music streaming via iTunes. This hasn't happened yet.

A recent CNET report warned there may be a long wait. Like Spotify, Apple still lacks the licenses it needs to stream tracks and is now telling the majors it won't deliver any 'significant' cloud-based music offerings in the near future. The focus appears to be on Apple's television plans.

Reluctant to enable Apple to take music services into the future, fearful of its level of control and clearly unwilling to abandon the money tree that is iTunes sales, Apple and the labels sit at a strange place. Both want to explore different futures, but neither can yet figure out how to let the other go.

Music lovers meanwhile look to iTunes and the labels and ask why we haven't yet seen music made available in Apple Lossless format for music fans who like the highest quality sounds.

Along with many other music-related innovations ideas like that appear stillborn right now, as major label reluctance to change continues to imperil the relevance of the very industry they are trying to protect.

Copyright © 2010 IDG Communications, Inc.

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