14 DAY TRIAL // iTunes is an important piece of the puzzle for Apple. Not only does it facilitate communication with all the gadgets that keep coming out, but it is also the gateway to Apple's iTunes store, which is a force to be reckoned with. Apple's digital download service is not only the dominant force in online sales, but it has already become the third retailer in the United States, placing it in a position of great strength. The main advantage that the iTunes store has is that digital music sales continue to grow, while CD sales continue to decline.
According to The International Federation of the Phonographic Industry (IFPI), the growth of digital sales while significant, is still not enough to actually keep pace with the decline of CD sales. Sales of songs via computers and mobile phones were up 85 per cent to $2.1bn in 2006, and they accounted for 11 per cent of global sales, while in 2004 they accounted for just 2 per cent.
Apple accounts for approximately 70% of the online music market, giving it control over this growing segment that is becoming more and more important to the business industry. As such, it is not surprising that the labels are unhappy. They want variable pricing, to be able to charge more for the songs that are popular at the moment, they want subscriptions so that they can get recurring revenue regardless of whether the customer is listening to the music or not and most of all they have a craving for a cut of iPod and iPhone sales.
Apple's negotiations with Universal are a recent example of labels trying to fleece Apple for all their worth, but Apple isn't backing down. It seems the labels have entirely forgotten that Apple actually created this market and has fought them in order to actually make it as profitable as it is. Customers like the one-price-fits-all model and they do not want to rent their music via subscriptions. If Apple had actually listened to the labels back in the day, there wouldn't even be a digital download market to fight over, but that is a moot point when revenue decline has left you starving for money.