Apple Sticks With iTunes Song Price

Apple Computers Inc. CEO Steve Jobs holds up the new iPod Nano during an announcement in San Francisco, Wednesday, Sept. 7, 2005. The Apple iPod Nano is 1/5 the size of the original iPod and weighs 1.5 ounces or 42 grams.
AP
Songs at Apple Computer Inc.'s iTunes Music Store will remain 99 cents per download after the company extended its distribution deals with major recording labels.

The recording industry and Apple had been at odds over Apple's insistence to keep its flat rate with some labels wanting variable pricing, including higher prices for new releases.

"Apple has all the cards, and when you have all the cards, you can play hardball," said Ted Schadler, an analyst at market research firm Forrester Research.

Apple shares jumped 2.9 percent Tuesday, after the renewals were confirmed.

The distribution contracts were up for renewal for the first time since iTunes launched in April 2003. Apple said Tuesday it would continue to offer the 99-cent pricing from a library of over 3 million songs, but declined further comment.

ITunes helped propel the legitimate music download business, and Apple claims it has about an 80 percent share of the market, which last year climbed to 353 million song downloads in the United States, according to Nielsen SoundScan.

Analysts say recording labels make about 70 cents per download but could pocket significantly more if the prices were raised by a few cents.

Representatives from two of the four major labels — Sony BMG Music Entertainment and EMI Group PLC — declined to comment on the iTunes contract renewals. The remaining two — Vivendi Universal's Universal Music Group and Warner Music Group Corp. — did not immediately return phone calls.

None of the negotiating parties would say how long the new deals will last, but Schadler suspected the record labels insisted on shorter-term contracts.

Apple's dominance of the download market means the Cupertino-based company does have the upper hand for now, but analysts predict its market share will pare down as rival services, including online music subscription services, gain traction.

Shares of Apple closed at $71.62, up $2.02, in Tuesday trading on the Nasdaq Stock Market.
By May Wong