More of my sites

WinInfo Daily News
SuperSite for Windows
Windows IT Pro Magazine
Connected Home
Thurrott Dot Com
Windows Weekly at TWIT

About this site

For six years, the Internet Nexus served as my technology blog, but I've since started blogging at the SuperSite Blog instead. If you're looking for the blog, please head there. --Paul

Wednesday, October 27, 2004

Apple's newest gambit: U2 iPOD

I really like John Dvorak, but this week he's written a horrible misinformed commentary for CBS Marketwatch that just begs to be refuted.

[Steve] Jobs, Silicon Valley's most creative promoter, unveiled a premium iPOD portable MP3 music player in glorious red and black which contains the complete collection of over 400 U2 songs including some never released material.

Actually, the U2 iPod does not contain any U2 songs, let alone 400 U2 songs. The 400 U2 songs Dvorak is referring to is part of a virtual boxed set that iPod owners can purchase from iTunes Music Store; it costs $150 extra, or $100 if you get the U2 iPod.

This should have marked the most impressive bundling job anyone has done since Adam Osborne bundled $2000 worth of software into a $1500 computer and changed the desktop computing business forever.

It would have been, sure, if Apple had actually bundled the songs.

Dvorak then figures out that the "classic" songs offered in the 400 song collection are actually worth only 13 cents apiece, meaning that the whole deal is itself worth a whopping $50. To put this in perspective, anyone who actually pays $150 for this thing is getting ripped off by about $100, and anyone who pays a $50 premium for the ugly black and red U2 iPod is, in fact, paying the exact price the music cost Apple: It's a wash.

With this U2 bundle the numbers skew wildly in Apple's favor with two-thirds of the money going to Apple. In fact the bundle done as a licensing deal should be sold for far less than $100, not $149. In fact the bundle should be more profitable for Apple and hardly represents any sort of breakthrough in record pricing.

This I agree with.

The 65-cent licensing rate should only apply to new music, not old tracks. Old tracks should be selling for less than 50-cents with 13-cents going to the labels. With really bad material where the labels get the rock bottom 4-cents per track there is no reason not to sell these songs online for 25-cents.

I don't think Steve Jobs intended to create a controversy with this issue, but merely a gimmick to sell more iPODS. I can assure you that a controversy will soon develop into something more significant.

Meanwhile, expect to see more bundling gambits until the MP3 makers run out of artists and genres. I'll probably buy the all do-wop MP3 bundle when it comes out myself.

I guess we'll see if a tiered pricing model ever takes off. If it does, it will happen on the "choice" side of the equation (i.e. Wintel-based stores) and not on the iTunes side, naturally. What I'd rather see is a choice in file quality: How about 99 cents for 160 Kbps songs and 49 cents for 128 Kbps.

[ Posted at 8:20 PM | Permalink ]