While the record labels are happy to see more and more online music stores start offering music download services, this may start changing direction in the years to come for one main reason. While online individual tracks are often sold cheaper than singles in the stores, the record labels get around double the cut out of online music downloads than the CDs sold in the shop, leaving the music download store with very little to profit from.
US Figures show that out of the 99c that one pays to download an Apple tune, Apple gets 4 cent (down from ~30c a year ago), the artist gets 8 cent (down from ~10c) leaving the copyright holders with the remaining 62% or more. However, customers were expecting online prices to fall due to no media costs, no replication costs, no printing and labelling costs and finally no shipping costs to worry about. In fact, while it costs near-zero to deliver an online track to the customer, the copyright holder sees online music stores as a 'luxury' or another reason to take in double the royalty for the track than from the same track sold on CD.
It looks like if the record labels keep up this practice, online music download stores that rely on song purchases for profit could start going out of business in the next few years, despite the popularity of legal music services significantly on the rise. GristyMcFisty used our news submit to submit the following news:
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Figures obtained by The Independent show that the labels take home the lion's share of the cost of a digital download - making more money per track than they do with CDs in shops.
But figures from the US show that Apple Computer, the dominant legal download business in Europe and the US, retains just 4 cents from each 99-cent (55p) track sale while "mechanical copyright" holders - generally the record labels, who own copyright in the song's recording - take 62 cents or more. Music publishers take the rest - about 8 cents. With the sites, the copyright owners have doubled their share of royalties, even though the marginal cost of manufacturing has fallen to almost zero. Read the full story here. |
Going by a previous article on the 99c price break down about 10 months ago, it looks like the record labels are getting greedier with what they get from online music services. I cannot see how they can expect consumers to move away from peer-to-peer MP3 swapping to DRM crippled music services as well as expect music download stores to happy run by keep pushing up the trade price to these stores.
As music purchased online is not CD-quality and does not include the CD, packaging, replication, shipping and other costs involved with CDs, I would expect lower royalty costs.
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Source: Enjoyment Independent
