iTunes Outselling Tower Records; Does It Matter?

from the what's-it-all-mean dept

For those of you still wondering why the traditional record store needs to be reinvented, it appears that a new report today has some clues. Apple's iTunes has now surpassed Tower Records and Borders Group for music sold, making it the seventh largest music retailer. However, it's likely that a lot of folks are going to misinterpret this news. Already, the news report notes that it's a "meaningful sign in digital music's steady progress." That's wrong. It's a meaningful sign in Apple's progress. Remember, Apple still views iTunes as something of a loss leader to help them sell more iPods. No other online music store has anything like that -- and that allows Apple to be more aggressive in some ways. Note that the top three retailers on the list of sales (Wal-Mart, Best Buy and Target) all are in a similar position. They sell music as a loss leader to get people to buy other products with higher margins. The recording industry hates to admit this, but their products are best served being promotional goods for other offerings. Recognizing that fact certainly would open up plenty of new business models -- but the industry can't seem to let go of the idea that they can get a premium for music alone.


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    identicon
    MissingFrame, Nov 21st, 2005 @ 4:06pm

    Somehow that doesn't seem right ...

    That an item that costs $0.25 to make and sells for $12.99 is a loss-leader. Where is all this money going?

     

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      Jim, Nov 21st, 2005 @ 4:10pm

      Re: Somehow that doesn't seem right ...

      To the record labels....

       

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        Dom, Nov 21st, 2005 @ 4:31pm

        Re: Somehow that doesn't seem right ...

        APPLE makes a loss, or minimal profit from the sales. The majority of the money goes to the record company

         

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      Bablock, Nov 21st, 2005 @ 6:33pm

      Re: Somehow that doesn't seem right ...

      While it's true that a CD costs little to produce as far as the materials and packaging go, it often costs a considerable fortune to produce the content - studio time ain't cheap. Add to that advertising and marketing costs, distribution costs, producers fees, engineers fees, photography, artwork, video production, and a profit for all concerned. A top act will have millions invested in a project, and that set of bills have to get paid before the artist or record company see any profit. I'm not including the cost of touring, by the way.

       

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    Christian, Nov 21st, 2005 @ 6:34pm

    Record companies know the end is near?

    Have record companies just been earning bloated profits for years, and it's taken the push for digital download sales to bring this to light? Maybe. Who really knows? I'm no expert in this arena.

     

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      nonuser, Nov 21st, 2005 @ 7:19pm

      Re: Record companies know the end is near?

      Nobody feels sorry for the big record companies, but now who's going to start a new label and sign a bunch of promising but unknown bands that aren't clones of reigning pop divas or rap stars, record them and pitch their work to radio station managers so they get enough airplay to get noticed?

      On the talent side, who's going to stick around with four other guys they're pretty much fed up with for the 3-4 years it takes to create a really worthwhile band, only to see their work swapped online for free and sliced and diced w/o credit as portions of the "creations" of thousands of "composers"?

       

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        Anonymous Coward, Nov 21st, 2005 @ 9:50pm

        Re: Record companies know the end is near?

        On the talent side, who's going to stick around with four other guys they're pretty much fed up with for the 3-4 years it takes to create a really worthwhile band, only to see their work swapped online for free and sliced and diced w/o credit as portions of the "creations" of thousands of "composers"?
        Well, the only artists I'd want to bother listening to. The ones who do it because they love it. The ones who really deserve my money.

         

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    Ben McNelly, Nov 22nd, 2005 @ 8:41am

    right.

    heck, not every one thinks.


    Maybe we should look past our fears of the conglomerates of the industries actions and see thier hearts, and we will realize how warm and cudly they realy are.

     

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    Ben McNelly, Nov 22nd, 2005 @ 8:42am

    not right.

    --- see what I mean?? Makes absalutely no sense.

     

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    Jeremiah, Nov 22nd, 2005 @ 10:57am

    Loss leader

    Finally, music is on-par with soda pop!!! (as a loss leader, that is...)

    And Kelly, in what world does it cost .25 to produce (presumably) a CD? OR were you talking about manufacturing....??

    Re: iTunes, i'd be curious to see the data on the sales themselves, specifically, if the "long tail" theory is holding. In other words, it's one thing if iTunes is outselling Amazon et al on Top 40 alone, or if it's a combination of recent releases and reissues, or if it's mostly indie artists...get my drift?

     

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    cue trax, Mar 24th, 2006 @ 5:28pm

    all of that is thery get some facts like how many recprds were sold in 2005 and how many downloads compare it to how much it costs to manafacture then see how mich it costs to produce the whle thing and u can make speculations like these

     

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