Thursday, April 26, 2007

Apple CEO: iTunes subscriptions unlikely

Ahead of final negotiations with the big four music labels, Apple CEO Steve Jobs on Wednesday said that he is unlikely to give in to calls from the music industry to add a subscription-based model to Apple's iTunes store, despite comments by analysts to the contrary. "Never say never, but customers don't seem to be interested in it," Jobs told Reuters in an interview after Apple reported record March quarter profits of $770 million. "The subscription model has failed so far.... People want to own their music."

The industry leading online music destination has sold more than 2.5 billion songs since it was launched and continues to expand its film offerings. During the conference call yesterday, iTunes said that has over 5 million songs, 350 television shows, and 500 movies and that iTunes accounts for over 85 percent of legal music downloads in the United States (Nielsen SoundScan numbers).

A recent revolutionary agreement with EMI for DRM-free music -- which will be available at premium in May -- puts the other labels at a disadvantage, according to previous reports. "EMI struck a deal that puts all of us at a disadvantage," said an anonymous music executive. EMI, however, defended its position, saying that consumers were frustrated with DRM protection.

The remaining labels -- Sony BMG, Universal, and Warner -- are expected to drive contract renewal negotiations with Apple toward variable song pricing, a subscription service for iTunes, and bundling more music alongside other features into digital packages.

Last week, industry executives and analysts told Reuters that they expect Jobs, following his open letter calling for DRM-free music, to push for further concessions from record companies on selling music without copy-protection.

"There are a lot of people in the other music companies who are very intrigued by it," Jobs said in the interview. "They're thinking very hard about it right now.... We've said by the end of this year, over half of the songs we offer on iTunes we believe will be in DRM-free versions," Jobs said. "I think we're going to achieve that."

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