Record Pricing at the iTunes
Steven Jobs tried to be the good guy when it came to music piracy. Initially, you could buy an iPod, copy your CDs onto your Mac, and, then, download them to your iPod. You could also spend quite a bit of time putting stolen songs on your iPod. Jobs wanted something better. That something was iTunes.
Long story short, Jobs convinced the record labels to go along with his plan and ended up with eighty-five per-cent of the music on-line business very quickly. Oh, and by the way, the music labels made a lot of money, as well. After all, they got the bulk of the iTunes cash flow. Ultimately, the labels wanted more. They actually had the nerve to suggest that Apple should give them some of the profits from the iPod itself. Wrong move. Bad strategy. No one listened anyway. iTunes launched in April, 2003 (Levy, 010). By October, the Windows iTunes store was up and running. Apple had a home-run on its hands.
Fast forward to 2009. iTunes is still dominant. The labels have tried a couple times to raise prices and actually succeeded a bit. Not really surprising.
Through all this, everyone realized that there was a paradigm shift going on in the music business. I don't think things are done yet. When you read Anderson's Free and consider the model a bit, you come to realize that there is probably a way to distribute music that is free to the ultimate user and, still, very profitable to the labels - and Apple. I predict that that is the next step. It'll be some sort of advertising process or a gift to start the sale of something else, but my prediction still holds. Music will be free - legally - soon. We'll see.
Anderson, Chris. Free. The Future of a Radical Price. Hyperion. 2009.
Levy, Steven. The Perfect Thing. How the iPod Shuffles Commerce, Culture, and Coolness. Simon & Schuster. 2006.