Let’s face it. Even though Steve Jobs and Apple almost single handedly led the major labels into the digital age of music, the numbers just don’t make sense, for anyone but Apple. With the licenses for the music that Apple sells on iTunes coming up for renewal, it is time for the music industry to take a cold, hard look at the reality of the deal that it made, and consider their options.
According to research firm Fulcrum Global Partners, while the installed base of iPods will quadruple from 2004 to 2005, the average number of paid downloads per iPod fell by nearly 50%, from 31 to 16. All of those iPods are almost entirely filled with ripped, copied or pirated music.
Here are the numbers as of Summer 2005:
While CD revenues have declined by some $1.7 Billion dollars on an annual basis,
iPod revenues are predicted to total over $4 Billion dollars in 2005.
At the same time, iTunes gross revenues for music downloads are about $200 million annually, with the labels taking home approximately $130 Million.
Do the math: CD revenues down $1.7 Billion. Download revenues up $130 Million. That leaves a shortfall of $1.57 Billion for the music labels. At the same time, Apple makes $4 Billion off of the iPod this year alone. Surely the labels cannot be happy with this. As a major label shareholder I would be outraged.
Those precious music licenses are up for renewal soon. The future of music is at stake. What does the smart money say the labels should do?