Amazon, Apple and the price of music
Ever since Amazon began selling digital music and offering lower prices than rival Apple, the suspicion by many iTunes fans is that the music industry was in cahoots with Amazon.
In the comments section of our scoop Monday on Apple's MacWorld announcement that it was doing away with copy-protection software and changing its pricing policy, many iTunes fans asserted the often repeated allegation that the four largest recording companies were giving Amazon a price break.
Not so, according to two music industry insiders with knowledge of the negotiations.
The suspicion has long been that the record labels want to help Amazon's fledgling music service compete against the Apple juggernaut. The labels have hoped that an iTunes alternative would emerge and dilute some of Apple's control over digital music sales. The reality is, say my sources, that Amazon, Wal-Mart and everybody else selling downloads is paying the same wholesale price as Apple.
"As long as a retailer pays the label's price they can sell songs for whatever they want," said one of the sources.
What this means is that Amazon, which offers many songs for 10 cents less than Apple's former standard price of 99 cents, has likely chosen to lose money on music sales, say the sources. It's generally believed that Apple's profit margin is just a few pennies per song.
Amazon's motivation is obvious. The company is battling the country's largest music retailer and the maker of the best selling music player. Amazon needs a competitive advantage.
That's going to be tougher to find now. Apple's announcement Tuesday that it will remove digital rights management from songs and offer more price flexibility, including the slashing of catalog titles or older music to 69 cents, is bad news for competitors--especially Amazon. Amazon representatives did not respond to an interview request.
I've been hard on iTunes recently for failing to provide customers with DRM-free music and over-the-air downloads. But the reasons to shop for music at any other Web store are quickly dwindling.
Amazon launched an MP3 store in September 2007 and tried to play up the fact that fans could get cheaper music at a higher quality and free of DRM?
While iTunes on Tuesday raised the price of hit songs 30 cents to ($1.29), catalog titles were reduced by 30 cents. And there are a lot more songs in the catalog category. Apple can now make the claim that iTunes is cheaper than Amazon on most music.
At iTunes plus, music buyers can get DRM-free music at 256kpbs, the same quality that Amazon offers. And Apple took the extra step of enabling people to go back and scrub DRM from their existing libraries--although they must pay a 30-cent fee per song.
Let's face it, there's little to indicate that providing DRM-free music or offering songs for 10 cents less were competitive advantages anyway.
"This whole David and Goliath story has been a bit overblown," said Russ Crupnick, NPD's senior industry analyst. "What we've seen in the year we've been tracking Amazon is that there is very little overlap between (Amazon and Apple's customers). There is very little evidence that Amazon came in and cannibalized Apple's business."
Crupnick said that this appears to mean that to compete with iTunes, a store is going to have to offer more than discounted songs.
"I don't think price has been the issue so far," Crupnick said. "The reality is that Apple and Amazon are both providing good value. Apple has a very sticky customer base. They are using the iPod and iTunes. Even people who aren't buying music from iTunes use it to manage their libraries. What we've seen is for people who want to hear the latest Akon single, there isn't going to be much resistance to buy that track at $1.29. And at the lower end, Apple can start to do more bundling and packaging.
"Let me put this way," Crupnick continued, "if a dime would have made a difference, we would have seen a larger migration to Amazon a year ago."
So is Apple destined to continue to reign supreme over digital music?
The only potential competitor I can see possibly mounting a challenge is MySpace Music. I would say that the site founded by the top music labels and News Corp. represents the last hope that social networking is fertile ground for music sales.
What MySpace has going for it against Apple is the opportunity to market music to more than 100 million unique worldwide visitors, and a reputation as a music hub. The service also offers free song streams to PCs and will sell merchandise and concert tickets. The service bills itself as a one-stop shop for everything music.
Still, digital music stores are like banks. People are unlikely to switch unless they have an overwhelming reason. I don't consider myself an Apple fanboy in any way but there's nothing compelling enough out there for me to bother switching.
Sure, I wish iTunes was better at helping me to discover new music and I wish the sound quality was better, but for everyday tasks, such as managing my library and working with my iPhone, Apple is the clear winner.
Greg Sandoval covers media and digital entertainment for CNET News. He is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at http://twitter.com/sandoCNET. 
I am a podcaster and very experienced in different codecs. I do all my podcasting in AAC now, because a 32k AAC mono sounds significantly better than a 48k MP3 mono file, and is of course much smaller.
Not all players play back AAC, but the majority of new players do. So as you say, "the reasons to shop for music at any other Web store are quickly dwindling."
I've been reading about this debate about whether MP3 or AAC offer the better quality all week. My question is can the average listener tell the difference at 256 kbps regardless of the format? I'm not being argumentative. I'm really asking? I can never discern the subtle differences that other people say they hear.
If you ever see me you'll notice I have huge ears. But it's very possible that they aren't any good. ;)
Honestly? Unless you have a few thousand bucks' worth of high-end audio equipment and a professionally trained ear, file formats would be extremely tough to discern against at 256kpbs (192 IIRC is cd-quality, or "good enough for CD" in most audio formats).
Listening to anything through earbud headphones? Err, prolly not.
I'm a podcaster as well as radio broadcaster, and I would never use a stream that small. 32k is way to low to hold any decent quality for a show that includes any music. Nor would I limit my audience to AAC. In fact, we're looking at the idea of using advanced .mp4 files which are much larger even than the 80k streams that I use (and popular podcasts like Buzz Out Loud).
I found it would be cheaper for me to delete and repurchase some of the albums I really wanted in higher quality than to upgrade my whole library. So, I've stripped the DRM from my older tracks I did not want to upgrade, and done the separate re-purchase for the ones that matter (musicians with clear, crisp vocals, and other high fidelity music like orchestra performances).
I hardly think iTunes is selling at only a 10 percent markup, especially considering they're selling catalog titles for only $.69 (according to your article "catalog titles were reduced by 30 cents"). It just doesn't seem likely that Amazon discounting its price by $.10 is causing them to lose money on each purchase.
I hardly ever buy music from either, because I prefer lossless audio ripped straight from classical music CDs or SACDs (or from the rare lossless music stores like Linn Records), but the few times I purchased from Amazon rather than iTunes because of the absence of DRM. I absolutely refuse on principle to ever buy DRM-ed music. I don't keep precise count, but I probably buy about $500-1000 of music each year.
This reminds me of the NBC debacle. When NBC claimed they came back to Apple with a better deal, which they didn't have. No record label is going to tell a blogger the truth or tip his strategy.
Apple sells AAC which is superior to MP3 and still NOT proprietary in any way. Joke is most iTunes users never noticed the DRM, and that is what screwed the labels plans. Apple stayed on top despite the efforts to pressure them. DRM would have never stayed in iTunes if the labels allowed it removed and the pricing is dictated mostly by the content owners, the labels!
This is not meant to be an argumentative question, but if "no label is going to tell a blogger the truth about his strategy" then how come you are so certain about the Apple/NBC deal? Perhaps, you've been fooled, too.
and this also break all the hyperlinks on the web that link to iTunes. In short Apple needs to uncouple iTunes from their hardware and make it available on competetive handsets.
I've got an interesting piece of information coming on this on Monday. Not a huge shocker by any stretch but an interesting tidbit.
iTunes is more convenient to browse and listen to samples, but Amazon is the better store in my opinion.
But $1.99? You bet. I'm there.
"Amazon is that there is very little overlap between (Amazon and Apple's customers). There is very little evidence that Amazon came in and cannibalized Apple's business."
While iTunes was DRMed, two kind of people could go to Amazon to buy songs: those who wanted DRMless and those who do not own iPods.
Now, they buyers are reduced at those who have non-AAC players.
So, probably, Amazon will be hurted more.
"and this also break all the hyperlinks on the web that link to iTunes. In short Apple needs to uncouple iTunes from their hardware and make it available on competetive handsets."
Apple already did that: iTunes (the application) runs on any Windows XP/Vista capable hardware.
If there is any problem, Apple can build iTunes-on-Android, iTunes-on-Symbian, iTunes-on-Pre...
I think he means they need to uncouple it from the iPod/iPhone/Touch. I know it's not going to happen because they make so much more money selling hardware than songs, but it would be a blast to use iTunes to load up any music player/phone I plug into my computer.
Apple sells other vendors' products at their retail store what makes you think that they wouldn't be up for selling Android software at the iTunes store? Android is an open source OS and iPhone OS is not. What's stopping Apple from doing that? One sale will lead to another etc.
I too balked at buying music from iTunes at 128 kbps, but at double the data rate, I'm ready to start buying.
I agree that 128k was a terrible format and I hated to buy anything from iTunes that way. What I did buy most in that format was Metal or overdriven Rock tracks where the lossy format does not suffer much. But really, it is not a stretch for someone who understands audio compression to tell the difference... 256k is still VERY lossy, but the saved disk size of the tracks is worth lossing some info for iPod listening.
The music companies, in their infinite stupidity, first insisted that Apple lock down the songs. Then when Apple's proprietary format (and superior product and service) gave them 75% of the market, they gave up DRM so Amazon could compete with Apple. The music companies, and the movie/tv studios hate apple and Jobs because Apple is so much smarter than the music industry. all of them.
- by JBSimmons January 10, 2009 3:13 AM PST
- I avoided iPods and iTunes like the plague until the bit rate went up to 256Kbps and 320Kbps. I cut my CD's at 320Kbps VBR MP3. I do not use earbuds, I use headphones, real ones. I'm quite impressed with the 320Kbps VBR MP3 and choose it because of it's universality.
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- by macsyscat January 10, 2009 6:15 PM PST
- The monologue wanders from analog to digital and back with little thought to what is going on. The best test of a recording chain is the faithful reproduction of the source INCLUDING the noise. Increasing the dynamic range adds noise, increasing the sample rate adds noise. On a good analog board, noise 60db down is reasonable (shot, thermal, etc.) The processing tendency is to push the program level to the max thereby pushing the background noise into the audible.
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(35 Comments)Has anyone done a 320Kbps VBR AAC and looked at the frequency analyzer response to find out why AAC has a "sweet spot" that seems to be in the vocal range (inferred from above) while MP3 may have a different "sweet spot" that is more dispersed?
I play my iPods through my stereo system as well although I have a 500 CD changer. (Have 2 iPod Classic 160Gb). My Amazon 256Kbps sounds great, but has a glitch in it. I wonder if that was my PC (2GHz CPU) or their rip process that caused that. I am going to have to get the music OFF my laptop and onto a desktop with a faster processor (3.0EE GHz) and a RAID 5 array. Laptop is running out of space quickly. That's the bad point of iTunes. I'll probably have to get a allocate 500Gb on the 1Tb array to handle it all.
Just wanted to cut at the highest bit rate possible from CD without having to do it all over again. Others have said 192Kbps is near-CD quality. Being so close to 128Kbps, I have a hard time beliveing that. I accepted Amazon's 256Kbps MP3 and quite pleased. It is possible that different codecs get different results with different genre's of music.
My priority is this for my 2,500 song collection on cassettes with Dolby S and HX-Pro. I will try and get a CD track first. Failing that, then finding it on a website, with high cut standards. After that, most of the music came from 33's and 45;s. I still have the 33's and 45's, but it's the last choice.
What should I cut the cassettes at? I have to go ana > digi and make the changes on the digi side using Sony Sound Forge. The cassette deck should remove the Dolby S. (or B or C) - sometimes I forget what I used over the years as we progressed to metal tapes. Is there any easy way to tell Dolby B, C, and S apart od do I need to design a circuite to tell je Now for the songs that I have given away all my 45's. Will try to find singles somewhere. Barring that, I have no choice but to use Sound Forge to do those as well.
Last, but least are the 33's. They're in great shape and have a USB phono as well as standard I/O jacks to push lossless through the ana > digi and come out with a 192Kbps MP3 max and has it's own software for LPs.
Just wonder if I'm better off cutting a lossless CD first going through the RCA jacks on my Sony WR-33 studio grade cutters and try and get the best dynamic range first, Then through Sony Sound Forge, and into 320Kbps or 256Kbps MP3 and import to iTunes. Does a lossless transfer like that yeild better results from the start?
My biggest problem is the +60fb or noise that shows up on the VU meters that go from -100db to +10db. It's from -100db to -40db and thats hard to get rid of w;o damaging music warmth, and 3rd/4th harmonics. One never knows noise unless they can see it digitally between tracks when mastering. Sounds like I'm learning to be a recording engineer here. Wish there were more to help out. That is my last resort and the results are not that good although the 33's have been stored flat in covers for years. How do studios get rid of tape noise and restore dynamic range?
Do I have to learn to re-master from source (next to impossible, but someone has to do it, and comapnies won't make money doing it. It's a labor of love for a 50's-90's country music genre. Maybe I'm in over my head in trying to make a perfect product. Most of my CD's and LP's are out of print, so that doesn't help much.
Any suggestions audiophiles? Or am I way ahead of the curve? Thanks for suggestions. Sure would like to get all 2,500 songs on an iPod and I'm a very happy guy. One iPod is for singles and the other is just album favorites. Haven't maxed either out yet at 320Kbps VBR MP3.
The various Dolby processes rode gain so the noise in quiet passages was less obvious. When this is digitized various very-low frequency components are added that alias into the passband. Additionally high bit-rates extent the passband emphasizing the thermal components. Every adjustment has its own signature.
In sonar work, knowing your noise floor and working with it is critical. In audio, its treated as some thing that can be filtered out.
I hope your cassettes are playing back at at least 15 inches/sec. If not your wasting your time.
Again, with noise you make a call. Chop it out and things get artificial, work with it and your female vocalist will sit in you lap.