EXCLUSIVES

iTunes Expands
Words by Erez Reuveni
April 2004

During the months since Apple® launched its iTunes® music store, everyone from Bill Gates to the Dalai Lama has considered opening their own online music store. Even this writer briefly considered opening his own music store, but thought better of it due to a conflict of interest. At the time of publication, nearly a dozen companies besides Apple are selling music online or plan to open an online store soon, including Napster, MusicMatch, Realnetworks, Wal-Mart, and Apple's favorite competitor, Microsoft®.

For the most part, the major online music stores have been selling music produced by the Big Five record labels, leaving many with the impression that the Big Five was putting the squeeze on Apple and others, demanding that the online music stores only sell major record label material. But that is changing and Apple is leading the way. The past few months have seen Apple adding new material weekly, from both the Big Five and the independent labels, with over 500,000 songs online last time we checked.

The MacDirectory recently spoke with two leading independent labels regarding the potential for online distribution and why they've signed on to iTunes.

Amaechi Uzoigwe is co-president of Definitive Jux Records, a New York based hip hop label representing such artists as El-P, Aesop Rock, Mr. Lif, and RJD2.

MD: Why are the indie labels joining forces with iTunes?
A: Put simply, it's an easier way to both expose and sell our music. It's easier in some ways to reach new fans virtually, as opposed to the old bricks and mortar paradigm. Maybe some kid who would never check out our stuff stumbles across something he thinks is amazing and tells everyone he knows. It's [iTunes] got the brush-fire potential. Plus, Apple takes a third of the 99-cent cost per track, with the label getting the rest. We split the profits 50/50 with the artist without middlemen, packaging and shipping charges, or marketing costs.

MD: Is there a risk that the traditional album format will be compromised in favor of single tracks?
A: That's a tough argument to make because it actually places the onus on the artist to actually make a great album that people will want to buy all of. On the flip side, it will also allow the industry to shamelessly promote even more singles. Hopefully that will reduce the number of pop star albums out there.

MD: Is there a risk that Apple and others might become the new middleman, capable of dictating what the eager consumer listens to?
A: Maybe. Some of them [online music sellers] are trying to stay away from influence peddling to maintain an editorial integrity of sorts. But as the business grows so will the platform and with that expansion comes the politics and the money. We feel if we've created a demand for our product, people will seek it out physically or virtually; and the music services, if they are truly looking to act as a new king of music stores, will pay attention to what's going on in the larger marketplace, media, etc. and look to promote the product that they know people are looking for. That's just smart business.

Ed Rivadiva is head of digital marketing for Palm Pictures, whose artists include Zero 7, Supreme Beings of Leisure, and Koop.

MD: Will online distribution benefit the indies?
ER: Independent labels like Pal, which rely on another company for physical distribution, often have a hard time obtaining price and positioning on par with the majors. By doing away with the physical limits of shelf-space, online music stores offer a far more democratic platform for consumers to discover and purchase music, regardless of record company muscle.

MD: Are you concerned with Apple, Napster, et al controlling the market?
ER: So long as no one company comes to monopolize the online retail space, this won't be a problem. The record companies already learned their lesson from making this mistake with MTV over a decade. Out primary concern is putting as much power in the hands of consumers. Our product is as good, if not better, than what the majors can offer. We simply need an equal opportunity to be heard.

MD: Have you run any models forecasting potential sales?
ER: Frankly no. We understand the potential at hand and have great expectations; but [with] so little confirmed consumer data available thus far, there was little point in conjecture. We have, however, received our first sales statement and the general reaction was a pleasant surprise.

MD: Was there hesitation to make the jump to iTunes?
ER: Piracy has always existed and will always exist. Our only choice in the matter is giving honest people a chance to be honest. We were simply waiting for the major labels to relinquish their hopeless attempt to retain control of distribution through their dominant brick-and-mortar installations and accept the fact that online distribution was inevitable. It was a very frustrating time-waiting for what we knew was an unstoppable transition to take place. You can't argue with consumers. Thank God the stalling is over.