September 27, 2004

The Independent On Music eTailing Economics [6:02 pm]

Record labels still on top despite online revolution, with commentary by Mark Mulligan of Jupiter Research

But figures from the US show that Apple Computer, the dominant legal download business in Europe and the US, retains just 4 cents from each 99-cent (55p) track sale while “mechanical copyright” holders - generally the record labels, who own copyright in the song’s recording - take 62 cents or more. Music publishers take the rest - about 8 cents.

With the sites, the copyright owners have doubled their share of royalties, even though the marginal cost of manufacturing has fallen to almost zero.

The revelation will embarrass industry executives, who meet this week in Manchester for their annual In The City music conference.

Mulligan’s take is a little different:

The split discussed in the story actually misses out a few key costs such as payments etc and is also a bit too heavily skewed towards labels. But it is in the right ball park and the principle remains the same: label costs are a massive slice of digital music prices. The article claims it will send many stores out of business. At Jupiter we take a slightly different tact: that stores with alternative revenue streams are the ones who will survive, using digital music as a loss leader.

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