Steve Jobs wins argument with Sony over timing of tiered pricing

Steve Jobs emerges victorious in dispute with Sony over timing of tiered pricing

When Apple announced at Macworld that the entire iTunes music store would soon be going DRM free, music lovers rejoiced. The drama leading up to that announcement, however, was anything but joyous. 

The New York Times is reporting today that prior to Phil Schiller's announcements at Macworld regarding DRM free music and tiered pricing, there was an extremely tense discussion between Steve Jobs and Sony's chairman of Music, Rolf Schmidt-Holtz, over the timing of when tiered pricing would take effect.

Record labels have long been resentful of the prominence and popularity of iTunes, and hate the fact that they have little leverage in negotiations. As more and more people stop buying CD's and start buying their music digitally, the record labels have been forced to make nice with Apple as they continue to look for ways to keep their profits at previous levels. 99 cents for a song is great for consumers, but record labels aren't as thrilled with the cheap price point. For years, record labels have been clamoring for variable pricing on iTunes that would allow them to charge more for newer and more popular songs than for older songs. Steve Jobs, however, was able to leverage the popularity of the iPod to keep those requests at bay. Until now.

When Apple sat down to negotiate with record labels recently, its primary goal was to attain licensing rights for distributing music over the air to the iPhone and iPod Touch.  Apple also wanted the labels to get rid of DRM.  In exchange, however, Apple had to make certain concessions, namely allowing record companies to experiment with tiered pricing.  All of the major record companies agreed to this compromise, with the exception of Sony Music. Sony Music wanted tiered pricing available immediately after its songs went DRM free. Steve Jobs, however, wanted to delay the arrival of tiered pricing until April.

This seemingly minor sticking point reportedly led to some extremely tense discussions between Steve Jobs and Schmidt-Holtz on Christmas Eve, and almost led to the deal being called off altogether. One phone call in particular described Jobs' tone as being 'combative'.  I suppose it's one thing to get concessions out of Apple, and another thing entirely to convince Apple to make those concessions on someone else's timetable.

In the end, Steve Jobs was able to wield the power of the iPod and the iTunes Store to his advantage once again as variable pricing won't take effect until April. The music industry might continue to change, but Apple's dominance hasn't wavered a bit.

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