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So the rumors are flying today about the possibility that Apple may adopt a model similar to Nokia, where purchasers of an iPod or iPhone would have unlimited access and downloads to the iTunes catalog. The idea is that the cost of an iPhone or iPod would have a built-in “fee” that allows users to download songs to their device. Of course Apple, being the biggest boy on the “legal digital downloads” playground, is trying to negotiate a much lower rate per unit sold than Nokia, offering to pay half of what Nokia is paying the labels whose music they offer. But this could be a huge shift in the current battle to define how people will “consume” music in the future.

The Good and the Bad

For artists and labels this move could have an enormous effect on revenue, both positive and negative. On the one hand, the”per song” model offered labels and artists a much greater amount of money on songs that sold legitimately. But most of the songs by labels and artists the public was “consuming” were not obtained by paying. They were gotten off of Peer-to-Peer file sharing sites. The 6 million dollar question (or billion or trillion) has been, “in the face of free music downloads, how do we (artists and labels) make money?”

Make Way for the Format Shift!

I think they’ve finally found the answer. Now, this blanket fee model will mean drastically less money for artists and labels per song, BUT, if it’s as easy (and “free”) to just download a song you like legitimately, I can’t help but think that people will prefer to get their music this way. And let’s not forget that EVERY time there is a format shift in an industry, the industry almost always wins. Think of when CD’s came out. I can’t tell you how many albums I re-bought just to own the CD of the music instead of the clunky, worn out tape or record I already had. A lot of money was made this way and that meant profits for record labels and artist. In fact, I’d be willing to bet that if the mechanism is easy enough, most people will prefer to just download their favorite albums instead of going through the trouble of transferring and converting their CD’s into MP3’s.

So, yes, the artists and labels that were making lots of money on legal per-track downloads are probably lobbying pretty hard against this, but I can’t help but feel that this is a pretty good compromise to the digital conundrum we find ourselves in right now. Yes, some people stand to make less money, but MORE people stand to make SOME money. And I think there will be a lot more winners than losers. Hey, find me someone in business who doesn’t love a good “format shift” now and then. In fact, I think you could typify our entire economy on “format shifts”. Capitalism at it’s best, bringing you the next best thing you already had or didn’t need:)

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Hans Erik
Content Marketing Director
Hans at Next2Friends dot com