Report: Variable Pricing Digital Music Deal Almost Fell Through
February 3, 2009 at 2:25 PM (PT)
The recent deal between APPLE and the major labels, where APPLE agreed to variable pricing on music sold online, while the labels agreed to provide DRM-free music, almost fell through over the year-end holidays. A NEW YORK TIMES report cited a particularly heated conversation between APPLE Chairman/CEO STEVE JOBS and SONY MUSIC Chairman ROLF SCHMIDT-HOLTZ that almost led to the dissolution of the agreement.
Reportedly, APPLE first offered to negotiate variable pricing about a year ago, provided that labels drop DRM copyright protections and agree to license songs for wireless downloads on the iPHONE. Although cell phone music downloading generated $70 million in sales compared to web-store business of $1.5 billion, most industry observers believe cell phone music sales will become the next major retail force.
Sources told the NY TIMES that only SONY MUSIC wouldn't agreed to the deal. SCHMIDT-HOLTZ wanted the pricing as soon as the deal is publicly announced, but JOBS wanted a longer time horizon. That led to what one described as "a heated exchange by phone on CHRISTMAS EVE." Eventually, considering APPLE's dominating presence in digital retail, SONY gave in and agreed to a longer waiting period.