A Disagreement With DF On Apple’s Approach To The Ringtone Racket.

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Daring Fireball’s John Gruber had a lot to say in his article about ringtones and what he calls the “ringtones racket”. However, I disagree with part of his premise, and ultimately his conclusions. For other views on this subject here’s a great post from Epple, and Roughly Drafted touches on the subject as well.

I don’t necessarily disagree that it’s a “racket” in the sense that I’d say nearly all people agree that ringtones should be considered “fair use”. However, the article seems to believe they’re that way now, whereas I don’t believe the matter is settled at all — certainly not settled enough for Apple to act in the manner the article suggests. And that’s where I disagree the most: The call for some Herculean effort on Apple’s part that’s simply not realistic in the current environment. Gruber does not like Apple’s approach, I think it’s a start.The DF article concludes thusly:

“Faced with the choice between doing what’s right for customers or charging them money for something they shouldn’t need to pay for, Apple chose the latter. There is no middle ground. And any business that hinges on your customers “not knowing any better” is a bad business.”

Apple’s real choices were to offer nothing or something much better than what’s available now, and at a lower price. Apple negotiated this while Verizon and other carriers never even tried to. Apple took an approach that didn’t put an end to the ringtones “racket” altogether because they cannot do so. There are limits to what Apple can do with content that’s not theirs. Such things must be negotiated, and we’re talking about negotiations with companies whose heads are still in the 70’s and believe you should pay them every time you so much as hum a song.

I’m not sure why Gruber believes a better ringtone deal available today is somehow not “right for customers”. He believes it should be free or nothing, but there are alternatives. Apple is correct at this time to negotiate major changes that shake the status quo, even though they don’t reach the utopian plane DF (and others) believe should be the only next step.

The argument that Apple is now restricting non-iTunes songs is overreaching. All “MP3 players” let you rip and play your own CDs, but how many let you make ringtones from them? None. Asking Apple to do what would be flatly refused by the labels is not just living in Utopia, but running for mayor as well.

The fact that most people want a ringtone considered “fair use” doesn’t change the fact that currently the labels have, at the very least, the upper hand in this argument. They have years of precedent in sales of ringtones, as well as specific prohibition of using songs as ringtones in online music stores’ TOS, on their side.

How did it get this way? Easy, we were all asleep. Ringtones weren’t as much in demand years ago and we didn’t notice or care. For every person that might have balked when the first trickle of such ringtones were offered for sale, there were 50 people who bought ’em. It’s not so easy putting that cat back in the bag. Too bad. Sucks to be us. Now it’s gonna be harder to change.

Take the labels to court, or let their own failing business tactics eventually force them in the right direction; those are the only things likely to make them change. But given how slow they’re moving on DRM, and their own warped views on ringtones (see below), that’ll take a while. Gruber seems to think that in the meantime Apple should either do nothing, or launch an initiative of free ringtones they’d be forced to pull within 48 hours, tops.

To put Apple’s approach in perspective, let’s look at ringtones from Apple’s and the labels’ point of view to compare and contrast…Apple’s ringtone offering is radical compared to the options available before it:

  • Cost is ninety-nine cents, or $1.98 if you don’t own the iTunes song.
  • Make it yourself (up to 30 seconds, with optional fade in and fad out).
  • Initially half a million titles available.
  • Purchase online and receive immediately for synching to multiple iPhones.

Notice that both prices are less than ringtones available from service providers elsewhere, and in their case you don’t even get the song! What if, As Gruber suggests, you already own the song on CD? Apple charges $1.98 for the ringtone, which is still less than anybody else, you still get to make it yourself, and you can still use it on multiple iPhones. In other words, even the worst-case iTunes ringtone scenario is a better value for the consumer than anywhere else.

Now let’s look at what the labels apparently believe is a ringtone value: The “ringle.” I’ve already written about how stupid these are, and their announcement provides a perfect point of comparison to Apple’s approach:

  • Cost is six or seven bucks.
  • Somebody makes it for you.
  • Initially 60 to 70 titles available.
  • Available at retailers on a CD, so you get to drive there, stand in line, etc.
  • Bundled with a couple songs you don’t want (so they can charge six or seven bucks).

The above two scenarios are the reality of ringtones now (well, ringles are due this Fall). They’re legitimate and legal. Neither is free, and both charge for a ringtone of a song you ultimately own, yet look at the world of difference between them! Heck, the “ringle” can even make buying ringtones from current carriers look good. Who would have thought that possible? Sony and Universal combine to scrounge up maybe 70 titles? Seventy?! I’d say that makes Apple’s half-million look pretty damn good.

How can anyone look at these two approaches and not realize Apple just made a game-changing move? How short-sighted do you have to be to eye only an ultimate goal, and consider any progress short of that some sort of misstep? In my view, Apple’s patience in building itself back up these last 10 years has probably been its greatest strength.

There are other ways to get ringtones on an iPhone, but their legality is highly questionable and I won’t dwell on them. Apple makes half-hearted attempts to block them since it’s no doubt obligated by the labels to do so. You cannot be the #3 retailer of music and simply turn a blind eye to it, the labels would have your head on a platter. Apple has every incentive to just quit the whole thing.

Thankfully, Apple doesn’t live in Utopia, but rather the real world where they realize change is made (sometimes slowly) one positive step at a time. This is exactly how they built the iTunes store. Gruber certainly doesn’t have to follow in Apple’s footsteps, but he shouldn’t attempt to cover their tracks either.

Sony And Universal Team Up To Create Something Stupid

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Oil and water. Matter and anti-matter. Sony and Universal. These are apparently combinations that just don’t mix.The brilliant minds at the record labels have come up with a new idea for the holiday season. They’re going to sell “ringles.” Heh. Ringles. I just had to see that name again.

It’s a single combined with a ringtone. Get it? A Ringle. No doubt they selected that name after many hours of heated debate over the name “Singtone.” Maybe they can get Scooby Doo for the ads: “I rearry rove my ringles, Raggy.”If it wasn’t their own doing, I’d feel sorry for the labels right now.

Anyway, here’s the gist of this new offering from the labels’ best and brightest:

“Each ringle is expected to contain three songs — one hit and maybe one remix and an older track — and one ringtone, on a CD with a slip-sleeve cover.”

So I get the same song twice (a remix), a song I probably don’t want, and a ringtone whose length and content have been decided for me — maybe by the same guy who thought up the name “ringle”.

“The idea is that if consumers in the digital age can download any tracks they want individually, why not let them buy singles in the store as well?”

Um, except the song I download is just 99 cents and I don’t have to drive to the retailer to get it, or did that fact elude the labels? More importantly, it’s the one song I wanted; not a remix and not an “older track.” Do they see the difference now? No, of course they don’t. As a label they stopped reading at the part about it costing 99 cents. That’s what’s bothering them.

“Sony BMG Music Entertainment, which came up with the ringle idea, and Universal Music Group are going to be the first out of the box with ringles.”

Yes, Sony’s had so many great ideas about music distribution lately. Their CD rootkit was a big hit. And isn’t ATRAC wonderful? Well, I mean wasn’t it wonderful before they had to kill it? And with Universal on board you just know this can’t really be a good deal for the consumer.

“The former will unleash 50 titles during October and November, while UMG will have anywhere from 10 to 20 titles ready.”

Um, 60 or 70 total songs to choose from initially? Are they serious? Hey guys, Apple is starting with half a million! How can the largest label on the planet in Universal only come up with 10 or 20 titles to start with? Universal is truly pathetic.Further, with iTunes I get the song I want and a ringtone I create myself for $1.98 (unless I already own the song, in which case it’s just 99 cents), so tell me what will the “ringle” cost?

Drumroll, please…

Wait for it…

“Sources suggest the ringle will carry either a $5.98 or $6.98 list price,”

BWAAAHAHAHAHAHAHAHAHAHAHAHA!! For three to six times the cost of iTunes I get the “bonus” of a questionable remix and an old song I don’t want, but I have to visit a retailer to get it, stand in line, pay tax, and the ringtone is created by someone else. Six or seven bucks is the price of an EP, which typically provides maybe five real songs. This is such a horrible deal for the consumer I can see why Universal jumped all over it.

“If it’s $5.98, ringles will have a 31 percent gross margin, shy of the 35 percent profit margin that CD albums carry nowadays; if it’s $6.98, that would give retail a 42.7 percent gross margin, similar to the profit margin cassette and vinyl albums enjoyed back in the day.”

CDs aren’t selling. Isn’t that what the labels are telling us? Isn’t that what the sales data says? Isn’t that what everybody knows? Yet the morons at Sony and Universal have decided that they’ll make a less desirable package at the same profit margin? Sure, that’s the solution. This absolutely boggles the mind.

Why isn’t everyone who owns stock in these labels calling for the heads of all senior management? At what point will the stock holders speak up?

“On the plus side, big retailers like Wal-Mart, Target, Best Buy and Amazon have agreed to support the configuration, although all of them may not be ready to do so at launch date, sources say.”

Yes, it will be hard to find shelf space for maybe 60 CDs not even in jewel boxes. Please. If they’re not ready at the launch date it’s because they know these won’t sell. Does anybody outside of Sony and Universal think these have a prayer? In the words of Scooby: “Rorry, Rony, your ringles won’t rell.”

Nyuk Nyuk: The Three Stooges And DRM-Free Music Online.

“What are you, a wise guy?”

What would happen if the three stooges tried to take on Apple’s iTunes Store? Well, now we know, because its happened.

First we have Universal Music. Wanting desperately to sell DRM (preferably Microsoft’s) music, and to jack up prices for newer and more popular titles, they are frustrated by Apple at every turn. So in their own way of trying to poke their fingers in iTunes users’ eyes, they’re offering DRM-free music for a limited time. They claim they’ll gauge reaction to determine if they should continue the practice. Sounds good, right? So what’s the problem? The problem is it’s all a bunch of hooey:

  • The tracks are not be available on iTunes. Aside from the obvious fact that you can’t gauge market reaction by not offering it on the world’s largest and most popular (by far) online music store, it makes Universal’s real motives pretty transparent. Universal should have been more low key but, frankly, they’re not bright enough.
  • They teamed with Wal-Mart. Why them? Well, aside from the fact that there aren’t many online music sellers left, this second stooge is perfect because, like Universal, they haven’t a clue how to step into online media sales and distribution. They’re made for each other. In my opinion Wal-Mart already started off wrong because, like Amazon, they’ve chosen the wrong file format.
  • The new service doesn’t work on Apple’s Mac. I can just hear the Universal execs now: “We’re already not making it available on the store used by most Mac users. Still, in case that’s too subtle about how much we despise Apple — though they pour millions into our coffers for doing nothing but supplying source files — let’s also utilize a web site they can’t use. Ha ha! Oh, but will they get wise to this not really being an experiment? Naaaah, we’re too clever for them.”
  • Looks like only their older catalog of music is available. What, you though you’d be able to get all the Universal music on Wal-Mart DRM-free that you can get on iTunes? What part of “this is not really an experiment” are you not getting? Universal has no intention of selling current titles for .94. They abhor Steve Jobs for not raising the .99 price, they’re sure not dropping it a nickel! They’re throwing their back catalog at it and hoping to get purchases so people will at least think about buying online music somewhere other than iTunes.

Fine, but what about Microsoft? How are they the third stooge? They’re not mentioned in the press releases and articles on this. In fact, the new tracks sell alongside their own WMA music. Why am I throwing them in the mix? Simple:

  • Wal-Mart and Microsoft have been in bed since the beginning. It’s no coincidence Wal-Mart’s site only works in Internet Explorer! Not even Firefox on the PC works! This isn’t incompetence, and it’s not because Wal-Mart’s developers just wanna code like it’s 1999, it’s deliberate. Further, Wal-Mart not only uses Microsoft’s DRM, they also use their WMA file format. These guys are tighter than Larry and Curly.
  • Microsoft is tight with Universal, too, even agreeing to a “Universal tax” on the Zune. Microsoft slips a dollar to Universal for every Zune sold. Sure, this has only added 47 dollars to Universal’s bottom line, but these two behemoths share similar views of online distribution, which is to lock it down as much as possible and charge you again for what you already own. Even worse, the agreement gave Universal a swollen head, making them think they could push other companies around. Never mind that Microsoft is nothing in the media business, and was simply desperate to get Zune sales (though it didn’t work).
  • Microsoft is for anything that gets people to Wal-Mart’s music site. After all, when visitors find out they can’t get current Universal titles DRM-free, perhaps the “bait and switch” kicks in and they’ll buy the WMA version.
  • Microsoft wants Universal to succeed in this ruse as much as Universal and Wal-Mart do. If Universal “wins,” and gains clout, they can keep DRM at least for their popular titles, and whose DRM do you think they’ll choose? Universal wants to tell Apple to take a hike; Microsoft would love that, they have DRM for sale.

So maybe you’re thinking, let’s say you’re right, Tom. So what? Why should that prevent me from buying the music DRM-free as long as its available and a lower price than iTunes? If it’s not available, I won’t buy the DRM version (pointless if I have an iPod anyway), so what’s the harm?

The answer is, maybe none. But I’m not going to do it. I’m not a boycott person, but this move seems so transparent and disingenuous, I’m not going there. But if you snapped up lots of Universal’s back catalog DRM-free, I couldn’t say I’d blame you.

If Wal-Mart sells a lot, and manages to become a player in this game, Universal will have the leverage to force a price hike on popular stuff and still keep it DRM’ed. This is their primary goal, and one Apple will not help them achieve. If Wal-Mart sells very little, Universal will claim it as proof that people don’t care about DRM. Either way, I don’t see a DRM-free current Universal catalog anytime soon.

Personally, I don’t think Wal-Mart will sell much. It’s more than just money, the iTunes store is very slick and well-integrated. Rather, I see iTunes users raising their collective hand up sideways in front of their nose to keep Universal’s fingers out of their eyes. In other words, we’ll moidelize ’em!