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iTunes may pay more to play
Paper reports that labels and Apple's Steve Jobs set to battle over the price of music downloads.
August 29, 2005: 7:36 AM EDT
Apple Chief Executive Steve Jobs
Apple Chief Executive Steve Jobs

NEW YORK (CNN/Money) - Apple Chief Executive Steve Jobs is preparing for a showdown with major record executives over the price of songs on the iTunes service, a published report said over the weekend.

If Jobs loses, the 99-cents-a-song pricing model that Apple uses could be replaced with a more complex model that prices songs by popularity, The New York Times reported.

Apple (Research), whose iPod digital music players and iTunes music service quickly established a market for paid downloads, was hailed for breathing life into the digital music business two and a half years ago, the report said.

But industry allegiance to Jobs has waned since then, and the policy of limiting Apple's music to Apple devices is increasingly under attack, according to the report.

Paul Vidich, a special adviser to America Online and former executive vice president of the Warner Music Group, told the newspaper "I just think the music companies are now at a point where there's too much money on the table not to insist" that Apple accept variable prices.

Jobs faces a showdown with at least two of the four major record companies over the price of songs on the iTunes service, the Times reported.

The paper said that this month, Apple started its iTunes service in Japan without songs from Sony BMG Music Entertainment and Warner Music Group. That left popular artists like Avril Lavigne, Beyoncé and Rob Thomas out of the catalog because the companies refused to license their music to iTunes, the newspaper said.

Higher pricing could backfire and send iTunes customers to search for alternative downloading sites, such as unauthorized file-swapping networks, the report said.

But the push for a change in pricing is not uniform across the music business, according to the report, which said The Universal Music Group, a unit of Vivendi Universal (Research) and the industry's biggest company, appears to support Jobs' desire to maintain the price of 99 cents a track for the time being.

The EMI Group, the British music giant, has expressed a desire for more variation in prices, but it does not appear interested in a protracted fight, the Times reported.

Jimmy Iovine, the chairman of Interscope Records, Universal's biggest division, told the newspaper: "We need to convert a lot more people to the habit of buying music online. I don't think a way to convert more people is to raise the price."

Mike McGuire, an analyst at Gartner G2, told the Times that Apple was not likely to quietly surrender its position in the market.

"I think if they're throwing down for a street fight, they may have picked somebody who's as good or better at it than they are," the newspaper quoted him as saying.

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