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story category I-Tunes Successful, but Unprofitable
All Your I-Tunes are belong to us?
(old news - 12:24PM Saturday Nov 08 2003)
tags: business · stats
Despite I-Tunes incredible 80% market share, financials released this week indicate the company makes virtually no money off of each download. As this Register article explores, the vast majority of the profits made from each download go back to the RIAA, despite the costs Apple incurs for hosting and distribution. "We would like to break even/make a little bit of money but it's not a money maker," says Steve Jobs. Jobs hopes to turn a profit by closely tying in hardware accessory (I-Pod) sales.

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Forums » I-Tunes Successful, but Unprofitable
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Tomek
Premium
join:2002-01-30
Brooklyn, NY
·Packet8

Huh?

said by Article:

the vast majority of the profits made from each download go back to the RIAA

Can I say: WTF?
Not only that they don't host, distribute or promote the service, still they earn load of money.
Can I-tunes and other services place RIAA in court under Sherman's antitrust?
--
We are the Borg! Resistance Is Futile! You Will Be Assimilated!

Penguins
Have You Played Atari Today?

join:2001-12-01
Cleveland, OH

Re: Huh?

Are the top execs getting fat paychecks?

If so then everything is fine. Nothing to see here.
--
Pure magic in 2k of 6502.

KrK
Heavy Artillery For The Little Guy
Premium
join:2000-01-17
Tulsa, OK
·AT&T Yahoo
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The problem is the royalties are just way too high.

The RIAA thinks they deserve a dollar per each copy, no matter what format, and no matter who provides the service.

What a ripoff, pure greed.

There's no doubt the main obstacle to easy to use digital music downloads for reasonable prices is the RIAA itself--- who, after all, want to protect their stranglehold on the distribution system. They aren't really interested in seeing services like iTunes survive. They want control over all themselves--- and the ability to price-fix anything.
--
"Regulatory capitalism is when companies invest in lawyers, lobbyists, and politicians, instead of plant, people, and customer service." - former FCC Chairman William Kennard (A real FCC Chairman, unlike the current Corporate Spokesperson in the job!)

Maxo
Your tax dollars at work.
Premium,VIP
join:2002-11-04
Tallahassee, FL
clubs:
·Embarq

Re: Huh?

By allowing this kind of business to happen while price gouging they can say that they are open to it and when it fails they can just say I told you so. Meanwhile they made a killing. I wonder if I listen to an Atom & His Package or Causey Way song if that money goes to the RIAA even though these bands are not connected to them in any way.
--
Tall blond dark and mean Rough and tough and strong and leanhttp://www.maxolasersquad.com

PunkGod

join:2003-02-02
I don't care about anything else. All I have to say is the RIAA needs to go down. Hell each person in the RIAA could retire with the money they have made.

ThirdShifter
Premium
join:2002-03-16
Vernon Rockville, CT

80% share who cares

I tunes.. 80% share. Makes sense. All PC users = Kazaa (p2p etc) Mac = itunes.
bmn
? ? ?
Premium,ExMod 2003-06
join:2001-03-15
hiatus

Re: 80% share who cares

said by ThirdShifter See Profile:
I tunes.. 80% share. Makes sense. All PC users = Kazaa (p2p etc) Mac = itunes.

Actually, that's on both platforms... ITunes is out for Mac AND Windows. Apple holds 80% of the market share on all legal music downloads.
--
Male by birth... Geek by choice. -- Man... Earth's most foolish child.

ThirdShifter
Premium
join:2002-03-16
Vernon Rockville, CT

Re: 80% share who cares

said by bmn See Profile:
said by ThirdShifter See Profile:
I tunes.. 80% share. Makes sense. All PC users = Kazaa (p2p etc) Mac = itunes.

Actually, that's on both platforms... ITunes is out for Mac AND Windows. Apple holds 80% of the market share on all legal music downloads.

Yup, The PC users had spoken. That buying legal music is not gonna help stop file sharing.
--
Anyone but Bush/Cheney 2004 Hope is a good thing, Maybe the best of things
bmn
? ? ?
Premium,ExMod 2003-06
join:2001-03-15
hiatus

Re: 80% share who cares

said by ThirdShifter See Profile:
Yup, The PC users had spoken. That buying legal music is not gonna help stop file sharing.
Then explain why there was such a surge in legal music purchases at ITMS when the PC version was released, made by PC users ?
--
Male by birth... Geek by choice. -- Man... Earth's most foolish child.

oliphant5
Got Identity?
Premium
join:2003-05-24
Corona, CA

Re: 80% share who cares

Because you can have even a tiny percentage of PC users affecting a market previously dominated by a platform with virtually no market share. That doesn't mean that PC users are flocking to iTunes.

Just because there is a surge doesn't mean anything other than confirming that Apple platforms constitute a tiny portion of the desktop market.
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Don't get it, demand it! The Anime Network »www.theanimenetwork.com/index.html
bmn
? ? ?
Premium,ExMod 2003-06
join:2001-03-15
hiatus

Re: 80% share who cares

said by oliphant5 See Profile:
Just because there is a surge doesn't mean anything other than confirming that Apple platforms constitute a tiny portion of the desktop market.
That is true in one regard, but one has to wonder. With name the name recognition of Napster, how is that ITMS is out performing them almost 5 to 1?

You can argue that Napster is PC only, but then that argument would be negated by the fact that there are more PC users.
--
Male by birth... Geek by choice. -- Man... Earth's most foolish child.

oliphant5
Got Identity?
Premium
join:2003-05-24
Corona, CA

Re: 80% share who cares

said by bmn See Profile:
said by oliphant5 See Profile:
Just because there is a surge doesn't mean anything other than confirming that Apple platforms constitute a tiny portion of the desktop market.
That is true in one regard, but one has to wonder. With name the name recognition of Napster, how is that ITMS is out performing them almost 5 to 1?

You can argue that Napster is PC only, but then that argument would be negated by the fact that there are more PC users.

Because the name recognition that Napster has is that it was squashed by the RIAA. I would imagine that most don't know that it had even returned.
--
Don't get it, demand it! The Anime Network »www.theanimenetwork.com/index.html
bmn
? ? ?
Premium,ExMod 2003-06
join:2001-03-15
hiatus

Re: 80% share who cares

said by oliphant5 See Profile:
Because the name recognition that Napster has is that it was squashed by the RIAA. I would imagine that most don't know that it had even returned.

Possibly, but with the media blitz (at least here) that its back and legal, I'm not so sure you could say that anymore. I remember seeing it on the national news, all the local channels and even on CNN once or twice.

BTW, interesting new avatar...
--
Male by birth... Geek by choice. -- Man... Earth's most foolish child.

oliphant5
Got Identity?
Premium
join:2003-05-24
Corona, CA

Re: 80% share who cares

I actually saw a commercial for Napster but only one time. They need to target networks like MTV and bombard them with commercials to get the word out.

It also could come down to how well iTunes works. I installed it (haven't bought anything, I was just curious) and it looked great...nice layout, easy to use...etc. I haven't seen Napster but it could be simply that iTunes has a head start and is simply a better service.
--
Don't get it, demand it! The Anime Network »www.theanimenetwork.com/index.html

ThirdShifter
Premium
join:2002-03-16
Vernon Rockville, CT

Since i don't have the exact figures of this surge from ITMS users. I would assume most of them are from Music Match trying an alternative.

Lets see what happens with napster.
--
Anyone but Bush/Cheney 2004 Hope is a good thing, Maybe the best of things

MrTangent

join:2001-12-28
Earth

Re: 80% share who cares

said by ThirdShifter See Profile:
Since i don't have the exact figures of this surge from ITMS users. I would assume most of them are from Music Match trying an alternative.

Lets see what happens with napster.

Here's what happened with Napster (as compared to iTunes):
Music fans purchased and downloaded 1.5 million songs from Apple’s iTunes® Music Store during the same period that Napster reported selling 300,000 songs during its first week of operation. More than 17 million songs have been purchased and downloaded from the iTunes Music Store since it launched in April 2003. According to Nielsen SoundScan, the iTunes Music Store had more than 80 percent market share of legally purchased downloads last week.
Taken from here.

--
"War Is Peace. Freedom Is Slavery. Ignorance Is Strength"

Speedy8
Premium
join:2002-08-22
Alliance, OH
clubs:


I've tried itunes, rhapsody and napster, and out of all 3 I found ONE album I wanted. That was on itunes, but still I think 99 cents for a digital song is way too much. It ends up being almost if not as much as a CD.

Edit: Oh yeah, and what about albums that had like intermission type songs which are like 90 seconds or less. That's a huge ripoff for $1 each.

oliphant5
Got Identity?
Premium
join:2003-05-24
Corona, CA

Re: 80% share who cares

Except instead of getting 1 song that's okay and 13 that suck, you can get 14 you want. Big difference.
--
Don't get it, demand it! The Anime Network »www.theanimenetwork.com/index.html
nasadude

join:2001-10-05
Rockville, MD
·Comcast

how about price fixing too?

I'm just wondering how it is that every online music service has a price of 99 cents per song. One would think that now there are 3 or 4 services and perhaps soon to be more, there would be some competition on song prices.

On the other hand, if nobody is making money except the RIAA on the sale of these songs, I guess there's not much room for the services to discount/compete.

backfeed
is giving feedback

join:2002-12-16
Peru, IN

Re: how about price fixing too?

I guess I would like to know.... How much Money does the RIAA need anyway?... Sounds like they are getting money from about every aspect of the music business there is. I wonder how they figure their market share?

MrTangent

join:2001-12-28
Earth

Re: how about price fixing too?

said by backfeed See Profile:
I guess I would like to know.... How much Money does the RIAA need anyway?... Sounds like they are getting money from about every aspect of the music business there is. I wonder how they figure their market share?
Actually, the RIAA gets almost no money from this. The labels get money. The RIAA is only a legal front for the labels and represent their interests. To reiterate, it's the labels that get the money. The RIAA are paid by the labels, but don't get percentages of the sale; the labels do.

--
"War Is Peace. Freedom Is Slavery. Ignorance Is Strength"

hamburglar_

join:2002-04-29
Columbus, OH

Re: how about price fixing too?

Yes, but I am sure there is some 60% "administration" fee the RIAA takes first.

MrTangent

join:2001-12-28
Earth

Re: how about price fixing too?

said by hamburglar_ See Profile:
Yes, but I am sure there is some 60% "administration" fee the RIAA takes first.

Nyet comrade. But I'm sure it makes pirates feel better thinking that. That way they can feel justified when they steal other people's intellectual property without compensation.

--
"War Is Peace. Freedom Is Slavery. Ignorance Is Strength"

KrK
Heavy Artillery For The Little Guy
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My guess is due to sky high royalty rates (for the RIAA, not the artists) that .99cents a song is as LOW as they can go (and in fact, as this article suggests, may actually be too low to survive.)

It sucks to think that services like iTunes and others charge 99 cents a song but 95% of it goes back to the RIAA leaving just a few cents for the service to try and operate all their costs out of.

In fact, it's really rediculous. The RIAA probably wants song prices to be higher then $1 each, no matter what the format. Pathetic. Greedy. Bastards.
--
"Regulatory capitalism is when companies invest in lawyers, lobbyists, and politicians, instead of plant, people, and customer service." - former FCC Chairman William Kennard (A real FCC Chairman, unlike the current Corporate Spokesperson in the job!)
joebear29

join:2003-07-20
Alabaster, AL


Register article is just plain nasty

Wow, I read the register article, and I don't get why the guy's so nasty to Jobs. The guy made the best deal he could, and it was a smart move for Apple. The idea of using iTunes to promote iMacs and iPods is pretty sound IMO. The DRM management applied to the songs is a joke. 99 percent of the time it can be ignored, and it disappears when it's burned to a CD.

I understand the annoyance/hatred the writer exhibits to the RIAA, but I don't think Jobs did anything wrong. Obviously, he is providing some type of service or people would not be using i-Tunes at all.

But the Register article itself was just plain nasty. It takes one viewpoint (RIAA/DRM is Satan's spawn) and then castigates anyone who deals with them as evil.

Oh, and the only Apple program I have ever used is iTunes.

storm64007
Premium
join:2001-05-21
Freeport, NY

Re: Register article is just plain nasty

There are lots of independent bands and record labels on Itunes that have nothing to do with the RIAA and the money goes straight to the independent labels and bands. Same goes for Napster.

bear73
Metnav... Fly The Unfriendly Skies
Premium
join:2001-06-09
Grand Forks Afb, ND
·Midcontinent Commu..

said by joebear29 See Profile:
...The guy made the best deal he could, and it was a smart move for Apple. The idea of using iTunes to promote iMacs and iPods is pretty sound IMO. The DRM management applied to the songs is a joke. 99 percent of the time it can be ignored, and it disappears when it's burned to a CD.
...
The Sony heads in Japan were noted as having a very similar idea. Sell the digital media (music/video) at cost or for free, take the loss. Ensure that your free media works best (or only) on your hardware thereby making profits on the hardware sales. Oh by the way, when it comes time to figure taxes, you'll make up some of that loss as well, as Uncle Sam gives you a break when you post a loss...
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devrandom
I got a pot, full of random stuff here
Premium
join:2003-06-28
Remember that they also make money from selling their third party products, like iPods and such that they have plastered everywhere, so they aren't losing all that much money.
lurker93
Premium
join:2000-06-19
Houston, TX


and the only Apple program I have ever used is iTunes


No wonder -- a PC user who never had QuickTime hose their machine would still like Apple.

trebzon

join:2001-09-03
Grandville, MI

Re: Register article is just plain nasty

>>No wonder -- a PC user who never had QuickTime hose their machine would still like Apple.

Bad choice. IE and Windows Update blow up MS boxes far more often the quicktime ever will.

neutral
faith in the future
Premium
join:2001-08-04
Ringgold, GA
·AT&T Southeast

Re: Register article is just plain nasty

said by trebzon See Profile:
>>No wonder -- a PC user who never had QuickTime hose their machine would still like Apple.

Bad choice. IE and Windows Update blow up MS boxes far more often the quicktime ever will.

I've never heard of IE and Windows Update blowing up mass machines. Operator error, perhaps.
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Winerin
Premium
join:2002-03-30
Woodland Hills, CA
·Pacific Bell - SBC

What the hell?

Virtually all the money goes back to the RIAA? What the hell is up with that? Here is a legitimate attempt at making getting music legally and the RIAA sucks the project dry. RIAA is not in the business of protecting the interest of artists, it's a bloodsucking organization.

oliphant5
Got Identity?
Premium
join:2003-05-24
Corona, CA

Re: What the hell?

Amen! Well said.
bmn
? ? ?
Premium,ExMod 2003-06
join:2001-03-15
hiatus

said by Winerin See Profile:
RIAA is not in the business of protecting the interest of artists, it's a bloodsucking organization.
The RIAA is not an artist ?! I could have sworn they were with the ability to create fantastic lies and spew.
--
Male by birth... Geek by choice. -- Man... Earth's most foolish child.

MrTangent

join:2001-12-28
Earth

said by Winerin See Profile:
Virtually all the money goes back to the RIAA? What the hell is up with that? Here is a legitimate attempt at making getting music legally and the RIAA sucks the project dry. RIAA is not in the business of protecting the interest of artists, it's a bloodsucking organization.

Actually, the RIAA gets zero of the money. The labels get the money. Repeat after me: The RIAA is only a legal front for the big five labels. They get absolutely zero profit from the sale of CDs, or in this case, digital media from iTunes. The labels get the profit (as does the artist, sadly to a lesser extent). The RIAA only gets their payment from the labels for their work in protecting the label's legal and copyright interests.

And has been pointed out previously, there are thousands of smaller, independent bands that are available on iTunes. These independent bands are not affiliated with the RIAA or major labels in any way, and get much higher profit margins than the major label bands. So if you really want to help bands, don't just blindly steal their music. Support independent bands/labels and purchase their music. Otherwise you're just part of the problem. (this isn't directed at you, Aumelen... just saying).

--
"War Is Peace. Freedom Is Slavery. Ignorance Is Strength"

rit56

join:2000-12-01
New York, NY

artistic development

they made a bad deal plain and simple. to bad for Apple and another example of the record labels way of doing things, the RIAA as well. they screw everyone they are involved with. each individual artist more than likely gets nothing out of it. I have no sympathy for them and their whining about PTP file sharing.

Bassistguy
Alrighty Then
Premium
join:2001-07-14
Ballwin, MO
clubs:

Why??

Why does the RIAA get most of the money?.. lol Maybe I just don't keep up with all of this anymore... but why??? Does the artist even see any of the money?

Camelot One
Premium,MVM
join:2001-11-21
Sarasota, FL
clubs:

Re: Why??

Because no matter what format you purchase it, the music is still copyrighted by the RIAA. That means CDs, Tapes, records, even digital downloads, all require some payment.

And the RIAA doesn't want online services cutting into their bread and butter. Just look back a day or two for the article talking about how already online, legal downloads have more than doubled single's purchases in the past few months. 99 cents for the digital version, what, $9 for a single on CD? If you were the one getting a % of the profits, which would you want to see sell more?

Don't get me wrong, they are still vultures.
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mrchris
We don't miss you Bush
Premium
join:2002-10-01
North Babylon, NY
·Verizon FIOS
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Could be iTunes fault..

For making deals with the Music Mafia RIAA. Go peddle your ripping off and extortion elsewhere (RIAA), scumbags!
--
Play ET!

Duo Maxwell
What? Stop Looking At Me Like That

join:2003-03-31
Racine, WI

Read here

Read this: »iTMS doomed according to Register...bwahaha!

Oh, and its iTunes not I-Tunes.

See 11 replies to this post

anamus

@mindspring.com

Sure its an Attemt, But it still Sucks.

You pay a buck and its damaged goods from the get go. You cant take it to all your pc's, you cant DL it to your car stereo, you cant DL it to all your other personal players, and you cant sell it on EBAY when you are tired of the same old song. They cancel all itunes auctions and suspend your account for trying. Im sticking with KAZZA the king of brilliance. Nothing to date is better from anyone in the world.

See 6 replies to this post

Yowzaaah
Ours Go To Eleven

join:2000-12-14
DamnFlat, OH
clubs:

Business Model 2.0

The Register article seems to think stevie is a complete twit, hanging all his hopes on scraping out a tiny profit on ipods. Did he ever think that maybe steve wouldn't share his every thought with him, and might have a thing or two up his sleeve for later? Some plans are best kept secret until implemented.

Here's my take on this: ITMS has 80% with some modification of services and DRM that number will creep upward. If they stay in the market 2-3 years with this sort of market control they will prevent the labels from doing anything on their own and make them used to the gravy stream from ITMS. At the same time, powerful artists ending their contracts will see ITMS as an alternative with teeth. Metallica may very well ask, "why not distribute completely through ITMS?" ITMS can give them MUCH more per track sold and cut out the label entirely, ITMS can also promote indie labels once they have "legs" in the market place. At present, however, Steve's baby still has some growing up to do and must remain the cute little plaything of the RIAA consortium.

Give it time, no computer manufacturer is without the desire for profit that the Register seems to ascribe to Apple. I see something much more interesting working behind all of this.

Then again, I'm not exactly wild about replacing the RIAA with Apple, but I have a feeling that once the djinn is out of the bottle there will be no putting it back and the market will break open devoid of RIAA control.

Who knows......
--
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joebear29

join:2003-07-20
Alabaster, AL

Re: Business Model 2.0

Exactly my thoughts.

It seems like the Register article writer is just bitter towards Jobs for some reason.
LazyTT
Premium
join:2003-08-10
Brooklyn, NY


i agree, too. and on a second note if apple is making just $.05 per song they are making about 2-4 million dollers per year (WITHOUT the rumord McDonnlad one Billion songs ($50,000,000 and the confermed pepsi 100 million(about $5,000,000!!). That is atleas enough to cover cost!!
--
-Lazy

KrK
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Re: Business Model 2.0

I'm not sure iTunes profit is $.05 a tune. If it was, they'd be making money and things would be ok.

I suspect that iTunes cut of the .99 cents is about 05 cents... and out of that 5 cents comes all their operating costs and overhead, and that's why they can't make money.

The RIAA will push them to RAISE prices rather then to cut their greedy share.
--
"Regulatory capitalism is when companies invest in lawyers, lobbyists, and politicians, instead of plant, people, and customer service." - former FCC Chairman William Kennard (A real FCC Chairman, unlike the current Corporate Spokesperson in the job!)

nixen
Rockin' the Boxen
Premium
join:2002-10-04
Alexandria, VA

So, Now Apple Has an Understanding

Of how the people that actually MAKE the music feel.

-tom
scrandall

join:2003-05-25
Basking Ridge, NJ

indies can play

A friend is an established indie artist (she sells about 15,000 CDs a year) and has just signed with ITMS. She gets about 70% of the money and is excited about the prospects. The RIAA gets 0% of the money generated by her sales.

mrchris
We don't miss you Bush
Premium
join:2002-10-01
North Babylon, NY

Re: indies can play

Yes, we need more of the major artists going indy and kiss the major labels goodbye
--
Play ET!

aliasrlz
Premium
join:2000-09-01
the world

said by scrandall See Profile:
A friend is an established indie artist (she sells about 15,000 CDs a year) and has just signed with ITMS. She gets about 70% of the money and is excited about the prospects. The RIAA gets 0% of the money generated by her sales.

That is fantastic...all artists should go independent and say SCREW the RIAA and sign direct contracts with ITMS, and others....
--
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Brisk
Qwest's Spirit Of Service Inaction

join:2003-07-11
Colorado Springs, CO
clubs:
·Qwest.net

Wal-Mart Economics

I thought it might end up this way. The RIAA has expressed no desire to run a large IT department to serve music to the world, though the customer was demanding it. It's backed up by the numbers. Kazaa's user and file numbers.

Now, not running it yourself is fine. But providers need to be paid.
If they don't run it themselves, or strike a balance with third-party IT providers for a small profit loss, it will add up in the billions for customer losses, because the consumer won't put up with higher prices.
Do it for less, or don't do it at all. Like at Wal-Mart. Remember? #1 U.S. Revenue Company?

Lower prices = Higher customer demand
Customer demand = Bigger profit later

Simple business concepts for the slow kid at the back of the class, Cary Sherman.
--
Such is the way of the internet... 0 to 60, then back to 0, then back to 20-something.VeriSign.HasOwned.us - Help Stop VeriSign's Greed now!

Jason Levine
Premium
join:2001-07-13
USA

What about the artists

With P2P the record labels keep talking about how the file sharers are hurting the poor artists. Now with legal music downloads, it seems as thought the industry is getting most of the 99 cents per song. Since 17 million songs were downloaded from iTunes, we're talking almost $17 million. If the record companies are getting 3/4 of this money (probably more), then we're talking about $12.75 million. Now I wonder how much of this the artists are seeing. After all, the artists are sooooooo important to the labels.
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Rexter
YeeHaw

join:2002-11-17
cloud 9

Would love to use this service but......

As much as I love this idea, I simply will not use any service, or buy any CD's where money that I pay goes to the RIAA. The only money that they will get out of me, what they have strong-armed out of the CD-R manufactures.

joekuz

join:2003-03-13
Calistoga, CA

Re: Would love to use this service but......

This pay per song ain't gonna work. It's too much for the consumer to pay plus this method doesn't generate huge revenue quickly. Though it would be a bad decision in the long I think the way to go is subscription. 10 million subscriptions at $50 (or whatever)is a big sum fast. And from what I have read this is pretty much what the RIAA is going for.

My real feelings are the RIAA shove it. This whole thing is much deeper and is not simply artists wanting money for lost revenue because of filesharing. But that's another story.

Rexter
YeeHaw

join:2002-11-17
cloud 9

Re: Would love to use this service but......

said by joekuz See Profile:

My real feelings are the RIAA shove it. This whole thing is much deeper and is not simply artists wanting money for lost revenue because of filesharing. But that's another story.

Yes, I agree. I'm all for the artists getting paid. Very few file traders aren't. I would go buy songs directly from the artists any time. But I absolutely will not by songs from any label that is part of the RIAA. There are many labels that are not part of the RIAA. One can find non RIAA labels at »www.boycott-riaa.com/

I'm more than happy to buy CD's from any of them. They need to launch an on-line music service. I'll be the first to sign up.

Hazeleyze

join:2003-05-09
Wauseon, OH

Another RIAA RipOFF

Here is another ripoff by the RIAA that I just heard of the other day. Some colleges charge an unreturnable $168 fee to download music whether you use it or not. The RIAA couldn't be behind that, could they?
Forums » I-Tunes Successful, but Unprofitable


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