Music wars: Apple vs. mobile music distribution

Thestreet.com has a pretty interesting overview of how the music distribution business has come to its current point. They don't mention the insane cut that music companys want as cause some problems, but its a good read. The article basically says that in 2003 the music and mobile industries decided to wait until 2006 and the arrival of high speed mobile networks before launching over the air music distribution. Because of this Apple has had the run of the field since then. By setting a low price point for music downloads, Jobs is not only fighting piracy, but also firing a shot across the bow of other forms of distribution. Apple is the value leader in terms of music downloads, who would have thought that. By pricing full song downloads at $.99 (and now hour long video downloads at $1.99) they have effectively set consumer expectations on pricing of content and will make it difficult for the mobile industry to sell song donwloads at $2.50 or higher. Studies have shown that at higher price points, consumers will wait until they reach their computer to make a purchase via iTunes instead of purchasing something over the air.

The article mentions that this situation was inevitable because the mobile operators need to recoup their investment in their high speed networks, requiring high initial pricing. The music industry has been pushing for a 60-70% cut of music sales forcing $2.5 and $3 prices onto the mobile operators. The music industry was hoping to do an end run around Apple and iTunes, but it seems like the music industry has shot themselves in the foot by being too greedy.