Apple seems in position to exercise strong influence over the developing digital music distribution market, writes London's Financial Times.
The report looks at the business plan Apple employs – that of stimulating iPod sales through its iTunes Music Store. It also looks at the 99 cent per song price-point that that company introduced.
Apple CEO Steve Jobs has gone on record to state that Apple's music store is "not a money-maker," causing the FT to ask: "If Apple cannot make money on 50 million sales, what hope is there for the smaller Web retailers?"
The FT adds: "The consensus among music executives, who asked not to be named, is that on every 99 cent download bought from iTunes, Apple takes about 10 cents, after it has paid 65 cents in record company royalties and 25 cents in credit card fees and distribution costs."
Jupiter Research observed that Job's words are uttered as a classic attempt to stymie the competition: "It discredits his competitors' chances of making money and strengthens his position in negotiating with labels."
The analyst firm in March released a report that pointed to the 25 cent fees for credit cards and distribution costs as the area in which online retailers can negotiate savings in order to improve profitability.
The challenge for new and smaller download services is in the price: "The big debate for us is that, on individual downloads, no one is making money," Russel Coultart of recordstore.co.uk told the FT. "Jobs arbitrarily set the price and now downloads are 99 cents. Who defined music as being worth 99 cents?"
The report speculates that Apple is focusing on music as a key strategic point in order to wield influence on the market.
Industry speakers at last week's Digital Hollywood event agreed that Apple could eventually create an MTV-style power relationship with the music industry, speculating that continued dominance of the digital music distribution market may eventually allow the company to "call the shots".