C|Net News examines the tensions between the music industry and Apple over the iPod. For one thing, the industry wants more flexible pricing while Apple sticks to the 99-cents model. They are in different businesses, really, with Apple using iTunes downloads to sell hardware while the content companies want to sell songs.

And, of course, as everyone knows but does not talk about, Apple profits from the free P2P services, the existence of which increases the value of iPods. At 99 cents, it costs $10,000 to fill up an iPod – and no one can seriously believe consumers are paying this. Many are loading their CD collections, of course, but many are also getting their music from the Groksters.

The story notes one set of potential partners for the music companies: the wireless companies, which could turn into conduits to supplying music to hybrid cell phone/music player combinations.

This raises interesting thoughts. The telecom companies are at serious odds with the content companies, with telecom opposing anything that might limit the spread of broadband, and thus resisting any effort to control P2P. If the wireless purveyors get a stake in legitimate services, it could change the political line-up, because the conduits would develop a serious interest in suppressing piracy.

In my view, things are likely to move fast in this area. The 99-cent price point simply seems too high to be the foundation of a system of legitimate downloading services. The content folks have a big problem because of the elaborate structure of existing rights that must be negotiated before substantial change can be made. Nonetheless, a system with lower and variable prices, with legitimacy policed voluntarily by the conduits in their own interest, would be a major step toward the devoutly-to-be-wished consummation of making the illicit services simply not worth the aggravation.

posted by James DeLong @ 11:25 AM | Markets: Business, Investment & Innovation

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