Stop Smoking Or I'll Stop Breathing

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Would you take such a threat seriously?  No?  So why take Apple at all seriously when they do the same?

The folks who manage the collection of copyright revenues from iTunes are looking for a raise of six cents per song (from nine to fifteen cents).  It is being reported that during the negotiations, Apple has threatened to shut down iTunes if such a thing were to come to pass. 

Well, first, here’s what was actually said, two years ago, in public testimony:

[iTunes] cost structure and margins are not flexible enough to enable the company [to pay more] without either (i) imposing a retail price hike that will reduce consumption and thereby reduce overall industry revenue or (ii) absorbing the cost . . . increase, eroding its margin and thereby jeopardizing its continued ability to invest or remain in the business.  Based on my experience at iTunes, . . . I have no doubt that an increase in the $0.99 per track price point would lower total music purchases at the store, stall growth in customer acquisitions, and therefore — in relatively short order — reduce overall license revenues paid to copyright holders.  Alternatively, if [iTunes] were forced simply to absorb [the extra cost] the result would be to significantly increase the likelihood of the store operating at a financial loss — which is no alternative at all.  Apple has repeatedly made clear that it is in this business to make money, and most likely would not continue to operate [iTunes] if it were no longer possible to do so profitably. 

Apple is saying that if the cost of a track went from, say, .99 to 1.09, the iTunes market would shrivel up so much that they’d end up paying the copyright owners less than they do now.  Given that the copyright owners would be getting paid 67% more per song, that would mean a 70% or more reduction in business at the iTunes store. 

Alternatively, if Apple had to absorb that six cents, it might lose a little money on iTunes, and if that happened, it would immediately imperil hundreds of millions of dollars of iPod profits by shutting down the iTunes store. 

Right.  If you believe either, here’s a news flash: Sarah Palin is going to debate Joe Biden naked tonight. 

Seriously, such BS ought to be illegal, or at least it should be made illegal to take such comments at all seriously.  Unfortunately, Apple is hardly alone in feeling free in making comments even the village idiot would laugh at.  We’ve seen much the same for years and years over the copyright fees charged to Internet radio. 

Really, if the price of food goes up, do you go to the manager of the supermarket and tell him, “I’m going to stop eating?”  If you don’t like cigarette smoke, and someone legally lights up somewhere near you, do you tell him, “I’m going to stop breathing?”  Not unless you want a Darwin Award, you don’t.  You don’t make such threats because they’re just not believable under the circumstances, and because all you do by making such threats is convince the threatee that you’re incredibly stupid, crazy or both. 

Why is this any different? 

Why do we see such nonsense?  The reason why we see such nonsense is that those spewing such out have no accountability for the claims they make.  What happens in these rate-setting deals is that both payor and payee take extreme positions knowing full well that the arbitrator will decide on something in the middle.  The payee say they want a 67% increase, the payees actually want to pay less than they do now.  Both positions are ridiculous, the final decision will probably be an increase of 0-2 cents.  The payors want the decision to be more like 0, the payees want a decision more like 2. 

The way decisions like these should be made is that each of the parties should have to submit proposals, and the arbitrator should have to decide which of the options is the most reasonable (with the right to reject all of them if all of them are ridiculous).  Right now, taking an extreme position is thought to help the extremist by nudging the referee is his/her direction.  In contrast, if the referee had to pick among the options, taking an extreme position would be punished, since it would be completely rejected in favor of a more moderate proposal.   

There is more than enough craziness and sociopathic behavior in this world to go around.  Too often, we encourage it by our rules and procedures and by how we report those procedings.  When groups are prone to explosive verbal diarrhea, our rules and our media shouldn’t be giving them the equivalent of laxatives.  They should be giving them Kaopectate instead.

Ed

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