Why everyone (especially Europeans) hates iTunes

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The European Commission is investigating pricing at Apple's iTunes business. Apple charges 99 cents or 99 pence or 0.99 Euros for a tune, depending on where you live. But a dollar does not equal a pound or a Euro. Because of exchange rates, Europeans pay more than Americans.

Good for the EC. The record labels are greedier than a two-year-old in a toy store. They seem to believe that they have an inalienable right to maintain the profits they have enjoyed decades. I think it's the 12th Amendment.

Steve Jobs has a good defense: The record labels made him do it. They dictate the prices here and abroad, trying to milk every penny they can out of their abused fans. They've tried to make Jobs charge more than a buck, but he has managed to resist.

At least, until he did a deal with EMI. Everyone is heralding the potential of ending the dreaded DRM that keeps us from copying tunes. But there's a catch: You pay an extra 30 cents for the right to copy a song you already own.

This is price fixing, pure and simple. Marketwatch believes the investigation could force an open global market for world music downloads. 

What a concept: Actually allowing the market to set the price? It's almost un-American! Or un-European.

The simple fact is, iTunes downloads are over-priced. People hate that. They vote with their pocketbooks. They will like the extra fee for DRM-free even less.

"Forrester Research found that just 3.2% of all households connected to the Internet had made an iTunes purchase in the past year and that the number of monthly transactions in those households with iTunes appeared to declining," notes Marketwatch. This ain't universal love.

An NPD Group survey found that "only" 500 million songs were downloaded legally in 2006, up 56 percent from the year before. Sniff.

But five billion free, illegal downloads were made last year. That ain't a whole lotta love, either. Note to recording labels: Wake up and listen to the music.

Here's the solution to this mess: A song on iTunes should be priced at 25 cents. Worldwide. Then look for the price that brings the most downloads.

At 25 cents a song, how many music pirates would decide that the threat of lawsuits isn't worth it? Maybe a couple billion of those five billion pirated songs would go legal. Maybe a whopping 5 percent of households would start downloading music!

The world is a big place, and music downloads can reach a big chunk of it. Distribution costs are almost zero. You can make a profit this way. 3 or 4 billion downloads at 25 cents is more profitable than half a billion downloads at a buck. Maybe 10 billion people would download songs at 10 cents apiece.

This long tail should be wagging the dog.

The world has changed. Get used to it. Take a chance. Experiment with pricing. Go with the flow and you'll survive.

And maybe people would really start loving their iTunes.