Is Apple The New Bully Of The Music Industry?

Many media pundits loves to bash recording industry executives as selfish bullies. Is Apple acting the same way?

As the #4 retailer of music in the US, Apple is a new age power broker that can decide what succeeds, what does not. Apple the music bully.

In the retail business, clothing stores, appliances, grocery stores—product location is everything. Food products stacked at eye level will sell more than food at the bottom of the shelf.

Product manufacturers and distributors pay extra to have their products placed in favorable positions in retail stores. The retailers become bullies who extract a payment for the privilege of displaying certain products.

Is Apple the music bully of the 21st century? An article in The Wall Street Journal calls Apple’s iTunes’ staffers, Music’s New Gatekeeper, as music power brokers.

A million internet users a day visit Apple’s iTunes store—home page shelves stocked with music albums, TV shows, and movies. That’s prime real estate.

Who decides what products go on the home page shelves? Apple decides. Rather, Apple’s iTunes staff decides what gets promoted and what does not.

Interestingly, and unlike the traditional retail stores, Apple does not charge recording companies for their prime promotional locations on the iTunes Store. Such visibility increases sales.

Does Apple give away that prime real estate? Not a chance. Apple is a shrewd bully and exchanges home page placement and promotion for discount pricing, exclusive songs, and more gimmes from artists and labels.

Is Apple a music industry bully? Yes, says Lily Allen, the British pop singer.

Music companies and artists have to provide Apple with a set of concessions to get better placement in the iTunes Store.

Apparently cash isn’t changing hands between Apple, the labels and the artists. So far. Importantly, Apple is negotiating a tough stance for lower prices than products that sell in standard retail stores.

Only Wal-Mart, Target, and Best Buy sell more music CDs than Apple sells in the iTunes Store. Yet Apple refuses to take money for better product promotion and placement, instead negotiating even better deals for exclusive content.

Is Apple preparing for the day when all music online is sold without DRM, the digital rights management system that locks iTunes Store music to Apple’s hot selling iPods? The answer can only be a resounding yes.

Exclusive, iTunes Store Only product will keep the sales going strong even when online shoppers can buy non-DRM music elsewhere. Apple leverages their current strength for future positioning.

How long will it be before Apple becomes the equivalent of the hard-nosed music industry executives that many call ‘greedy?’ Will Apple bypass record labels and court artists with direct deals, sans major or independent labels?

Gangster tactics of pressuring merchants for favorable terms is nothing new for the retail business. Apple’s tactics may differ in the online world of digital music, but a strong arm pressure tactic nonetheless.