A recent article in UK broadsheet the Independent has hit out of the way in which many online music stores will ‘disappear in the next 5 years due to the size of the royalties demanded by major record labels. The article reveals the share of a download track price which goes to the labels. Of course, readers of David Card’s report $0.99 Digital Singles (available to JupiterResearch clients on http://www.jupiterresearch.com) will already know what the split is.
The split discussed in the story actually misses out a few key costs such as payments etc and is also a bit too heavily skewed towards labels. But it is in the right ball park and the principle remains the same: label costs are a massive slice of digital music prices. The article claims it will send many stores out of business. At Jupiter we take a slightly different tact: that stores with alternative revenue streams are the ones who will survive, using digital music as a loss leader.