Music Labels Rethink iTunes, Again; Same Old Gripe of Album vs Singles

This has become the equivalent of first snowfall stories that local TV news stations do every year: this gripe against Apple ( NSDQ: AAPL) iTunes has been trotted out every year for the last five years or so, and now WSJ spends tons of words to rehash it again, though with some new twists. This time, like before, the argument is that labels would like to sell the albums as a unit instead of singles, and the new part is that some of them are beginning to bypass the iTunes behemoth distribution machine. Apple insists that labels can't sell the whole album as a unit, and has also stuck, for the most part, to its 99 cent-per-song philosophy, which labels have fought against. Another gripe: Apple often asks for exclusive sales rights for songs in exchange for prominent placement on its home page.

Now, a new example has emerged that runs counter to the Apple monopoly: Kid Rock'sRock 'n Roll Jesusalbum was kept off iTunes, but managed to sell 1.6 million copies in the U.S. since its release last year, a sizable number in these times for the record industry. Seeing that example, his label Atlantic Records (owned by Warner Music) last week yanked an album by R&B singer Estelle from the iTunes Store, four months after it went on sale there. Warner's rationale? It called the removal part of a broad range of digital-release strategies "uniquely tailored to each artist and their fan base in an effort to optimize revenues and promote long-term artist development," the WSJ story quotes.

But this is risky?first, by dissing Apple, and secondly by keeping songs off the biggest music service, users may go off looking for illegal downloads instead. Then there's the little matter of consumer preference: the majority have shown preference for buying singles than albums.

In any case, trying to develop alternatives to monopoly distribution is always admirable, and indeed, desirable in the long run, but the more pertinent question is: if not iTunes, then what? Wal-Mart ( NYSE: WMT) is not feasible for every artist or label, and retail sales is on a declining curve. Amazon+Rhapsody+Napster can maybe have the reach, someday, but not the awareness or promotional value. On the mobile side, operators and Nokia ( NYSE: NOK) can put up their hands, but the reality is it is not happening on any scale in U.S., yet. The only other alternative left is working through scaled social networks like MySpace. Maybe MySpace Music, when it launches next month, will be able to become that other big alternative the music industry wants?

These and other more nuanced topics will be discussed at our EconMusic conference in London on Sept 23.