iTunes: Unlimited Downloads

According to the Financial Times, Apple Inc. is talking with major record labels about offering unlimited access to the iTunes music collection for a flat fee paid when purchasing a new iPod or as a monthly subscription fee. In the former, Apple could add as much as $100 to the price of its iPod and iPhone devices in exchange for unlimited access to iTunes for the life of the hardware, sources told the newspaper. The company is also talking with record companies about subscription plans that would run $7 to $8 per month.

The move would be a dramatic change from Apple’s current business model which is similar to Amazon MP3 Store where the company profits from the sales of its iPod music players but essentially breaks even on the 99 cents per track that customers pay to download music from iTunes. It is generally believed that Apple is using the service as a marketing vehicle to promote its iPod and iPhone products which have huge profit margins between 33% to 50%.

It could have been prompted by the slowdown in iPod sales. “The fourth quarter was essentially flat [in iPod unit sales], which is pretty darn bad, and they’ve dropped considerably since then,” Ezra Gottheil, an analyst at Technical Business Research Inc., said. “We’ve read it, and others have read it, as a saturation of the high-end music-player business. There’s a finite worldwide demand for something that just plays music.”

Here’s an article by BusinessWeek:

Unlimited Tunes from Apple?