iPhone Apps For Music Distribution

Everybody knows that songs on the iTunes music store cost 99 cents without exception (apart from the brief “iTunes +” experiment a while back that is). However, Apple may now be facing some challenges in this area thanks to its recently released App store for the iPhone.

Apple receives approximately 30% of the revenue from music sold in iTunes, a percentage that is carried across into the App Store as well. The difference is that in the App store there is no hardline rule on pricing - developers are free to charge anything from  free to $999.00 for their applications. Some record labels have discovered that they can take advantage of this fact, selling music bundled with basic applications for twice the price. A recent example is Sony BMG’s bundling of David Cook’s “Light On” single with a basic lighter visualizer for $1.99. Other apps have gone in the other direction, bundling advertising with music for free.

I see several problems of this method of music distribution (besides the increased price). iPhone users will have to keep all of their artists/albums/music on their iPhone interface as separate icons. There is also the issue of consumer familiarity; people are used to getting their music through the iTunes store and paying 99 cents. Unless the record companies begin to throw in codes that allow people to download the music they purchase in Mp3 format so that it can be imported into iTunes easily, then I don’t see this taking off. One caveat: free, legal music (with a download code to redeem) attached to advertising in a downloaded application could very well be a compelling model.

What do you guys think?