Apple gets behind the album format with new offer

NEW YORK (Reuters) - Apple Inc. is throwing its weight behind the music industry’s efforts to protect the album format by allowing fans to buy complete digital albums without having to pay again for songs they already own.

A customer checks out Music Store (on a screen) with Apple iTunes at an Apple store in Tokyo in this August 25, 2006 file photo. Apple is throwing its weight behind the music industry's efforts to protect the album format by allowing fans to buy complete digital albums without having to pay again for songs they already own. REUTERS/Kiyoshi Ota/Files

The record industry is keen to maintain the profitable album format, which is under threat as users of Web-based music download stores, such as Apple’s iTunes and Napster Inc., prefer to buy individual songs rather than whole albums.

Apple said on Thursday iTunes is introducing a “Complete My Album” service that offers customers who want to turn individual tracks into an album a 99-cent credit for every song they have already purchased from the album.

For example, if a customer had bought three 99-cent singles and decides to download the entire album with a listed price of $9.99, the customer would only have to pay $7.02.

Fans will only be able to take advantage of the discount within 180 days after first buying the songs, Apple said.

The new service comes as the music industry is under pressure to find new ways to boost profits, as sales of digital songs have so far failed to come close to replacing the downturn in revenue from CD sales.

According to Nielsen SoundScan, U.S. album sales in both physical and digital formats fell 10 percent in the first quarter of 2007 compared to the same period a year ago.

Even though digital album sales doubled, CD sales fell 20 percent. CDs still account for 90 percent of traditional album sales.

Apple’s iTunes has more than 70 percent of digital music sales in the United States, putting Chief Executive Steve Jobs in a powerful position in negotiations with record majors including Warner Music Group, Universal Music Group, EMI Group and Sony BMG Music Entertainment. To date, iTunes has sold more than 2 billion songs.

At eMusic, the No. 2 digital music store, the company said it has been offering a similar service since launch and that over 60 percent of all its downloads were full-length albums.

“The premise that the album is dead is only true among the youth segment, which is really the iTunes customer,” eMusic Chief Executive David Pakman said.

EMusic currently does not carry music from the major labels and said it serves a mainly older customer base than iTunes.

The major record companies will open separate talks with Apple over the summer and will try to improve the terms of their respective relationships.

Jobs has been described both as a savior and thorn in the side of record companies by analysts, since he unveiled his company’s hugely popular iPod digital media player and the accompanying iTunes store four years ago.