The NY Times reports on the heated negotiations that led to the announcement at Macworld that Apple would be dropping Digital Rights Management (DRM) from all iTunes music. In exchange, the music labels were given their long-requested variable pricing model. In addition, Apple was able to secure over-the-air iTunes music downloads for the first time.
Apple, however, was said to have a strong upper hand in the negotiations according to music executives:
In interviews, several high-level music executives, who spoke on the condition that they not be named to avoid angering Apple, said they operated in fear of Apple's removing a label's products from the iTunes store over a disagreement, even though that has never happened. The labels do not have much leverage in negotiating with Apple.
Steve Jobs, himself, was reportedly responsible for a particularly heated exchange with Sony Music on Christmas eve.
Also interesting is that Apple holds another powerful bargaining chip with the control over the iTunes homepage itself as well as the popularity rankings.
"Whether the industry likes it or not, the iTunes chart showing the most popular songs in America is a major influencer of how kids today discover and communicate with their friends what kind of music they like," said Charlie Walk, the former president of Epic Records, a unit of Sony Music. "It's a very powerful thing right now in American pop culture and immediately validates a hit song."
The influence of Apple's home page promotions and popularity charts has been the subject of much debate amongst App developers, but it seems Apple may be well aware of their impact.
