For years I have been arguing that iTunes digital music distribution was a license of music, not a sale. When Steve Jobs and his team negotiated the original iTunes deal with the major labels, the economics gave iTunes roughly 30% of each download, like a distributor/ retailer of CDs would receive and the remaining 70% would flow to the labels and presumably be split as with a traditional CD sale.
But what was rarely questioned at the time, was the way the 70% label share would be split. The labels assumed that these downloads were ???sales??? of copies of the songs and that artists would receive their royalties based on traditional accounting practices.
Indeed in the early days of payments from iTunes, labels often continued to deduct fees for ???packaging??? and ???breakage??? and ???co-op??? often when there were no actual costs being incurred. Hardly anyone questioned whether iTunes downloads were ???licenses??? versus ???sales??? ??? which would have swung the payments heavily in favor of the artists.
“co-op,” advertising costs shared by retailer and label. ???Packaging??? and ???breakage??? have their normal meanings, but some what out of context in digital distribution. Breakage refers to the 10% of vinyl(?) records expected to break during shipment, puh-leeze, it was a rip-off then, doubly so now.
Hamish MacEwan 