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Universal Refuses To Renew On iTunes

Posted by ScuttleMonkey on Mon Jul 02, 2007 02:29 PM
from the don't-be-greedy dept.
Businesses Media Music Apple
UnknowingFool writes "It appears for the moment that Universal will not renew its long term contract with Apple for content on the iTunes store. While the details are not known about the exact nature of the dispute, many speculate that it has to do with Apple's stance on fixed pricing and Apple's refusal to license their DRM. The worse case scenario may include Universal pulling its entire catalog from iTunes. Both sides stand to lose out with 1/3 of of new releases coming from Universal and an estimated 15% of Universal's sales coming from digital downloads. Apple's market share is about 75% of digital downloads, and digital downloads are growing while CD sales are shrinking."
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[+] News: New Head of EMI Says 'Embrace Digital Music or Die' 176 comments
no0b writes "Guy Hands is the new head of EMI, Britain's largest music publisher. Hands has come out publicly with a statement warning the industry against something music listeners have probably understood for some time. In the words of the Telegraph article, 'the industry will not survive if it continues to rely on CD sales alone.' More from the piece: 'With both new and established acts now capable of making money without the backing of a big company, McGee says record labels are being left out of the loop. He scoffs at their efforts to make up lost ground by developing into "multimedia entertainment companies that can manage bands and share in live income". But try they must. Revenues from record sales in Britain have dropped by more than £130m since 2004. The true cost to the industry could be far greater. TNS, the market researcher, looked at the spending habits of file-sharers between 2003 and 2005 and estimated a £1bn loss to the country in retail spend.'"
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Universal Refuses To Renew On iTunes 25 Comments More /

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  • This is nothing more than (Score:5, Insightful)

    by Pendersempai (625351) on Monday July 02 2007, @02:36PM (#19720309)
    empty posturing. What does Universal lose by signing a short-term contract instead of a long-term one? Probably nothing. What do they gain? Marginally more credibility in the back-and-forth threats between Apple and the record companies. Wake me up when they explicitly threaten to cancel their contract and remove their media from iTunes if an express list of demands is not met. Until then, it means nothing. And even then, they'll likely return to the bargaining table before pulling the plug. Both sides know where their interests lie, and neither wants to pull the plug.

    My long-term prediction? More of the status quo. Both sides are winning, and there is no external stimulus that seems like it might upset the equilibrium that has developed. Apple doesn't want to lose a third of its collection, and Universal doesn't want to be tied to the misfits and rejects that compose the rest of the playing field.

  • Most likely negotiation tactics or... (Score:5, Insightful)

    by theolein (316044) on Monday July 02 2007, @02:37PM (#19720311) Journal
    The most likely answer is that Universal, whose bean counters are not dumb enough to drop fully 15% of their sales to spite Apple, is simply making noises to negotiate a better deal.

    The other possibility is that Bill Gates, in utter desperation because the Zune is such a piece of crap, has offered to pay Universal for exclusive content for the Zune. I would seriously not put it past Bill G and Steve B to do something like this. It would be a really bad day for Apple if this did happen, because it would make the Zune more popular and the iPod less popular.

    Of course, it could backfire heavily against both Microsoft and Universal if Zune sales don't grow significantly.

    • Re:Most likely negotiation tactics or... (Score:5, Insightful)

      by russotto (537200) on Monday July 02 2007, @02:42PM (#19720385) Journal
      Apple, on the other hand, probably IS willing to drop Universal's catalog from iTunes if Universal gets unreasonable. Which is the more likely thought process?

      1) Oh, Universal's music is no longer available on iTunes. I'll buy this piece of crap Zune instead of the cool new iPod Femto

      or

      2) Oh, Universal's music is no longer available on iTunes. I'll have to <strike>pirate it like there's no tommorrow</strike> rip it from CD onto my iPod

  • That'll sure help the A/R folks out... (Score:5, Insightful)

    by EricTheGreen (223110) on Monday July 02 2007, @02:37PM (#19720323) Homepage
    Unsigned Band with break-out potential: "So, we sign with you...and our record won't be up for sale on iTunes?"
    Universal A/R dude/dudette: "Yep, that's right."
    Unsigned Band with break-out potential: "So any unit sales revenue we see from you will be from Wal-Mart and Best Buy sales, nothing else?"
    Universal A/R dude/dudette: "Uh huh."
    Unsigned Band with break-out potential: "Losers. Next!"
    • Unsigned Band with break-out potential: "So, we sign with you...and our record won't be up for sale on iTunes?"

      You're assuming major labels are still out there trolling nightclubs for "unsigned bands with break-out potential".

      More often what they're doing is hitting up their local malls and "recruiting" teenage girls (or in the case of boy bands, teenage boys) to actively "break" as the next pop star. These girls and guys had nothing going for them (except cheerleader looks) before, so why would they turn down the promise of riches just because the songs some producer wrote for them to lay their heavily processed vocals over won't be on iTunes? If they do, hey, there's plenty more at the mall they came from.

    • Minor correction(s) (Score:5, Insightful)

      by Overzeetop (214511) on Monday July 02 2007, @03:02PM (#19720649) Journal
      Unsigned Band with break-out potential: "So any unit sales revenue we see from you will be from Wal-Mart and Best Buy sales, nothing else?"

      Universal A/R dude/dudette: "No, of course not. You will never see sales revenue because we will cook the books so that you never see a penny. But you are othewise correct - the unit sales revenue you will never see will only come from Wal-Mart and Best Buy."

      Unsigned Band with break-out potential: "Where do we sign?"

  • Load of Hooey (Score:5, Insightful)

    by Nom du Keyboard (633989) on Monday July 02 2007, @02:48PM (#19720469)
    Edgar Bronfman Jr., the chairman of Warner Music Group, reinforced that idea at a recent investor conference, saying "we believe that not every song, not every artist, not every album, is created equal."

    And yet you sell all your CD's at $16.99 regardless of that fact now, don't you?

    At the same time, Mr. Jobs has refused the industry's calls for Apple to license its proprietary copy restriction software to other manufacturers. Music executives want the software to be shared so that services other than iTunes can sell music that can be played on the iPod, and so that other devices can play songs bought from iTunes.

    Another load of crap. iPods can play music from any other DRM-free music seller. This joker wants you to believe iPods only play iTMS music, which is a lie. And iPod owners would likely buy music from other sources if: 1) It didn't have yet another, incompatible, version of DRM; 2) It was priced right; 3) It was the music they wanted to hear; 4) It had a nice interface to easily purchase and load said music onto their iPod. The record companies themselves are the ones to blame here.

    You know, It's the DRM, stupid!

  • I just don't see it working out for Universal (Score:4, Insightful)

    by MikeRT (947531) on Monday July 02 2007, @02:51PM (#19720507) Homepage
    Losing 15% of your income is a lot of money when you are that big. That's about the point that shareholders want to hear about cost-cutting measures to regain what they have lost--namely downsizing and such. For Apple, it would be a blow, but it would also not be nearly as bad because they still have so many content providers to work with.

    If Apple and Universal cannot come to an agreement, Apple should bide its time, wait for them to weaken and strike. Buy out their catalog for a cool few billion dollars in cash and license it exclusively through the ITMS.

      • Re:Whoda thunk? (Score:5, Insightful)

        by TheRaven64 (641858) on Monday July 02 2007, @06:25PM (#19722899) Homepage Journal

        Jobs is a clever, clever man.
        More to the point, Jobs is an arrogant bastard, who simply will not back down or compromise when he thinks he is right. You'd have thought the other CEOs would have learned by now that bluffing (or even looking like you're bluffing) is a really, really bad thing to do when negotiating with Steve. As ATi learned, he has absolutely no problem with damaging his company in the short term if he thinks it will strengthen its position in the long term.

        • As ATi learned, he has absolutely no problem with damaging his company in the short term if he thinks it will strengthen its position in the long term.

          Though I don't have an opinion on whether Steve Jobs is doing this, I do prefer a company executive that looks, years down the road, to the future instead of to this or the next quarter. That's a shortsightedness it seems too many corporations have now.

          Falcon

  • OK - Here's a thing (Score:5, Funny)

    by Quiet_Desperation (858215) on Monday July 02 2007, @02:56PM (#19720563)

    But some music executives have been chafing at the flat rate

    Well, Universal, here's *my* new flat rate for any of your artists.

    $0.00

    I call it the Interwebs Discount.

    Happy now?

    And there isn't a damn thing you can do about it.

  • Which DRM to use? (Score:5, Interesting)

    by Animats (122034) on Monday July 02 2007, @03:01PM (#19720637) Homepage

    The problem with music DRM, from the music distributor perspective, is that it's too closely tied to player vendors. There's the iPod and the Zume, and in both cases the player manufacturer takes a cut of the revenue. UMG, reasonably enough, wants to cut the player manufacturer out of the revenue stream.

    Microsoft has orphaned "PlaysForSure", which, for a while, looked like an option. Or at least Microsoft tried. WalMart went with PlaysForSure, and they might insist that Microsoft keep supporting it.

    What really matters is what WalMart does. If the music industry doesn't come up with a good solution, Bentonville may dictate one. Their site currently says The Apple iPod and Microsoft Zune digital media players do not currently support protected WMA-format files, and will not play Wal-Mart Music Downloads. Walmart.com has a large selection of WMA-/DRM-compatible digital music players available at great prices.

    WalMart, remember, sells online music at $0.88/song, below Apple and Microsoft. And they're not going to raise their prices.

  • Poor Universal (Score:5, Informative)

    by Trogre (513942) on Monday July 02 2007, @05:28PM (#19722391) Homepage
    So now no more iTunes sales for:

            * Baby Boy Da Prince
            * Bee Gees
            * Drake Bell
            * Black Child
            * Brandon
            * Big Tuck
            * Big Tymers
            * Blak Jak
            * Bloodhound Gang
            * Mutya Buena
            * Vanessa Carlton
            * Jamie Cullum
            * Domination
            * Down AKA Kilo
            * Dispatch
            * Drake Bell
            * Godsmack
            * Gotan Project
            * Chris Gotti
            * Pat Green
            * Harry O.
            * Heavy D.
            * Infinite Mass
            * Ja Rule
            * Elton John
            * Jack Johnson
            * JoJo
            * Juvenile
            * Jordan Flynn
            * Kaiser Chiefs
            * Brie Larson
            * Murphy Lee
            * Lindsay Lohan
            * Lloyd
            * Damian Marley
            * Stephen Marley
            * Mika
            * Mushroomhead
            * Mystic
            * Natalie
            * Pharoahe Monch
            * Prince
            * Rakim
            * Rammstein
            * Scissor Sisters
            * Strive Roots
            * Sunland

    The rest are here [wikipedia.org].

    I'm not a fan of iTunes and have never bought anything off them, but Universals reasons for ditching them can only be nefarious. Okay so Prince isn't going to care, and Elton probably won't either. But if anyone knows the other artists it might pay to tell them what their label has done and that now might be a good time to think about their future with Universal.

    • Re:Worst case? (Score:5, Insightful)

      by Doctor_Jest (688315) * on Monday July 02 2007, @02:34PM (#19720283)
      DRM free?

      HAH. don't hold your breath... and it _will_ be more expensive than iTunes, and it _will_ be more DRM-crippling than iTunes.

      Yeah, competition's great.

        • Re:Worst case? (Score:4, Insightful)

          by acvh (120205) <geek@mscigar3.14s.com minus pi> on Monday July 02 2007, @02:59PM (#19720599) Homepage
          "BTW, Magnatune with Amarok is far better deal then iTunes. Just in case somebody is interested. "

          There IS the issue of just how large their respective inventories are: I believe iTunes wins there.

          Hey, there are many sources of cheap, independent music. I use them. I like them. But to say that 500 albums at 5 bucks each represents "a far better deal" requires some suspension of reality.

          • Re:Worst case? (Score:5, Insightful)

            by LordVader717 (888547) on Monday July 02 2007, @03:30PM (#19720961)
            No. Look where people go for their downloads. Especially, look at which store people buy DRM'ed tracks from.

            If they want to keep the DRM, good look trying to sell it on anything other than iTunes with Fairplay. They'd be excluding themselves from the biggest market.
            If they're prepared to sell DRM-free, and want more than Apple's $1.29, they're screwed too, cause customers don't like being fucked by price hikes.

            The fact is that by breaking their relations with the biggest distributor of downloadable music, they're only screwing themselves.

    • Re:Worst case? (Score:5, Insightful)

      by anotherone (132088) on Monday July 02 2007, @02:38PM (#19720325)
      Universal already has the option of going DRM-free with iTunes, and they haven't taken the bait. Anyway, they don't have an exclusive contract with iTunes. Your whole post makes no sense.

        • Re:Worst case? (Score:5, Informative)

          by astrosmash (3561) on Monday July 02 2007, @03:10PM (#19720739) Journal

          Yes - because they don't like what Apple was offering them, DRM-free or not.

          Right. And what exactly do they not like about their deal with Apple?

          They want to charge you more for their music. They'd like you to purchase multiple tracks for each device you own, and they'd really like it if you couldn't burn those tracks to CD.

          Your post makes no sense because Apple has no say in the dealings that Universal does with other on-line retailers. Yes, competition is great. Theoretically, if Universal was uncomfortable with iTunes' dominance in the marketplace they would make sweetheart deals with other on-line retailers to provide cheaper music with more freedom to drive people away from iTunes, and the consumer would win. But that is not what is happening, because they're just too greedy, and the other tech companies too easily roll over to the whims of the entertainment industry. iTunes is successful in part because they're the only ones who have stood up to the record companies.

          Instead, Universal uses its dominant position to strong-arm more money out of companies like Apple and Microsoft -- you'll recall that Universal stayed out of the Zune music store until Microsoft agreed to give then a cut of the Zune hardware sales. That's all that this is about.

    • Re:Worst case? (Score:4, Informative)

      by Drawkcab (550036) on Monday July 02 2007, @02:41PM (#19720377)
      iTunes isn't the one pushing DRM, its the record labels like Universal who insist on it. Apple knows its customers don't like DRM and they'd sell more without it, but the copyright holders are the ones worried about losing revenue in the long term without DRM. You've got it completely confused.

        • Re:Worst case? (Score:5, Insightful)

          by cayenne8 (626475) on Monday July 02 2007, @04:31PM (#19721699) Homepage Journal
          "I really don't understand this. Almost all the CDs sold in the last 20 years had no form of DRM. And they weren't scared then."

          Well, remember back when CD's came out...there really was no way to rip them...hell, not many people had a harddrive big enough to hold all a CD's data. At that time, a CD was a safe, one use medium...you could record off it to cassette, but, that was lossy and they didn't care that much about it.

          Then...came larger harddrives, cd burners and cd drives on computers...and compression techs (mp3, etc). Well, what was once 'secure' to do consumer's hardware limitations, wasn't any more.

          The music companies hate that...and with digital music and DRM, are trying to close that hole. They'd fix the CD's to be read only if there were only some way they could...trust me. They're gonna be happy to get rid of CD's if ONLY they can lock the users down in a way they screwed up on and didn't do with CD's.

          They do not want to repeat the non-DRM mistakes they made with CD's.

    • Re:Universal shoots itself in the foot. Film at 11 (Score:5, Insightful)

      by Cadallin (863437) on Monday July 02 2007, @02:47PM (#19720455)
      Hold on, Hold on. The iPod is NOT a prosecutable monopoly. It's a natural Monopoly. Which is to say, it arises because that just what consumers are buying. There is not illegal about that at all. It is 100% legit. It is only illegal to use a monopoly in one area to force a monopoly in another. Like Microsoft using their Monopoly in Operating Systems to shut Corel out of the market for Office Suites. Like Microsoft using their Monopolies in Operating Systems and Office Suites to secure a Monopoly in the Browser Market. That's illegal. iPod/iTunes is not, despite complaints by overzealous European prosecutors. There are LOTS of (legal even) ways to get music onto an iPod. Buying CDs for one. Plenty of Musicians are distributing music themselves in MP3 or FLAC (which can't be played on an iPod Shame on you Apple! But FLAC can be converted to other formats that can be played on an iPod). iTunes Music Store "Lock-in" in pretty poor to be honest. The vast majority of iPod users are not filling up their iPods on ITMS purchases.

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