Universal Refuses To Renew On iTunes

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."

Worst case?

[EveryNickIsTaken]

The worse case scenario may include Universal pulling its entire catalog from iTunes.

How exactly is this the "worse case" scenario? I'd like to see Universal sign with someone else (hopefully a non-exclusive, DRM-free deal.) Competition is always a good thing.

Which DRM to use?

[Animats]

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.

Re:Worst case?

[CastrTroy]

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. What all of a sudden makes them want to sell everything. If they'd focus more on making quality music, and delivering it at a fair price, then they wouldn't have problems with people pirating music.

Re:Universal?

[illegalcortex]

Wiki says HD-DVD is exclusively backed by The Weinstein Company/Dimension Films (through Genius Products), and First Look Studios. A number of Warner's releases have been HD-DVD only. And then there are the non-content companies who are exclusively backing HD-DVD: Toshiba, NEC, Sanyo, Microsoft, RCA, Kenwood, Intel, and Memory-Tech Corporation.

Personally, I think it's a bit early to be deciding who is doomed and who isn't. I think it's just as likely that both formats are doomed and there will be a "winner" only in the same way that laserdisc "won" the battle to be the next video medium after VHS. It was the format to use, there were just a low percentage of people interested in it.

DRM Licensing

[sagefire.org]

Apple's refusal to license their DRM

Oh, if only Apple would license their cross-platform DRM! I know this will be modded as off-topic BUT I wish Apple would license its DRM to the BBC! That way, the BEEB would have an easy way of distributing their content in a non-Windows environment and still satisfy their perceived DRM need. It still would not make a native Linux method of playing BBC content, but it is pretty easy to get iTunes (for example) to run under wine. So, though it is not a perfect solution, at least it would be better than what the BEEB is doing now

So, go ahead, mod me off-topic, but I am hoping to at least also get to be modded as interesting as well.

Re:Worst case?

[c_woolley]

Correct, and also, it is up to the company's board to decide what they believe will have a financial impact to "maximize" profits. That company may decide (hopefully) that fair business and good PR will win customers. Apple took this stance when they told the recording industry they would not hike the prices of their music downloads. They never stated that they didn't like the idea of more money coming in, but it did rally a lot of customers who bordered the fence to either stay with Apple, or go to Apple. It was a financially driven decision to charge less money in order to make more money, and one that worked.

Also, the poster that stated that there is a legal obligation to maximize profits, this is not entirely true. They are obligated to ensure that they are not misrepresenting their shareholders' needs, but there are limits as to what is expected. Otherwise, WorldCom and Enron would have just been fulfilling their legal obligation to maximize profits (Sarcasm included).

What if Apple Signs Recording Artists?

[tjstork]

Or buys a radio station, or two... seriously, there's enough local stations out there that Apple could pick up a few, then, use their radio network to leverage iTunes. Sure, Universal might bail, but, within a few years, top Universal Artists would wind up on the bottom of the hit parade. In the very least, Apple could sponsor up and coming talent out there with better deals, like more money for the artist, or at least, more creative control. I'd be willing to bet that more acts would sign with Apple who has the market of the future, versus Universal, who has a bunch of CD stores on their way to going belly up.

What Apple has done is create the Windows of Music. You either play on that platform, or die.

Re:Worst case?

[Altus]

Universal is going to demand DRM with their new provider. They will be cutting themselves out of that market (which I doubt is actually a huge consumer of online music since those players probably contain mostly ripped CDs, but that is besides the point) no matter what.

They just want more money and they dont want to give up DRM to get it. If they went somewhere else and sold their music DRM free I would probably buy it (assuming they have anything I want) but if its got some other DRM I wont buy it, because I use an iPod. I don't think I'm alone in this.

Re:Pretty simple for me

[exp(pi*sqrt(163))]

> 90% of CD content blows I'm guessing that a typical CD store contains something like 20,000 CDs. (That's a very rough guess.) That means you think 90% of those CDs blow. That means you think 2,000 CDs in a typical music store don't blow. Which is kinda interesting. If you put me in a typical music store I could imagine finding, say, 50 CDs I like. Like many other people, I can spend an hour in a CD store and not find any CDs I'd like to listen to, even when I'm in a mood to spend, spend, spend. If you think 10% of music doesn't blow then you're very lucky - you're easily pleased. And yet you say "90% of most CD content blows" as if that was a bad thing. Weird.

Re:Most likely negotiation tactics or...

[Whiney Mac Fanboy]

The third possibility of course is that Universal could do an EMI & go down the DRM free path - selling iPod compatible mp4s/mp4s on amazon / whatever.

I think that's a reasonable bargaining chip to bring to the table - imagine the launch of ipod compatible, variable priced music on Amazon - launched with a live concert by universal artists such as U2 & Elton John....

Aren't companies legally obliged to try to

[falconwolf]

maximise profits?

No. Companies, whether corporations, proprietorships, or partnerships, have the responsibility to do what the owners want as long as it doesn't break the law. In the case of partnerships and proprietorships it's usually the owner(s) who run the business. Corporations on the other hand have the responsibility to fulfill the requirements of the charter the corporation has been given as well. And since the first corporate charters were granted, to amoung others the Dutch East India Company [wikipedia.org] and the British East India [wikipedia.org] companies one of thise requirements for that the corporation had to serve the common or public good.

Falcon

Re:Most likely negotiation tactics or...

[Phroggy]

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

or

3) Oh, Universal's music is no longer available on iTunes. Hey, here's a cool song on iTunes, from some other label, I was thinking about getting this one too, I guess I'll just buy it instead. I don't really need that other song I wanted.

or

4) Universal conspires with two or three other big labels to also drop iTunes if their collective demands aren't met. Apple accuses the labels of forming a dangerous anti-consumer cartel, while the labels accuse Apple of being a dangerous anti-consumer monopoly, and because the labels have deeper pockets and are much more experienced at spreading ridiculous lies and deceit, few people hear Apple's side.

or, as another poster pointed out,

5) Universal sets up an iTMS competitor selling DRM-free tracks; they offer an introductory price of $0.89/track for the first three months, then jack it up to $1.99 per track for the tracks more than a handful of people want, while still offering crap nobody likes for $0.89/track (which is the price they'll advertise, of course). Throw billions of dollars at promoting it, and they'll convince some people to switch away from iTMS.