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Music Businesses Media The Almighty Buck Apple

Vivendi Calls iTunes Contract Terms "Indecent" 288

Posted by ScuttleMonkey
from the better-business-through-greed dept.
Bemopolis writes "Brace yourselves for a shocking revelation: The CEO of Vivendi, parent company of UMG, is not happy with the current deal with the iTunes Store. 'The split between Apple and (music) producers is indecent [...] Our contracts give too good a share to Apple.' The usual argument about older music priced at the same rate as new music is trotted out. No doubt UMG would prefer to make the former cheaper, while maintaining the current pricing for the latter. At least he had the decency not to claim that they were trying to defend their artists against predatory iTunes pricing. Or maybe he just misplaced the index card with that boilerplate on it."
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Vivendi Calls iTunes Contract Terms "Indecent"

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  • by Calibax (151875) * on Monday September 24, 2007 @04:24PM (#20734951)
    No doubt UMG would prefer to make the former cheaper, while maintaining the current pricing for the latter.

    (Where former = older music, latter = new music)

    No doubt UMG would prefer to keep the current price for the former, while increasing the price for the latter.

    There, fixed that sentence for you.

  • Boilerplate (Score:2, Insightful)

    by Bryan Ischo (893) * on Monday September 24, 2007 @04:27PM (#20734979) Homepage
    But Bemopolis clearly didn't misplace his index card with the Slashbot boilerplate for attacking anyone in the music industry for anything that they ever say or do.

    I'm not quite sure what the story is here though. The CEO of a company wants his company to make more money? What a shocker.
  • by Traxxas (20074) on Monday September 24, 2007 @04:27PM (#20734983)
    UMG is pissed that both old and new music is cheap at iTunes. They want all music to be more expense and new music being the highest priced.
  • by Paktu (1103861) on Monday September 24, 2007 @04:29PM (#20735005)
    If Vivendi doesn't like the terms of the contract, no one is forcing them to renew. I don't see what this guy thinks he will accomplish by whining to the press.
  • Waa, waa.... (Score:2, Insightful)

    by larien (5608) on Monday September 24, 2007 @04:31PM (#20735055) Homepage Journal

    At present, UMG, the world's largest record company, gets 0.70 euro ($0.99) out of the 0.99 euro retail price charged by iTunes, Vivendi said
    So they get 70 Euro cents for every song for zero marginal cost. They get over 70% of the sale price, leaving the remaining At least on a physical CD, they had the excuse of printing, transit, etc, etc to cover, but with this they just get a cheque every month for sitting on their backsides and doing sod all.
  • by Anonymous Coward on Monday September 24, 2007 @04:32PM (#20735065)
    Silly question, but if the contract terms are unfair to UMG, then why the hell did they agree to them ?

  • by mrchaotica (681592) * on Monday September 24, 2007 @04:33PM (#20735091)

    So, how's the view from that sarchasm?

  • Re:Waa, waa.... (Score:5, Insightful)

    by larien (5608) on Monday September 24, 2007 @04:36PM (#20735141) Homepage Journal
    Crap, just re-read what I typed; forgot to escape the "less than". Supposed to read:

    So they get 70 Euro cents for every song for zero marginal cost. They get over 70% of the sale price, leaving the remaining <30% to cover costs plus a profit for Apple.

    At least on a physical CD, they had the excuse of printing, transit, etc, etc to cover, but with this they just get a cheque every month for sitting on their backsides and doing sod all.

  • Sounds familiar... (Score:5, Insightful)

    by johnny cashed (590023) on Monday September 24, 2007 @04:37PM (#20735161) Homepage
    'The split between Apple and (music) producers is indecent [...] Our contracts give too good a share to Apple.'

    Substitute "producers" for Apple and "artists" (musicians) for "producers".
  • by Spy der Mann (805235) <spydermann.slashdot@NOspam.gmail.com> on Monday September 24, 2007 @04:38PM (#20735177) Homepage Journal
    The split between Apple and (music) producers is indecent [...] Our contracts give too good a share to Apple.

    I agree. Music PRODUCERS (this is, the artists, and not the greedy intermediaries) should get more share :)

    Strange curiosity: Today's captcha is "authors"
  • by frdmfghtr (603968) on Monday September 24, 2007 @04:39PM (#20735197)
    FTA:

    At present, UMG, the world's largest record company, gets 0.70 euro ($0.99) out of the 0.99 euro retail price charged by iTunes, Vivendi said.
    My math puts that at 71% for UMG, 29% Apple.

    I'm split on this one:

    (1) If you think of it in terms of traditional retail, Apple is applying a 41% (.29 retail/.70 wholesale) markup. That sounds like a hefty markup at first, until you figure in Apple's cost of storage and delivery. While there is no "storage" and "delivery" in the traditional brick and mortar store sense, there is still server storage and bandwidth costs. I wonder what Apple's true costs (costs to music producers and IT costs to run iTMS) are on a per-track basis. Know that, and you can get a better grasp on the actual profit margin.

    (2) If the deal is so bad for the producers, why did they go in on the deal in the first place?

    The second point is more rhetorical, but the first one I think bears further study before deciding if the markup is excessive. Of course, getting Apple's per-track expenses will be damn near impossible so we'll have to settle for speculation and conjecture. :)
  • Re:Boilerplate (Score:5, Insightful)

    by garcia (6573) on Monday September 24, 2007 @04:40PM (#20735215)
    I'm not quite sure what the story is here though. The CEO of a company wants his company to make more money? What a shocker.

    Then they are free to pay for the hosting, bandwidth and UI design themselves and not have to outsource it to anyone else in the future. I'm sure that they will quickly realize that the initial investment and then continued operating costs would be more than they are paying to Apple.
  • In my opinion... (Score:5, Insightful)

    by PJ1216 (1063738) * on Monday September 24, 2007 @04:44PM (#20735279)
    iTunes is pretty decent. Yea people can complain about the media not working on the iPod, but I have an iPod (whether or not you think its the best or worst). But when it comes down to pricing, $.99 for a song isn't half bad. Some people may argue for lower prices, but when it comes down to it, its cheaper than some candy bars and honestly, I get more enjoyment from a song than a candy bar. Sometimes they price new albums somewhat high, especially if they don't have a lot of tracks. It's always nice to see like a 16 track album going for $9.99 (price of 10 & 1/11 songs). (Now, if only eBook stores would do similar pricing, that'd be awesome.) Digital media SHOULD be a HELL of a lot more inexpensive than the physical media. iTunes does the distribution, storage, and virtually everything else involved with selling those songs. The record labels AREN'T DOING ANYTHING anymore. They don't have a right to the lion's share of the profit. Beyond that, they sell the music licenses to Apple, so Apple should be able to charge whatever they want. If Apple wants to charge more, its their right (though it'd be a bad move) and it's also their right to keep the rest of the profit. Now, chances are, the profits are probably in percentages and not flat dollar values and that's probably what is pissing the record labels off... Apple is selling them cheaply, so they're not making as much money. Apple isn't really making that much money off of iTunes either, so the labels shouldn't complain.
  • by Spy der Mann (805235) <spydermann.slashdot@NOspam.gmail.com> on Monday September 24, 2007 @04:44PM (#20735283) Homepage Journal
    Whats that i hear? the moaning sounds of a dying industry?

    I can tell you what it is...

    The future's in the air
    I can feel it everywhere
    Blowing with the wind of change
    :)
  • Old SJ quote: (Score:1, Insightful)

    by Anonymous Coward on Monday September 24, 2007 @04:45PM (#20735289)

    Let's talk about the iTunes store. How did you get the record labels, which had been resisting digital music, to sign up?

    It was a process over 18 months. We got to know these folks and we made a series of predictions that a lot of things they were trying would fail. Then they went and tried them, and they all failed, for the reasons that we had predicted. We kept coming back to visit them every month or two, and they started to believe that we might actually have some insight into this, and our credibility grew with them to the point where they were willing to take a chance with us.

    -Q&A: Jobs on iPod's Cultural Impact [msn.com]

    The most interesting jobs to me, are ones where people have nothing better to do than "add value" to a product that already works. Typically, they end up screwing up a good thing.

    Let's say that all the music companies do leave iTunes, what then?
    1. Multiple services, which would be as annoying to consumers as having to go to different stores to buy different label's music. In reality the majority of consumers would probably rather to pay a little more and go to the "Music store" that carries all music as opposed to the "Vivendi store", "Universal store".

    2. They unite and create a new iTunes, without Apple, under a different name. Then, as a side effect, they will also create a new Steve Jobs, who'll probably favor one of them over the others, as opposed to favoring the iPod (and total sales). This establishment will slip away even easier than iTunes.

    In either event, consumer cynicism goes through the roof. And piracy will be the largest benefactor. I bet you could figure out more accurate scenarios (I only spent about 5 minutes of thought on this), but I can't imagine something better coming to pass when you are talking about so many assertive people working together without an obvious "boss".
  • by ciroknight (601098) on Monday September 24, 2007 @04:53PM (#20735387)
    His customers are forcing him to renew, no way he's going to leave iTunes and it's three-billion-songs-sold. He hopes by whining to the press everyone will throw daggers at Apple for being "too restrictive", when in reality their music still costs about 4 times what it's actually worth and the artists are still only getting about 0.5% of what they should be.

    Luckily, looking at the Apple-NBC ordeal, we know Apple doesn't play those games.
  • by TheRaven64 (641858) on Monday September 24, 2007 @04:54PM (#20735401) Journal
    I don't know what it's like for CDs, but for books a 41% retail markup is pretty low. Once you realise that they are also doing the duplication etc. it gets even lower.
  • Indecent (Score:5, Insightful)

    by whisper_jeff (680366) on Monday September 24, 2007 @04:59PM (#20735453)
    I'd love to see how much of that 70% makes its way to the artists. Perhaps Vivendi misunderstood where the "indecent" portion of the financial split exists...
  • Re:Waa, waa.... (Score:5, Insightful)

    by jandrese (485) <kensama@vt.edu> on Monday September 24, 2007 @05:10PM (#20735597) Homepage Journal
    I think the complaint is that they're basically loan sharks with lots of connections. You can't tour without a label because affiliated companies of the labels (Clearchannel) own a large percentage of the venues in the country. Granted you can always barhop and go to smaller venues, but that pretty much precludes doing it as a day job or getting that "superstar" status.

    The idea that people couldn't produce their own records or with the help of a company that doesn't rip them off is getting more absurd by the day. What they really can't do is get those CDs into the hands of major distributors (owned by the record companies again) or get radio airplay (owned by the record companies) on anything outside of AM or college radio. For all of this what is the primary service of the record labels? To front some money to the band (not a salary, a loan) for the rights to everything they make and to get first cut on any money coming to the band. It sounds like you'd have to be crazy to take an offer like that, but really your choice is to wallow in obscurity for eternity or bend over and spread your cheeks for the big record company.

    This is also why record companies find the internet to be so scary. Piracy is an issue, but the loss of control is a much more fundamental one. Even if it doesn't catch on directly, it gives bands more leverage at the bargaining table and that is the last thing the record companies want.
  • by Anonymous Coward on Monday September 24, 2007 @05:15PM (#20735645)
    Parent is quite correct. I've seen the numbers in the RPG Publishing Industry. In general, the markup looks roughly like this (numbers are rounded off for ease of use but the percentage is roughly correct as of 2003-ish):

    If you pay $20 for a book, the bookseller purchased it for $10 from the distributor. The bookseller marks it up 100% from what they paid for it.

    The distributor, who sold the book for $10 to the bookseller, purchased it from the publisher for $5. The distriubtor marks it up 100% from what they paid for it.

    The $5 that goes to the publisher has to pay for (1) printing and (2) talent (editor, writer, artists, etc.). The publisher - who did the work of putting the thing together, owns the copyright on the work, etc. - gets roughly 25% of retail price.

    Itunes, in this case, is roughly analagous to the distributor/bookseller rolled into one. UMG is roughly equivalent to the publisher - they did the mixing, they own copyright (or at least some of the distribution rights).

    To compare:

    Traditional Publishing: The publisher gets 25% of retail.
    Music Industry: Gets 70+% of retail. That's triple what an analagous industry gets in the physical world. Better yet, once the artists are compensated (i.e., the copyrights bought), costs of production per unit are 0 (compare to physical publishing, where merely paying your artists does not yet pay for the physical books themselves)!

    Conclusion: The music industry is correct.. the split *IS* indecent... but not in the way they would like to believe. The MUSIC INDUSTRY, and not iTunes, is the one getting an indecent amount of money in the deal.
  • Re:Waa, waa.... (Score:5, Insightful)

    by no_opinion (148098) on Monday September 24, 2007 @05:20PM (#20735725)
    You're looking at it the wrong way : the labels are like venture capital for musicians. They have to cover their up-front artist payment, marketing, music production (e.g. producers like the Neptunes who bill at 100K per finished minute of music), music video production, fulfillment systems, etc., in addition to the distribution cost. The cost to send the file is not what they're trying to recoup.
  • by Hamster Lover (558288) * on Monday September 24, 2007 @05:24PM (#20735753) Journal
    I don't disagree with the premise that older music could or should be priced differently from newer music. One would expect that with older music the costs of production and distribution have been largely recouped. Of course, to me that means that older songs should be priced from 25 cents to 75 cents and new music remain at the one dollar level.

    I doubt UMG/Vivendi shares my pricing philosophy, however. Differential pricing to them is just a lever they want to use to rationalize higher prices.
  • 70-30 Split (Score:3, Insightful)

    by Nom du Keyboard (633989) on Monday September 24, 2007 @05:31PM (#20735853)

    At present, UMG, the world's largest record company, gets 0.70 euro ($0.99) out of the 0.99 euro retail price charged by iTunes, Vivendi said.

    So UMG gets the fat side of a 70/30 split, and all they have to do is sit on their asses and cash the checks -- and they don't think this is good enough!

    And why don't I see them running their own music stores? Because they don't know how to do it profitably. All they know how to do is whine, complain, and demand more money for things they are incapable of ever accomplishing on their own. If there was ever a reason for Big Music to crash and burn, this is it!

    Music existed before the music companies, and it will exist after they're gone. With the Internet, artists -- especially the vast hoard of unsigned artists -- don't need Big Music to get their music out. For every big name you've heard of that was signed by the record companies, a thousand others were passed over, and it wasn't because they weren't good enough too. If you want fairness and a level playing field for music, that's what's happening now, and Big Music is terrified. As for those precious recording contracts, you'll have a better chance of hitting it big buying lottery tickets!

  • by jmauro (32523) on Monday September 24, 2007 @05:32PM (#20735875)
    There is actually two types of old music, the "classics" (i.e. Beattles, Sinatra, Rolling Stones, etc) which can command the higher price than the new stuff on iTunes. And the "non-classics" that cannot command a higher price because the market isn't there due to lack of popularity. Most of the songs don't actually fall into the "classics" group, but would probably generate some money if they were priced lower than the new stuff. When talking about the old stuff though the record labels are usually refering to the "classics" which would make more bank than anything else.
  • by yo_tuco (795102) on Monday September 24, 2007 @05:35PM (#20735925)
    "UMG is pissed..."

    Maybe because now they know how the artist's feel when the middle man gouges you.
  • by rossz (67331) <ogre@geek b i k e r.net> on Monday September 24, 2007 @05:57PM (#20736177) Homepage Journal
    "Ok, we'll do a contract based on the contracts you force upon the artist. You'll get 5%, except we're going to use magic bookkeeping to guarantee that you will always owe us money, no matter how well the music sells. That's right, this time you are the bitch."

    Alternately, tell them they get an amount exactly equal to what the artists receive, with auditing of the music industry books to verify the money is actually paid. Hell, offer them twice the amount the artist gets. They still won't go for it because they wouldn't want their books audited.
  • by aardvarkjoe (156801) on Monday September 24, 2007 @06:02PM (#20736237)

    Did you completely miss the sarcasm in the summary write-up? It was positively dripping, sir.
    Even better is that his post was moderated to +5. The lack of reading comprehension among Slashdotters astounds me sometimes.
  • by Anonymous Coward on Monday September 24, 2007 @06:11PM (#20736317)
    (they want to be able to charge less for old songs and 99 cents for new ones).

    You're kidding, right? They want something more like $1.29 for old ones, $1.99 for new ones, and $2.49 for 'hot' ones.

  • by ZorinLynx (31751) on Monday September 24, 2007 @06:17PM (#20736371) Homepage
    So why not release the music in iTunes Plus? More money per song, and the customer gets a better product.

    OH WAIT! NO! That would make too much SENSE! Nevermind. I'll shut up now. :)
  • by Hatta (162192) on Monday September 24, 2007 @06:28PM (#20736491) Journal
    One could argue that racism is about self-interest and survival.
  • by theurge14 (820596) on Monday September 24, 2007 @06:37PM (#20736557)
    Music doesn't depreciate, it's not electronics.

    Sure it does. Now that I've heard the Red Hot Chili Peppers "Dani California" on the radio 24/7 for the last 18 months I can't stand to hear it any more.
  • Re:Boilerplate (Score:3, Insightful)

    by smellsofbikes (890263) on Monday September 24, 2007 @07:19PM (#20736919) Journal
    I doubt that. iTunes made a new business plan viable. Now that it's established, going back and redoing it is comparatively inexpensive, because the risk has already been assumed by Apple. It's not the development that's the problem: it's development without recovering costs that makes companies cry. That's one part of copyright/trademark/patent protection that is probably useful.
  • by BarlowBrad (940854) on Monday September 24, 2007 @08:15PM (#20737277)
    Except in this case they really aren't being gouged.
  • by p0tat03 (985078) on Monday September 24, 2007 @08:31PM (#20737387)
    Do you really want that to happen? The main problem with music companies now is that they own all of the distribution channels. As brick and mortar record stores decrease in importance, do you really want yet another monopoly waiting to take over? Granted, they would be all about the brushed aluminum and everything will be shiny and chromed... but still :P
  • Re:Boilerplate (Score:3, Insightful)

    by ZachPruckowski (918562) <zachary.pruckowski@gmail.com> on Monday September 24, 2007 @09:21PM (#20737739)
    Yeah, it's cheaper than it was the first time, but you have to create a cross-platform music player that doesn't suck, come up with a DRM scheme, host a bunch of servers, continually update the store with new music, and support all of this, as well as pay bandwidth costs. Then you have to spend millions advertising it, and convincing people to use it.

    Might be easier than it was the first time, but it's still darn tough. Most online music stores lose money. The reason that iTMS is profitable is the scale and the strategic benefits.

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