Universal unwilling to renew annual iTunes contract - report

Posted:
in iPod + iTunes + AppleTV edited January 2014
Following a standoff in negotiations, Universal Music Group of Vivendi, the world’s biggest music corporation, last week notified Apple that it will not renew its annual contract to sell music through iTunes, reports the New York Times.



Citing "executives briefed on the issue," the newspaper said Universal will instead look to market music to Apple at will, which could allow the label to yank its songs from the iTunes service on short notice if the two sides do not agree on pricing or other terms in the future.



The New York Times characterizes the move by Universal as a bid to regain a bit of leverage in the near-monopoly that Apple chief executive Steve Jobs has created in the digital download sector -- the one part of the music business that is showing significant growth.



In particular, Jobs’s stance on song pricing and the iPod’s lack of compatibility with music services other than iTunes have reportedly become points of contention between the two parties. The Apple headman has adamantly demanded that iTunes stick to its original pricing system that charges a flat 99 cents for a song since, arguing that a uniform system and low prices will invite new consumers and reduce piracy.



The big record labels, however, want the right to charge Apple more for popular songs to capitalize on demand or, in the event of special promotions, to charge less, reports the Times. During a recent investor conference, Edgar Bronfman Jr., the chairman of Warner Music Group, reinforced the labels' notion that "not every song, not every artist, not every album, is created equal."



Similarly, Jobs has also refused to bend at calls for Apple to license its FairPlay proprietary copy restriction software to other manufacturers, saying it would dramatically increase the software's susceptibility to hackers. Instead, he has urged the labels to drop copy protection measures on digital songs all together.



In April, Jobs and Apple teamed with record label EMI to do just that: launching premium, unprotected tracks (called iTunes Plus tracks) for $1.29 a piece. The move, according to EMI, has since driven a significant uptick in its digital sales. So far, however, other major labels have been reluctant to follow EMI's example.
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Comments

  • Reply 1 of 57
    The only surprise here is that it took so long.
  • Reply 2 of 57
    deepkiddeepkid Posts: 97member
    This is a late and perhaps not-so-smart chess move on behalf of Universal. The big record labels are a dying breed, much like the huge airlines but aren't reading the writing on the wall. This stand-off will be interesting to observe. Note to big record labels - it isn't 1984 anymore.
  • Reply 3 of 57
    this is kind of scary. I am a big supporter of the music side of the store, downloading songs on a daily basis. The EMI deal, great... but if other songs go up in price from .99, I am going to stop buying.



    The only way I can agree with a price jump is if DRM is completely wiped off of the songs. Even then, $1.29 really sucks, but what can I do?
  • Reply 4 of 57
    asciiascii Posts: 5,936member
    If the labels would only follow EMIs example they would not be tied to iTunes but could still be compatible with the iPod.



    They are so obsessed with DRM, but it only takes 5 minutes to create non-DRM files from a CD, which they sell.
  • Reply 5 of 57
    sallisalli Posts: 5member
    I am sure that this is just because they want to wait a bit longer for the results of EMI sales. Before they see some hard numbers, they are too scared to hop on the no-DRM train, but also do not want to make a long term DRM deal. When they see the results, I think they will sign the long term deal, and we all know what it is going to be like.
  • Reply 6 of 57
    deepkiddeepkid Posts: 97member
    Quote:
    Originally Posted by josephwinters View Post


    The only way I can agree with a price jump is if DRM is completely wiped off of the songs. Even then, $1.29 really sucks, but what can I do?



    You have the option to not buy, buy it on some other format, "borrow" it or wait for a price drop.
  • Reply 7 of 57
    xoolxool Posts: 2,460member
    Universal's job should be to get their clients' music in to as many stores as possible and to make efforts to increase sales through marketing and other promotions.



    Withdrawing from the #3 store with 10% of the market sounds like the opposite to me. Unless they are colluding with other labels, all they'd be doing is removing their client's material from the fastest growing music marketplace and force consumers to use other means. Some will still head out to the local music store but many others will find "other" alternatives, especially those used to the convenience of digital downloads.



    I'd expect the labels to wake up and start to get what's going on, but instead I think they want to play more games. If consumer votes (with our pocketbooks.. ahem #3 store) don't seem to do it, then the artists will have to rise up and demand an end to this nonsense. If the labels ignore us both their downfall will only be that much swifter.
  • Reply 8 of 57
    jimdreamworxjimdreamworx Posts: 1,091member
    Good points, Xool.



    Universal has now chosen to refuse to sell its product in a specific marketplace that is growing.

    This is wrong, both for the artists and shareholders - unless of course they can offer proof that sales will increase once they pull out of iTunes... but I didn't think so...
  • Reply 9 of 57
    syklee26syklee26 Posts: 78member
    in the mean time, Limewire just released 4.0.
  • Reply 10 of 57
    xoolxool Posts: 2,460member
    Quote:
    Originally Posted by syklee26 View Post


    in the mean time, Limewire just released 4.0.



    Limewire, preferred by Universal Records 3:1 over the competition!
  • Reply 11 of 57
    anantksundaramanantksundaram Posts: 20,368member
    Do they think that non-Apple services are going to sell songs for more than $0.99 (or $1.29 non-DRM) per song? What are they smoking?
  • Reply 12 of 57
    mark2005mark2005 Posts: 1,158member
    Quote:
    Originally Posted by anantksundaram View Post


    Do they think that non-Apple services are going to sell songs for more than $0.99 (or $1.29 non-DRM) per song? What are they smoking?



    Wasn't it Universal that first got the $1 per Zune deal from MS? And then said something to the effect that they'd be working to do that with other companies (that have both a store and a player, which is really just Apple). What are they smoking?
  • Reply 13 of 57
    nevenmrgannevenmrgan Posts: 240member
    Did somebody at Universal hold their Business 101 book upside-down when they read it? They're distrusting their only distributor that's showing any growth and refusing to follow the example of a recently upticked competitor? What's next, they'll refuse to sell their music at all in an attempt to gain leverage against those annoying customers?
  • Reply 14 of 57
    breezebreeze Posts: 96member
    So Universal in it's glutinous greed thinks it can muscle Apple into giving it a cut of it's hardware by issuing a veiled threat of possibly cutting Apple off anytime...( ie: no long term contract)



    Well who exactly would they be detrimentally alienating, hurting and pissing off big time (as well), by doing this?



    1. Apple - The 3rd biggest (and undisputedly best liked) music retailer in the US/World)



    2. Steve Jobs - Remeber Michael Eisner's outcome him when he played power games with Jobs



    3. Music buying consumers - Who resent having beed gouged for years paying $20+ for CDs...



    4. Resentful Musicians - Who hate the big labels for being short changed and exploited forever



    5. Their signed Artists/Performers - Who may well rebel and sue them for hampering their promotion, careers, fan relationships, thereby hurting their sales and reach by shunning the most popular sales channel and exposure they could possibly want - iTunes.



    That leaves one bullet left in the 6 chamber revolver - to shoot themselves (Universal) in the head with...



    Apple should incorporate a new Record Label and sign up all musicians with fair contracts. Signed Universal musicians will be legally backed in breaking their contracts - since their interests are being ignored and not best served by Universal.



    Universal is a GREEDY monster that cares none about Music, Culture Art or Musicians -



    Go ahead Universal - Shoot yourselves in the head and do us all a favor.
  • Reply 15 of 57
    aaarrrggghaaarrrgggh Posts: 1,608member
    It might actually make some sense for Universal to do this. The top two sales channels sell music as loss-leaders. Apple actually is in it for a profit, so must mark up costs. If they can figure out how they can get other stores to sell their products at a loss... guaranteed profits. (Moron PHB's!)



    I just hope that Apple makes the move to actively promote competing artists, especially independents. There is no hurdle with the Apple Corp legal battle over for good.
  • Reply 16 of 57
    jpellinojpellino Posts: 678member
    If nothing else, the music business' shift in the past five years has proven that while it obeys the laws of supply and demand, it does so just barely, as the supply is now outside the control of the music company itself. ITMS has produced a model that runs right on the razor-thin edge of what people are willing to pay for.

    It's like the prisoner's dilemma. Universal believes that the music distribution game is zero-sum. It is not. It used to be, but not anymore. Not when you can make unlimited digital copies and tell anyone selling a particular piece of music to pound sand. They believe that since they can manipulate the demand side with marketing, saucy artist behavior and such, that they should be able to manipulate the supply side too. When you had physical media only, you could. You can't anymore.

    Unless you want to go back to nothing but piracy, you'd better listen to the people who made their living in digital and respect the 20 years of experience. Steve and Apple seem to know how hard they can push before the audience revolts. Universal does not. They're used to making $16 on something that costs $1 to manufacture. Outside of pasta at Wolfgang Puck's, no industry can survive making that sort of added value.
  • Reply 17 of 57
    19841984 Posts: 955member
    Quote:
    Originally Posted by AppleInsider View Post


    During a recent investor conference, Edgar Bronfman Jr., the chairman of Warner Music Group, reinforced the labels' notion that "not every song, not every artist, not every album, is created equal."



    While I tend to agree isn't it up to the consumer? Different people have different tastes.
  • Reply 18 of 57
    macmikeymacmikey Posts: 11member
    Quote:
    Originally Posted by aaarrrgggh View Post


    It might actually make some sense for Universal to do this. The top two sales channels sell music as loss-leaders. Apple actually is in it for a profit, so must mark up costs. If they can figure out how they can get other stores to sell their products at a loss... guaranteed profits. (Moron PHB's!)



    I just hope that Apple makes the move to actively promote competing artists, especially independents. There is no hurdle with the Apple Corp legal battle over for good.



    It has been long known that Apple isn't raking in tons of profits on sales of music at iTunes--that's a break-in-at-best enterprise. Apple's money is in selling iPods (and now iPhones). On this front, Apple's interest has always been (at the top level) for the artist and the consumer, not themselves. Their profit comes in iPod sales which should, frankly, make no never-mind to the labels anyway.



    The one point Universal makes that I kind of agree with is that, in fact, all music is not created equal. They're exactly right; some music is great, and some is garbage. Which makes me wonder: If they know they've got an artist selling crap, and it really is an issue for them, why do they keep the artist signed? This doesn't delegitimize their point, only their right to make it.
  • Reply 19 of 57
    donebyleedonebylee Posts: 521member
    Quote:
    Originally Posted by Xool View Post


    Universal's job should be to get their clients' music in to as many stores as possible and to make efforts to increase sales through marketing and other promotions.



    Withdrawing from the #3 store with 10% of the market sounds like the opposite to me. Unless they are colluding with other labels, all they'd be doing is removing their client's material from the fastest growing music marketplace and force consumers to use other means.



    Quote:
    Originally Posted by breeze View Post


    5. Their signed Artists/Performers - Who may well rebel and sue them for hampering their promotion, careers, fan relationships, thereby hurting their sales and reach by shunning the most popular sales channel and exposure they could possibly want - iTunes.



    That is the point I was going to make: Universal's biggest potential problem could come from contracted artists who might have standing to sue them for failure to adequately promote their products by withdrawing from the 3rd largest music venue.



    I think U2 and a few other large acts may well have more say in what Universal ultimately does than the idiots making these threats realize.



    As for Apple starting a label, that would be a very, very bad idea. But, if they were to create an independent bizarre, which would provide a published set of fees for any independent artist who wants to sell their music through iTunes that would be very interesting indeed. Then Apple is only selling music--just like they do now--without getting into competition with record labels.



    And finally, I have to wonder how much longer these record labels can exist in their current form? As more and more music is distributed digitally, other than advertising what exactly are they doing to earn their money? Suing customers?
  • Reply 20 of 57
    Quote:
    Originally Posted by breeze View Post


    So Universal in it's glutinous greed...



    http://www.macrumors.com/iphone/2007...onents-at-220/
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