Universal Music Group (UMG) has turned down an offer to renew its contract with Apple for 2 years, instead moving to a month-to-month sales basis with Universal allegedly moving to end it’s music sales on iTunes all together.
Figures published June 22 had iTunes as the 3rd largest music retailer in the United States at 9.8%. If iTunes was a bricks-and-mortar operation Universal Music would never consider the move; cutting off a leading retailer in a market that is experiencing declining sales is pure stupidity. But it is easy to work out what it’s all about: greed.
Many music companies have never been happy with the iTunes 99c per track sales model. More recently Universal Music did a deal with Microsoft that saw Microsoft make a payment per Zune sold, Apple does not offer a similar deal. UMG is likely betting that it can offer its extensive music catalog elsewhere for a better price.
The real insanity though is what the actual effect of UMG pulling out of iTunes will be; it won’t be more sales, it will simply result in more piracy. Whilst there are legitimate concerns about the closed nature of iTunes and the near monopoly status Apple has in selling music online, there is little doubt that in popularizing legal music downloads, Apple has provided a challenge to music piracy. Music labels are profiting where they would perhaps have not profited before; given a choice of not being able to purchase their favorite tracks on iTunes legitimately customers will revert to piracy, and UMG will lose out even more so than by sticking with a 99c fee they don’t like. To paraphrase the old saying: better a paid download from iTunes than 2 higher paid downloads from a theoretical competitor (bush).
Not a good thing for Apple and the iTunes users, UMG will only lose money from this.
I hate iTunes, but I dont see people dropping it anytime soon :/
I believe that Universal and Apple will get together again. Music selling isn´t only about technical demands like DRM-free MP3 etc. it is also about the coolness factor, which boosts sales. And who’s cooler than Apple at the moment?
Regards,
René
Hi,
Adieu? It could be a case of sour grapes over a half-hearted discussion by Apple to invest in Universal Music in 2003.
Regards,
Coral
http://www.cora...ry.blgospot.com
What happened to all those companies reverse engineering Fairplay so that other providers could start selling ipod compatible drmed music?
Price increases for… black. Disposable iPods without replaceable batteries. OS upgrades every 14 months.
Greed, indeed.
Huh. I guess they’re starting to play hardball with Jobs about the 99 cent pricing. I hope he just lets them walk, and doesn’t give them the variable pricing or “buy this crappy song to get this good one” bundling.
Kind of funny how EMI is offering DRM-free downloads on iTunes, and Universal is going the opposite direction, and likely moving to a more restrictive, less convenient retailer.
Great Universal, it took 4 years but you (er, apple) managed to get people into the habit of picking up tracks (but not albums so much) legally online and now you think you can walk away?
Cos finding pirate tracks has got so much harder these past 4 years… a fragile peace.
UMG probably think they have a ‘killer brand’ to build their own store around no doubt… arf!
Not to carry water for UMG but….. Apple doesn’t give a piss about the music business. iTunes is at best a break-even proposition that helps them sell more 30Gb+ iPods. The share of hard drive taken up by legit iTunes purchases is trivial compared to sideloads and illegal downloads. Consequently music is free. Bad news for UMG and the other labels but also for the other folks in the industry including the “artist”. The labels last chance is to try to mess up Apple’s ecosystem. First by undermining iTunes and then maybe offering hardware alternatives to iPod. Will they succeed? Dunno. But playing Apple’s game has been a disaster so far. They’ve got nothing more to lose.
Universal is run by a bunch of idiots…the same ones that bought mp3.com and didn’t have a clue what to do with it so they sold it.
I wonder how many of their execs have taken an economics course…
the odds of Universal walking away from iTunes ultimately are as good as Universal walking away from Wal-Mart and Best Buy — in other words, not good at all. As the 3rd largest retailer of music in the USA now, I don’t see Universal walking away from Apple.
Content may be king, but without distribution, not so much…
A suicide move, if true. For one simple reason: most artist know (and buy ?) only iTunes tracks. Will an artist be happy when he learns that is contract renewal has a no-iTunes clause? I’d never sign that!
Drew has it. This is an attempt to wrest some control from Jobs, who uses (their) content to sell his hardware.
Drew: exactly. While I don’t think it would necessarily be a wise move for UMG to leave iTunes, the fact of the matter is that the interests of the two parties are not very well aligned, and that’s never good.
Agree with Drew too. Having all majors saying “yes” to iTunes will end to a distributor monopoly. Competition is good. I don’t mind to buy UMG songs on Amazon, Virgin or other online stores.
Completely disagree with Drew. If Apple doesn’t care about music, why introduce an iPod at considerable risk to them as a company. Remember it was Apple’s insistence of a single price, single DRM and per-track purchases that revolutionized the industry.
If it weren’t for Apple we’d still be pirating music.
Like most consumers, I choose to have an iPod, because it’s by far the best music player, as the iPhone is by far the best phone/music player/internet device. That means I use iTunes and by from the iTunes store. My “lock in” doesn’t feel like much of a lock in. It’s like – OMG, you stop me buying music where it’s often more expensive, I have fewer rights to play it, and is managed by poorer software. I feel such a victim of a company that believes mediocrity is unacceptable.
People have a choice, if they buy a Zune, they use the Zune Marketplace, if they buy something else, they probably use some other store that’s probably dying now Microsoft have screwed them over. Apple are selling music, why don’t the labels want that? I’m confused.
UMG profits on iTunes music is way higher than their profit on actual CDs. UMG is now being greedy. I for one will boycott UMG if they pull out….
This is 100% warning shot across the bow of itunes. I like itunes and deal with them quite a bit, however placing all online distibution in the hands of one entity is dangerous for both the labels and the consumer. Locking into a multi-year agreement where you have no leverage is not good business sense when it requires that you give all digital content to them. If you look at the film studio model, the studios are hesitant to give ITunes the deal they require because they don’t want to lock users (and the studios) into a monopoly (which it will in essense become). ITunes is seeking to own each vertical from creation (Disney) to distibution (itunes) to hardware (IPod/AppleTV/iPhone/etc). Can’t fault them for that, and they make great equipment, but they can’t be the only player in town.
Let’s see what happens in Q4 with Amazon and down the road with others. Until then, why lock into something you don’t have too
I really don’t understand this move and totally agree that this will lead to more piracy. The consumers have spoken.. they are unwilling to pay money for a form of entertainment that has been devalued to to oversupply and uncontrolled, ubiquitous P2P distribution.
As a small label, I’d rather sell more tracks inexpensively than less at a higher price. I also think an inexpensive subscribe-to-own model ala eMusic could be a winner. Encourage new listeners, encourage people to do the right thing.. make it cheap and easy.
This is very stupid of Universal. By taking their tracks off of itunes they are sending the wrong signal to consumers. They basicly are saying well were not going to make it easy to purchase music so go ahead and pirate.
don’t think it’ll add to piracy….most of iTunes buyers are folks that don’t know how to use a torrent or think its a hassle or are just against piracy…..so if they can’t find songs on iTunes they’ll go to the next provider of Universal’s music, be it Microsoft or Universal itself…..
I hate to see companies act so stupidly…
– I don’t see itunes going above 99 cents for a long time..
The biggest issue with iTunes is the fixed price : Universal Music and other music majors cannot choose to sell their back catalogue for 50 c / track, and their new hits for 1,5 $ / track !
Fixed prices reduce the competition, for sure. This is interesting for Apple, not for content ptoviders like Universal Music, because Apple makes far more profits with iPods and iPhones devices than with iTunes tracks, and Apple does not share the iPod + iPhones profits with content providers…