Universal Music plays iTunes hardball with Apple

Universal Music plays iTunes hardball with Apple

Summary: Does Apple's iTunes store need U2?That's the crux of a game of chicken being played between Apple and Universal Music Group, which counts U2 and other big name artists in its stable.


Does Apple's iTunes store need U2?

That's the crux of a game of chicken being played between Apple and Universal Music Group, which counts U2 and other big name artists in its stable. Who's going to blink?

The New York Times and others are reporting that Universal Music Group told Apple that it will not renew its annual contract to sell music through iTunes. The reports, which cite unnamed sources, indicate that Universal Music is looking to market its music at will. The bottom line there is that Universal can pull its music at any time if there's a spat.

Clearly, Universal Music is looking for leverage. This anonymous source sure seems to be getting around. Meanwhile, it doesn't hurt that Universal Music's move can ride the iPhone publicity wave a bit.

What's truly shocking about this showdown is that it didn't come earlier. The music industry has chafed as Apple CEO Steve Jobs has become the industry's kingmaker. Music companies want subscription services on iTunes. Jobs says no. Music industry wants to raise prices a bit. Nope. You get the idea. At some point, music firms need to make Apple a little less dominant.

Meanwhile, other music services abound and Universal probably wants the best deal it can get. The problem with this strategy: iTunes dominates the music scene.

So what's going to happen? Universal will raise a ruckus that may amount to a little more leverage, but in reality both parties need each other. And unless all the music companies revolt--Sony BMG has reportedly reupped--Universal doesn't stand a chance.

Ultimately, Universal's spat could alienate iPod users, who happen to be customers. Not that annoying customers is anything new to the music industry, but it's not the brightest strategy.

Topic: Apple

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.


Log in or register to join the discussion
  • Dumbest statement in a year.

    "The problem with this strategy: iTunes dominates the music scene."

    Bzzzzt wrong. Apple may have a commanding lead in MP3 players but that hardly constitutes "dominates the music scene".

    In fact, according to every thing published, sales of iTunes is minimal compared to people ripping CD's to their MP3 player.
    • Cry me a river

      [i]Bzzzzt wrong. Apple may have a commanding lead in MP3 players but that hardly constitutes "dominates the music scene".

      In fact, according to every thing published, sales of iTunes is minimal compared to people ripping CD's to their MP3 player. [/i]

      The article is about the music download business in which iTunes dominates. These music companies are something else: they have so much disregard for their customers, yet they seem to appeal to them for sympathy. I hope Apple crushes them and forces them to sell their music without DRM. Who knows? Maybe they will go out of business on account of their stupidity. Either way, I hope they get kicked around like they deserve.
      P. Douglas
      • Why would anyone cry you a river.

        Are you about to make millions on their deal?
      • Very True

        Universal will only hurt themselves. CD sales continue to fall and among the segment of the population that prefers owning their music files over renting them, Apple is and will be a force. The record companies make desperate moves like this because they see their power dwindling.
    • Not so dumb

      I read, just a few days ago (sorry, I can't remember the source, whether online or in my local paper) that iTunes was responsible for a large majority of paid music downloads - something to the tune of 70%.
    • Apple iTunes

      Is the number 3 seller of music in the United States right now. That includes brick and mortar.

      Universal is simply posturing. There is no way they are not going to make their music available to the number 3 music retailer in the nation.
    • apple is only one venue

      amazon.com just announced an online music service that should be out in few weeks.

      The best part... NO ACC! lol.

      DRM FREE MP3's!!!!

      Its about time.

      just google -amazon.com online music service- in google
      • Right, Here is the best

        • Yeah, give your CC # to an illegal Russian site

          Mike Hunt
      • Too little, too late.

        Yeah, and? iTunes already has some DRM-free music, and Apple claims over half its catalog is going to be available in a DRM-free format by the end of the year.

        I'm afraid Amazon.com is going to be too little, too late.
    • Not really

      Just because CDs are still a big seller doesn't mean iTunes is nothing. There's still a big profit in iTunes - or they wouldn't be putting their music in iTunes in the first place. I'm pretty sure Apple has leverage.
  • Uni Ono

    There might be pressure from the other direction as well. You don't think that agent-
    land, manager-land, and artist-land aren't all going to get on the phone and sizzle
    the ears off of the unlucky Uni suit who takes the call? Because these stakeholders
    don't get paid if product doesn't move, and Uni just trial-ballooned pulling product
    off of the shelves of the digital Wal-Mart.
  • Apple will win

    Sorry Universal, at the end of the day Jobs will win. He knows how to play the electronic media game. On the other hand, time and time again the big media companies have proven they can't.
    • I don't think so.

      Apple isn't much of a player in the big picture of music distribution.
      • That's a mighty strange position to take.

        "Apple isn't much of a player in the big picture of music distribution."

        Apple is the dominant player in legal digital downloads. If Universal fails to renew with Apple, there will be one predictable result. Instead of taking 71% of every sale of Universal's music sold on iTunes, they will get 0% of the files being traded on P2P networks.

        In a [url=http://media.seekingalpha.com/article/39275]survey[/url] of 40,000 people, only Wal-Mart and Best Buy sold more music than Apple.

        And before you go off on a tear about how digital downloads are only a small part of the market... That's true today. But the labels are becoming aware that that will not be the case much longer. The market is rapidly shifting away from CD's being the primary form of distribution. Even the labels are predicting a 20% decline in CD sales over the next year.
      • That is a joke, right?

        Apple has no competion. The FUD-meisters who wrote this story down play Apple's
        dominance here as much as possible, sayign thing like other online stores abound,

        But the truth is NONE of them can compete with iTunes. Check it for yourself. What
        would you rather use? Why?

        And, it's APPLE that is pushing to remove DRM, no one else (other than the users).
        Apple supports the user, not like Microsoft who only supports the admin.
        • Your a joke RIGHT?

          It was APPLE the introduced the DRM and made it impossible to play their songs on anyone else's MP3 player,,, you HAD to stick with their ipod, if you wanted to keep your music!

          Um there are MANY MANY that are competing with itunes as many have gotten SICK of the DRM crap that itunes institutes!
          AND ONLY NOW because of this exodus and European countries suing Apple because of this, only NOW Apple pretends to be the leader in having them removed?

          OMG do you have your head up S.Job's ass or something?
          • You know not of what you speak

            Apple didn't introduce DRM. Windows Media had DRM long before Apple did. But
            that's beside the point.

            Apple doesn't like DRM, never did. They only did it to appease the record
            companies. That they used that to their advantage to sell iPods is apparent.

            You mention others "who are sick of the DRM crap" but, you're wrong, they use
            WMA DRM for the most part. Who - outside of iTunes now and eMusic - sells
            music without DRM?

            The European countries and their lawsuit posturing has nothing to do with getting
            rid of DRM. It's about having Apple's DRM playable on different music players -
            like WMA DRM does.
          • What a baby....

            Sounds like some one needs to change your diaper, cause you 5H|T all over
            yourself, and now its coming out of your mouth.

            Apple introduced FairPlay a type of DRM however DRM has been around years
            before iTunes. It just so happened that happenings surrounding Apple brought
            DRM in to the limelight. Apple used FairPlay DRM because it was required to in-
            order to get record labels to sign contracts. If you want to blame someone, blame
            the labels.

            In-fact in recent months Apple as done more then any other corporate body to
            reverse, undue, and change the DRM movement as it relates to internet delivered

            if you are such a hater, then go buy at eMusic, you can go nuts in their catalog of
            13 albums. But you won't find U2, or your favorite 'Backstreet Boys' at eMusic. That
            is what you get from labels when you don't have DRM; that is until Apple single-
            handedly manipulates one of the largest world markets to go without DRM. Apple
            isn't pretending, it is commencing. Apple now serves DRM free music, but notice
            DRM-free music availability is based on the label, That Is Because DRM-FREE MUSIC
            AVAILABILITY Is DECIDED By The LABEL. DRM removal is instituted from within the
            record labels and so far only one of the four major labels is allowing it. Your distain
            is so misguided.
        • brand loyalty in not the smart thing to do anymore

          Every other day.. someone comes out with services and products that most users would find superior to their own. Usually cost is a factor.

          There are thousands of software devs hard at work everywhere.

          Im envisioning a day.. when netgear, linksys, will be as profound as cisco.

          its only a matter of time.. as chips get smaller, smarter and faster...

          Technology will level the playing field in all venues.. including music...

          look... Amazon.com is announcing a soon to be released online music service website which will be superior to iTunes.

          becuase the music will be DRM free and in MP3 format.