Has Steve Jobs dropped the iTunes ball?
Has Steve Jobs been too focused on the iPhone over the past six months and allowed problems to develop over in an established part of Apple's business - iTunes. The New York Times reports today that Universal Music Group has notified Apple that it will not renew its annual contract to sell music through iTunes.
Rather than have a contract, Universal wants to be able to sell music to Apple at will, which would give it the right to remove songs from iTunes if pricing became an issue. Universal hopes that by not entering into a long-term contract with Apple that it might be able to negotiate better terms.
There are two sides to this story.
On the one hand Apple wants a single pricing scheme for music sold through iTunes (or at least it did until it introduced iTunes Plus). Apple believes that this simplifies the buying process for customers and helps to reduce piracy.
Universal, on the other hand, has a different view. It sees Apple as a company which, while jealously guarding its own business, is willing to meddle and interfere in other business models. Universal doesn't like the fact that Apple is using low-priced music to sell (and profit) from iPod sales.
Is there a chance that Universal might pull its catalog of songs from iTunes? Yes. It would be a hugely moronic move, but the music industry has been known to make some really bad calls over the years. Universal would like nothing more than to hurt Apple, even if that meant hurting itself in the process. If Universal does pull the plug on iTunes, I'd expect it to have an iTunes clone up and running first, possibly selling music for the same price as Apple currently does, but cutting out the middle man. Apple's weakness in the music industry is that it's several steps removed from the business of making music and that puts the company in a potentially dangerous position. If Universal pulls out of iTunes, other studios could follow suit. That could leave iTunes with a store but nothing to sell.
Thoughts?