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Analysts expect more music studios to follow

Apple may have to pay royalties in 2007 for every iPod shipped in 2007 if Universal Music Group successfully negotiates an agreement with Apple. Earlier this year, DailyTech reported that Universal had struck a deal with Microsoft and its Zune portable music player. Microsoft would pay royalty fees for every song downloaded by a user and every Zune player sold. Similar to a tax, this contract was definitely a big win for Universal and the music industry.

Now, Universal is indicating that it wants to have the same contract setup with Apple too. According to Universal's chief executive Doug Morris, he is already communicating with Apple about the possibility of an agreement. Analysts are uncertain about Apple's decision but based on the outcome Universal had with industry giant Microsoft, it is likely that the situation between Universal and Apple will be coming out the same.

In a Reuter's report, Morris said "it would be a nice idea. We have a negotiation coming up not too far. I don't see why we wouldn't do that... but maybe not in the same way. The Zune (deal) was an amazingly interesting exercise, to end up with a piece of technology."

It will be certainly interesting to see the outcome that Universal has with Apple, considering that Apple leads the number spot for portable music players. The iPod is such a staple of the portable music industry scene that it was certainly difficult for Universal to ignore. Other major music studios and labels may end up seeking similar negotiations

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By Mazzer on 12/1/2006 5:03:12 PM , Rating: 5
I don't disagree with having to pay a small royalty for each song downloaded but it seems wrong that Universal should get money for a music player that they had absolutely no hand in making. If I buy an ipod I may not buy one song that Universal owns. From the article it sounds like Apple is being targeted because it is so successful and that doesn't seem right, rather if all pmp were 'taxed' then I wouldn't feel so bad for them.

RE: Fair?
By dwalton on 12/1/2006 5:24:25 PM , Rating: 5
I hope Apple says "no", Ipod's loss of Universal will have as much impact on Universal's bottom line as Apple if not more. Music company are overstepping their bounds and are asking to be compensated in ways that make no sense.

Listerners won't have to forego the Ipod just to get to Universal's library of songs. There are abundance of places to get them free and with ease. That means Universal recieves no revenue from from Ipod or Itunes and has to deal with the uptake of Ipod users pirating Universal's songs. That might be enough to make record companies realize that such tactic hurt worse than they help.

Next thing you know HBO, ESPN and MTV will be asking Samsung, Sony and Toshiba for a cut of the sales of their HDTVs, while MGM, Paramount and WarnerBros will want a cut of HD and Bluray player sales.

RE: Fair?
By ajfink on 12/1/2006 5:49:03 PM , Rating: 2
If Apple says now along with all other media player manufacturers (and Microsoft doesn't play spoil sport and try and get out of their agreement), Universal will choke on their own attempts to try and do this. How obnoxious. Microsoft never should have done it in the first place.

RE: Fair?
By creathir on 12/1/2006 10:02:51 PM , Rating: 3
Maybe at first...
But given that other manufactures are complying with the request (Microsoft) this would just mean the entire music collection would only be available on Zune and CD... (Excluding of course Napster, Yahoo, Rapsody... any of the subscription services...)

It may hurt them at first, but which will be hurt more? What good is that awesome iPod if you cannot get music for it.
- Creathir

RE: Fair?
By michael2k on 12/1/2006 11:09:48 PM , Rating: 2
Hmm, given that 93% of music sold this year was on CD and only 5% from the iTMS, Apple has a long time to go before worrying about Zune Marketplace threatening them.

In fact, Microsoft has more to worry from Apple given that Apple has 8% marketshare in the US, and growing faster than the Zune is...

RE: Fair?
By PrinceGaz on 12/1/2006 8:58:16 PM , Rating: 2
Whilst I may ordinarily be a pro-PC and anti-Apple sorta guy, I really hope Apple do the right thing for the whole industry and don't give in to this music-industry enforced "MP3 player tax". If Apple do give in to it, then it will be a serious step backwards in legal digital-music adoption.

When will record companies realise that they are not in charge any more, and so stop trying to make us pay extra for our music? I don't mind paying for the music I enjoy listening to, but there's no way I'll pay extra for it in one format or another, or because I may be playing it on a PMP.

The only end result of extra charges or taxes either on individual music tracks or on the hardware used to play them, will be more people downloading the music illegally.

RE: Fair?
By BillyBatson on 12/1/2006 7:16:05 PM , Rating: 3
I agree with you. In my household we have owned 6 different Ipods, 4 at any given time, and we have never purchased a single song from Itunes. If an Ipod came preloaded with content (such as the zune?) and soem if not all of that content was from universal, i would understand the tax. However if there isn't any media on the ipod and it is just a hardware media player then there is no reason for them to see any royalties from the sale of such devices. What next? Tv's will be taxed by the movie industry? so wrong.
They are all trying to reach out for profit that doesn't belong to them yet they slap our hands away when we try to reach out for content that isn't ours.

RE: Fair?
By cubdukat on 12/2/2006 9:15:22 PM , Rating: 3
Screw these greedy bastidges...

Now I'm definitely not buying a Zune. I don't want any of my money going towards Universal Music. Personally I would only be too happy if Apple told them to go screw.

double taxation?
By lucyfek on 12/1/2006 5:08:04 PM , Rating: 2
isn't apple (and any legitimate music store) paying royalties for every sold song?
what a bs, it resembles the idea of charging google more for bandwidth (that it had already paid for, and so had users of the service) only because it's more popular than in-house offer.
not that i cared (about itunes), but still.

RE: double taxation?
By umcrouc0 on 12/1/2006 5:26:45 PM , Rating: 2
Yes, iTunes pays about 70C of the 99C per song as royalties. If you're independant and sell through them you need to go through a company like but they only keep 9% of the 70C paid out by Apple. Larger record companies like Universal are only giving a few percent of the royalties to their artists unlike the 91% that independant artists can get. With the rediculously high percentages they keep for basically being a facilitator of distributing someone with talent, there is no way that any company selling playing devices should be paying them anything for player sales. Record companies can complain all they want about people stealing music but their real problem is that people aren't forced to buy a full album worth of filler just to get one good song.

RE: double taxation?
By ninjit on 12/1/2006 6:27:43 PM , Rating: 2
This is actually one of the great things about the iTunes stores. Musicians who sell their songs directly through them get a lot more money.

There was a great example I read about the other day. A song featured on Smallville was really really popular, but nobody could find it anywhere. The singer/songwriter was a no-name British artist with no-contract, still working on an album to pitch to record companies.

But faced with the overwhelming response to his song on Smallville he put it up as a single for sale on iTunes, and made something like $200k off of it right away!.

I'm hoping more artists decide to stay away from record companies and remain independent.

I, and many other people, will have far fewer complaints about buying music if we know that the majority of the money is still going to the musician.

Ah, the beauty of the internet.

By Brainonska511 on 12/1/2006 5:04:19 PM , Rating: 2
Why can't Universal just change it's business model instead of blaming everything on "piracy." This "tax" on music players is just ridiculous. What about the MP3 players which contain absolutely no Universal music?

RE: Ridiculous
By umcrouc0 on 12/1/2006 5:30:24 PM , Rating: 2
I agree. Universal could have taken control of the digital music age right when it started. They had so much control over the industry at the time that it would have been easy for them to stop iTunes before they really got rolling. By resisting the switch to digital sales for so long they got left behind and it is completely their fault.

RE: Ridiculous
By AlexWade on 12/1/2006 10:03:47 PM , Rating: 1
Why can't Universal do what you said? Because that would involve listen to the customer and think about what would work instead what would give Big Label, Inc. the most money. You can bet every last penny you have the artists won't see one cent from this tax.

In any other business, the RIAA and MPAA would have been long ago out of business for the way they treat customers: like criminals.

Less filling, tastes great.
By MonkeyPaw on 12/1/2006 5:34:04 PM , Rating: 3
Think about it, now that we can pick and choose what we want to purchase on a CD, music companies/labels can no longer make full price on a CD of mostly crap, remixes and 1-2 good songs. Since the consumer has the power of specific choice, it put the burden on the labels and artists to actually be good at what they do. Piracy is the scapegoat for everything in the business, but what I really think is going on is that they don't like seeing their cash-cow get robbed. Rather than improving the content (versus stretching talent out over 5 "albums"), the answer is taxes, royalties, and increased per-song download prices. Yet again, computers have proven that some people's jobs are obsolete or unnecessary.

RE: Less filling, tastes great.
By Mudvillager on 12/1/2006 6:37:32 PM , Rating: 2
That's exactly how I'm feeling about all of this. Mainstream bands will be preasured to create good music to be able to survive and the music scene in general will become a lot healthier. Labels that operate like Universal have no place in the Internet age.

By tdawg on 12/1/2006 5:07:44 PM , Rating: 2
Hopefully, with Apple's market share and resulting strength and influence, they will be able to stand up to Universal and say no. There's no reason why Universal or any other music company deserves royalties on hardware they didn't contribute to making in any way.

Analysts may think that because Universal was able to get Microsoft to agree to this that Apple will be forced to follow suit, but in reality, Universal had a much stronger bargaining position with Microsoft, a newcomer trying to build a music service portfolio necessary to sell their hardware, than they do with Apple.

RE: Please
By Kadoro on 12/2/2006 1:32:22 PM , Rating: 2
Let's hope Apple can see what Walmart did!

RIAA and imparticular Universal needs Apple more than Apple needs them...

This is a really good article about how Walmart is planning on playing hardball with the RIAA. Apple shouuld do the same.

Apple has stood up a couple of times and said the price is $.99 (US) let's hope they continue.

And Hoorah for the Indies... I didn't realize they could benefit so directly from iTunes. I may have to buy some more Independent songs...

Lawsuit protection
By jonobp1 on 12/2/2006 9:31:46 AM , Rating: 2
There are a few countries where their recording industry has levied "taxes" on things such as blank media. You may be say $2 more in Canada for a spindle of cd-r's. This was an agreement with the manufacturers and the government to help curb the industry effects of piracy. You pay money assuming that you will use the discs to pirate music or whatever. You pay regardless of whether you are or you aren't. In effect, if you pirate a disc you already paid something to the industry for it and in some countries the casual citizen is ignored for doing so. I figure as long as you aren't cranking them out and selling them. People have argued that they shouldn't pay if they aren't pirating as there are many other uses for media, but the tax has stayed.

If this is the case and I have to pay extra for an ipod or whatever on the basis that royalties are being collected so the cost will pass to the consumer then I want some rights. If I have my ipod confiscated I don't want to hear crap about what music I have on it. Technically I already payed for "royalties" when I purchased my device, and the device did not have any content on it. So, that means that I should be entitled to fill my device. I would like to see this go to court especially with the Zune. The RIAA may have kicked themselves in the arse for setting a pre-sale precident. Paying royalties on a device without content is assuming a great deal. My ipod has music I created, indy music and private work data which does not involve anything with an AA at the end. I have no ripped cd content that I did not get straight from the band and I have never once purchased a piece of music since the first DRM'd cd's rolled out. These people lost my business a long time ago so why should I pay a royalty for a device that will never see any of their content? And if I did pay that royalty would that not be compensation based on the theory that I will pirate music and by that rational would said roylaties not be considered payment for any pirated music found on the device.

Hopefully the **AA's will all go out of business. Eventually they'll screw up and sue Bill Gates or something by mistake and he'll sue them out of business. Or maybe the government will take its head out of its arse and realize that they are a monopoly with no business model at all. Hell, an 8 year old could probably figure out how to sell music better than these losers. They spend so much money on DRM and useless anti-piracy campaigns just to have a number to pass off as losses for the year because of piracy. I have an idea, make good music and sell it. Every artist should realize that they are hated because of their label. Drop them after your first album that they over hype into a hit and then tour and sell your own music, people won't hate you and will buy.

RE: Lawsuit protection
By Moose1309 on 12/2/2006 1:58:46 PM , Rating: 2
You are absolutely right. This is nothing more than a Mafia business model: let's figure out who is successful, and has made a lot of money on a good product; and shake them down. MS has a similar model with the Novell deal: they're just claiming that anyone running Linux owes them money, regardless the the actual legality involved.

Dvorak said roughly the same thing as you on his blog

It just seems.....
By Rock Hydra on 12/1/2006 5:19:00 PM , Rating: 3
That the average honest consumer can never win with the music industry. If anything, these music companies are indirectly promoting pricacy, but they have their head stuck so far up ther asses to see it, and this is only going to cause a snowballing effect.

By Gelde3001 on 12/1/2006 10:03:54 PM , Rating: 3
And why has no-one pointed out that it should be apple et al claiming for royalties from the music industry per unit sold and NOT the other way around. It is not in the music companies interest to limit sales or to potentially do so with this idiocy.

Time to grow up as a species and therefore as a culture....

By shamgar03 on 12/2/2006 8:49:40 AM , Rating: 1
It seems to me that this is really grounds for an anti-trust case. Look at it this way, Universal has a monopoly on X artists songs or X movies. Songs aren't like other items, you can't get generic versions of Eminem or Dido. When people buy a song they don't won't a band that sounds like the band they want they want the band. So its inherently a monopoly. Because of this, Universal can use its monopoly status to basically extort money from various music services. This is like if a company that was the only company able to generate power in the united states decided that it wanted a cut of computer sales...and no one could do anything about it because it was the only company with permission to make power.

RE: Monopoly
By Moose1309 on 12/2/2006 2:08:44 PM , Rating: 2
Not really a monopoly - more like mafia practices like I said above. There's a difference between having 100% market share and shaking down someone in a completely different industry by threatening them.

The real issue is that the music industry serves no useful purpose anymore. If anything, it needs to be seriously downsized. The original raison d'etre is to get records and music out to people - guess what, that now happens for free digitally. "But the poor artists don't get paid," you say. Well they don't get paid for CD sales either - "We're promoting them," say the Dons at Universal, "that's all the payment they need." Barenaked Ladies just made available their newest album alongside an unreleased one on a Flash drive in non-DRM'd MP3. They said on the radio this morning "if you like it, come to our show." I think these **AA criminals see the writing on the wall for a dinosaur industry. Change your business to something legitimately useful, and you get paid. Stop shaking down others.

How Utterly backwards!
By mindless1 on 12/4/2006 2:09:42 AM , Rating: 3
Seems the music industry thinks pretty highly of itself. How about for every song downloaded and player sold, the music industry pays a fee to the player manufacturer for helping to peddle their content?

Now its Apple
By crystal clear on 12/2/2006 4:00:21 AM , Rating: 2
They are out to get everbody.

RIAA drops the dead eDonkey

Music industry = musicians
By bennyg123 on 12/4/2006 11:27:26 AM , Rating: 2
When all of you lambaste the music industry it seems that you're forgetting something - that the people creating the music get only get compensated for sales of their recordings through the collection efforts of the "Music Industry".

Before the days of recorded music, if someone wanted music, they had to pay a musician to perform it. Now all they have to do is pop in a CD or play an MP3. It's easy to see how musicians have lost from this - why spend to hire musicians to play at your party, bar, restaurant or whatever if you can just pop in a CD, plug in an iPOD, or at worst hire a DJ?

For all but a few pop sensations, recorded music has been a bad deal for musicians. Anything that helps musicians get paid - and they should be paid every time one of their songs is played on any device - will be an enormous benefit to musicians. For this reason, it is important that companies with the size and clout of Universal Music - which represents a large number of musicians - use their leverage to make the emerging world of digital media one that encourages investment of time and effort by artists.

"A lot of people pay zero for the cellphone ... That's what it's worth." -- Apple Chief Operating Officer Timothy Cook
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