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Experts say going up against Steve Jobs isn't a wise move

With the release of the iPhone on June 29th, Apple took a bold step into an industry it has never before been in. Facing stiff competition is something that Apple's been use to doing for a long time now. This week however, Apple faces a surprise turnaround from one of its partners in the online music industry, an area where Apple is the dominant force.

Universal Music Group of Vivendi last week sent notification to Apple indicating that it would not renew its contract to sell music on Apple's iTunes store.  The move comes after much negotiation between UMG and Apple. Unfortunately, music industry experts say that the grip that Apple holds on online music sales is what's discouraging UMG.

UMG has a long list of artists including notable names such as Akon, Rhinna and U2. However, Apple itself packs a punch in the amount of revenue that it brings to UMG. In the first quarter of 2007, Apple's sales on the iTunes store brought in more than 15-percent of UMG's worldwide revenue -- that's more than $200 million USD.

According to unnamed executives, UMG is looking into other sources for revenue, either through other channels or possibly a store of its own. Apple's long time control over what devices can play its music has troubled a lot of music lovers as well as publishers. Just recently however, the iTunes store began selling DRM-free music.

Ken Hertz, an entertainment lawyer representing such artists as Beyonce and Black Eyed Peas warned against going up against Apple directly.

"When your customers are iPod addicts, who are you striking back against? The record companies now have to figure out how to stimulate competition without alienating Steve Jobs, and they to do that while Steve Jobs still has an incentive to keep them at the table," said Hertz.

Since the launch of iTunes, Apple has controlled prices of music on its store. This is one area of concerns for music publishers who either want more revenue or are looking into other areas for revenue. The iTunes model has proven itself to be a success formula for music sales however. Before the advent of online music stores, consumers were forced to buy whole CDs and often times received only one to two favorable tracks while the rest were throw-ins.

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go apple
By rockyct on 7/2/2007 10:40:24 PM , Rating: 4
I hope Apple calls their bluff. Apple does have arguably too much control over protected formats on the ipod, but I'd rather them have too much control than UMG having too much.

For once I find myself on the side of Apple. I have a feeling UMG will come up with some compromise because they will lose $4 million in revenue a week. I just hope that UMG tries their own music store just to watch it tank, unless they go crazy and sold actually mp3s. That might actually work.

RE: go apple
By Samus on 7/3/2007 4:57:54 AM , Rating: 2
these money hungry record label jackasses probably aren't making enough in royalties. if apple holds out, they'll just renew the contract, they have no choice in the long run.

RE: go apple
By MobileZone on 7/3/2007 8:26:34 AM , Rating: 2
Oh, and Apple is not money hungry at all? The labels are just finding ways to get away from the monopoly of electronic music distribution. Or everybody in this planet should like, buy and have an ipod/itunes (even better if it's a mac) to be able to listen to music?

RE: go apple
By fic2 on 7/3/2007 1:23:48 PM , Rating: 2
I think it would be great when UMG comes begging Apple to take them back in the iTunes store if Apple played hard ball with them. We'll take you back, but now we are going to sell your songs for $0.75/each with DRM and $0.99/without DRM. Take it or leave it.

"It seems as though my state-funded math degree has failed me. Let the lashings commence." -- DailyTech Editor-in-Chief Kristopher Kubicki
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