Report: Universal Music Group Declines to Renew iTunes Contract
July 2, 2007 1:27 PM
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Experts say going up against Steve Jobs isn't a wise move
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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RE: go apple
7/3/2007 1:23:48 PM
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.
"If you look at the last five years, if you look at what major innovations have occurred in computing technology, every single one of them came from AMD. Not a single innovation came from Intel." -- AMD CEO Hector Ruiz in 2007
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