Universal confirms iTunes non-renewal | iLounge News

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Universal confirms iTunes non-renewal

The Universal Music Group has confirmed reports that it will not renew its long-term iTunes contract. The label responded in a statement, which said, “Universal Music Group has decided not to renew its long-term agreement for Apple’s iTunes service.  Universal Music Group will now market its music to iTunes in an ‘at will’ capacity, as it does with its other retail partners.” Macworld UK reports that in addition to variable pricing, Universal wants to be able to offer certain tracks and certain bands exclusively through other, competing online music services, in an effort to lessen Apple’s control of online music sales. Apple has yet to comment on the statement.

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21

Josh-

You make a great point.  The biggest hurdle Universal will face is making buying a track outside of iTMS fast and easy.  It can be done, but it’s gonna require a bit of thinking outside the box.

Posted by YouKnowItsTrue on July 5, 2007 at 3:44 PM (PDT)

22

You guys ever think universal would want to be able to pull tracks from iTunes if they wanted maybe because they are thinking of releasing / trying out the iTunes Plus stuff?

Posted by bradwjensen on July 5, 2007 at 4:20 PM (PDT)

23

YouKnowItsTrue,

Not so fast my friend…

Quote:
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Apple will eventually go along with it, because they have a profit motive as well.  Anyone who thinks Apple wouldn’t want to increase their take from iTMS by 300-400% is foolish.
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The purpose of itunes is to sell ipods not music.  Apple basically breaks even on the deal.  Jacking the price up 900% wouldn’t matter if you’re still getting $.20 per track, which is what Universal wants and a cut of ipod sales.  They’re just trying to line their pockets.

Quote:
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I’m sure the artist would love to have an increase of 300-400% percent of each track they sell online as well.
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They would…if Universal actually planned to give it to them.  Artists make next to nothing off their albums and the tracks sold on iTunes.  If I remember correctly, for every album sold an artist makes 1 to 3 dollars.  For every song sold on itunes I think the artists get like $.13.  So the majority of guys you see shining on the videos with the Bentleys, Diamonds…ARE IN DEBT!  Only platinum artists, writers, and producers make any money in the music business outside of the record companies.

Quote:
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Remember when Prince had his $100 million contract with Warner but still found something to complain about? 
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This is exactly what Prince was complaining about.  Every recording contract is the same.  They basically pay you to make a record, promote it, distribute it, and take ALL the profit.  Oh by the way they now own YOUR music and are able to do whatever they want with it…sell samples for more profit, license it for a little more change…all the while the artist probably sees 1% of this money.  That’s why all really successful artists buy their masters back and/or start their own record companies.  So they can reap these benefits.
 
Studio time, tours, producers, writers, guest artists…all comes out of the artists pocket.  So while they gave Prince 100 million they probably made 700 million off of his talent and of the 100 million he probably spent 50 of it making the albums to complete his contract.  You tell me you wouldn’t have a problem with that.

Posted by ArtVandelay on July 5, 2007 at 5:08 PM (PDT)

24

ArtVandelay-

Finally someone who can carry a conversation.  We may not agree on everything, but I like your style.

iTMS is definitely being used to drive iPod sales, but it’s my understanding that Apple gets 10 cents from every track sold.  After 2.5 billion tracks sold that equals $250 million for Apple…definitely not chump change.  I suspect Apple’s cut of a $2.99 song would be about 40 cents each.  I have heard that Apple’s cut of each track is lower than 10 cents each, but we know it’s not nothing per song…they’re doing more than breaking even with iTMS.

If an artist gets 13 cents for each song sold on iTMS that’s pretty good considering an album has about 12 tracks…that works out to being close to the average of what you’re saying they make per album.

As far as profit sharing goes, that’s a tough one to negotiate.  Artist like Prince that I used in my example get huge advances…the advance goes against what they would’ve made off profits.  Not too many artists are lining up to give up their advances, but they all want more on the back end…who’s being greedy in that situation?

Posted by YouKnowItsTrue on July 5, 2007 at 7:47 PM (PDT)

25

^^^^^^^^^

$250 million sounds like a lot but delivering those songs to customers is not cheap.  I am pretty sure the people employed and the resources needed to keep the itunes store up are not cheap.  Sure they make a profit but not as much as you would think.

$.13 per song is nothing considering the record company is getting $.77.  Considering how few artists actually sell 500,000 let alone a 1,000,000 albums that’s a rip.  If you sell 1,000,000 itunes songs that’s only $130,000…BEFORE TAXES!  For a million songs that’s nothing. 

Considering that advances are negotiated before an artist makes it big they’re usually a rip considering these deals usually run several albums.  You have to then use that advance to make your record.  That’s like getting hired for a job and your boss saying you have to buy your own desk, phone, paper, pens… in order to get the job done.  I’m not saying it should be equal but IMO artists should get a much larger cut of the profits than they do now.

Posted by ArtVandelay on July 5, 2007 at 9:32 PM (PDT)

26

Well I know somebody, not me, im just sayin—I know somebody who isn’t going o stop downloading music via PvP and other free sources until he can get it 50 cents per song with no DRM tags at all and playable anywhere he likes.  Unfortunately the music companies don’t understand that if that were to happen he’d probably end up buying enormous amounts of music, which equals quite a lot of money.  Too bad for them, I guess he’ll just have to stick to the free sources and shop smart.

Posted by John Doe on July 5, 2007 at 9:58 PM (PDT)

27

Let’s be realistic here man.  A tremendous amount of people who buy music on iTunes are just as easily able to get it online “elsewhere”. 

$0.99 is a reasonable price to pay for old songs and new songs that you like without doing anything questionable.

I see where you’re coming from with the whole $2.99 per track thing, but that’s more of a supply and demand argument which is what the whole file-sharing debate really comes down to.

Once a track is digital…there’s an unlimited supply which drives the price towards 0.  Driving it back up goes against the basic economics of that.

If a song is worth more because it’s more popular it will just be purchased more times and prove it’s value.  If the price goes up a lot of people won’t buy it and the whole thing is going to even out. 

The only real downside is that the artist is in less cars getting played and advertised to other people in the car because less people own the song.

Universal wants to up the price, that’s fine, but economics will take care of itself.

Posted by OtherPerspective on July 5, 2007 at 10:43 PM (PDT)

28

Ironically, the very music they will want to charge more than .99c is the easiest to locate on any p2p due to popularity. If Apple can hold their own long enough UMG will realize what a mistake going this route is. Don’t be fooled though, they’ll keep trying to find ways to squeeze us (and the artists) to increase Share price.

Posted by jason on July 5, 2007 at 10:54 PM (PDT)

29

So with itunes Universal looses about $.10 on the dollar to Apple who handles sales and has a well established apparently popular distribution model.

In the old days, what did the companies loose on the dollar to the physical model of CD manufacturing, burning, cases, labels, distribution, resale, returns?

With iTunes, how much more complicated is it for Univ than just emailing the completed track to Steve and saying ‘here, make gold’..

Posted by ge on July 6, 2007 at 12:06 AM (PDT)

30

YouKnowItsTrue -

10 cents a song huh! I guess maintaining servers and bandwidth are free.

I would venture to guess it costs Apple oh say about 10 cents a song for servers, bandwidth, power to keep the lights on or make payroll for support personal etc.

Remember we get to sample a snippet of all them tracks and we are not obligated to buy.

In the end I would hate to see their electric bill for all the servers they must run 24/7 so you may download those juicy Fergie tunes.

Think a little before you think that Apple is making killer profits. I don’t think their profits are near what the labels are making. Imagine what the logistics are to even begin to create what the iTunes music store is.

Posted by FreeBandWidth on July 6, 2007 at 12:17 AM (PDT)

31

Steve Jobs will call the CEO of Universal. In about four minutes, Universal will sign the exact same contract as the others. Jobs may or may not say “Who’s your daddy?” after the Universal guy apologizes profusely.

Steve can fire Universal. Actually, Apple doesn’t really need that music store that much. The iPod is selling well, and the store isn’t making a lot of profit. It’s profiting the labels. Steve will simply say, “Sure. Pull out if you want. And see your profits go down the drain.” He won’t let Universal change the terms. It will be his way or the highway.

If Universal pulls out, its CEO will be fired and a new CEO will run back to Steve, wagging his tail. See what happened to Disney’s CEO when he failed to partner with Pixar.

Posted by Puiz on July 6, 2007 at 4:23 AM (PDT)

32

@Puiz

While I agree the Universal will come back to the table because they’re being idiots, I highly doubt Doug Morris, the CEO/President of UMG will be fired. 

How do I know this?  Warner Bros fired him back in the 90s and they went down the toilet shortly thereafter.  Morris went onto to form Universal Records and the rest is history.  He is not a disposable music biz CEO.  You might as well say, “when Clive Davis screws this up, they’ll fire him and replace him with someone else.”

Stupid move by Doug and he’ll end up regretting it.  It almost sounds like the idiots who banded together to take down Napster didn’t learn their lesson the first time.

Posted by funk49 on July 6, 2007 at 5:24 AM (PDT)

33

A penny, guys!  That’s the most Apple pays for the bandwidth of each song they sell.  Exact figures are not available to me, but I actually suspect that it’s even less than a penny per track considering that YouTube pays about $0.001 per minute of video they stream.

So, at a penny per song going to the bandwidth, Apple is still left with $225 million in revenue from iTMS.  Of course there are other expenses, but how come people are acting as if Apple shouldn’t have expenses just like everyone else.  I imagine that the biggest expense for Apple is marketing, but how much marketing have you seen dedicated solely to the iTMS? 

The cost to the labels is a lot more than a penny per song considering they’re paying for the artist, production and marketing.  Yet, a lot of people here act as if they keep every dollar they make.

Even if you believe Apple is only breaking even off iTMS (I believe it’s doing a lot more than breaking even), do you really believe they wouldn’t love to make a profit in the future off the iTMS?

Also, the argument that the labels need Apple more than Apple needs the labels is a slippery slope for both parties to navigate.  Don’t forget that music is what is sold on iTMS…what would they do without music?  Of course, the labels would also be foolish to pull their product from their third largest retailer.  But ultimately, Universal is not threatening to leave iTMS all together, they just want to keep other options open as well.

Posted by YouKnowItsTrue on July 6, 2007 at 12:36 PM (PDT)

34

Even if you believe Apple is only breaking even off iTMS (I believe it’s doing a lot more than breaking even), do you really believe they wouldn’t love to make a profit in the future off the iTMS?

Considering how harsh Apple’s prior—and ultimately incorrect—denial of UMG’s non-renewal was before this official announcement, I suspect that your argument is more true than not. The belief that iTMS only exists to propagate additional iPod sales is weak at best; I certainly don’t know a single person who buys an iPod just so they can get at the contents of the music store. At best they might go hand-in-hand, but most people I know want an iPod just for the device itself. The music and vid downloads are just added gravy.

Posted by flatline response on July 9, 2007 at 4:16 PM (PDT)

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