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Universal declines 2-year iTunes contract

updated 12:45 pm EDT, Mon July 2, 2007

Universal: no new contract

Universal Music has declined to ink a 2-year contract with Apple to keep its vast catalog of tracks on the Cupertino-based company's iTunes Music Store, but has agreed instead to offer its tracks on a month-to-month basis. The music company is now free to offer its music -- which includes artists such as 50 Cent and Mariah Carey -- exclusively to other vendors, which could weaken Apple's dominant position in the digital music industry. Universal's 12-month agreement with Apple expired last month, according to Reuters, and some music execs have expressed discontent with Apple's market leading stranglehold that they say may have stunted growth of the digital music market by locking users into its own iPod+iTunes ecosystem.

by MacNN Staff

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rtbarry
Fresh-Faced Recruit

Joined: Aug 2001

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07/02, 01:12pm | report spam | close Reply |
yeah...

...it's apple's fault that the labels are all dying. yeah, that's it.

@sshats. the only future prospects for the music industry lie online. and the only performer in this space is iTunes. ultimately, apple shouldn't need exclusivity and should just compete on the merit of their delivery system. but when universal tries to blame iTunes for their bad fortunes, it is laughable.

read last month's rolling stone. the death of the crappy music industry has been a long time coming and was very well earned by these greedy dinosaurs.

RIP Universal.

jpamental
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Joined: May 2005

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07/02, 01:14pm | report spam | close Reply |
stunted the growth?

The iTunes store has grown so fast that it's become the 3rd largest music retailer online AND offline. It's laughable to think that Apple has done anything but expand online music. I think that they're looking at the $38 in royalties they got from all of those Zune players and wish they were getting a piece of iPod sales. (I'm being a bit flippant about the Zunes, but Apple does sell just a few more music players than Microsoft)

sUNtiGEn
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07/02, 01:17pm | report spam | close Reply |
stunted growth????

some music execs have expressed discontent with Apple's market leading stranglehold that they say may have stunted growth of the digital music market by locking users into its own iPod+iTunes ecosystem

this is a load of CR**. If the labels want to avoid being locked into a closed eco-system... then have Apple strip DRM from their catalog (like EMI did). They can even make a couple of extra cents doing this.

What this really is, is Universal looking to start a bidding war over it's catalog... they want to close the eco-system, that's for certain... it's just a question if it will be FairPlay, WindowsMedia, or RealMedia.

Who do you think will pay the most to lock the other two out?

- matthewk

cblackmo
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Joined: Nov 2006

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07/02, 01:23pm | report spam | close Reply |
are they serious?

Month-to-month contract? What for? So if Apple doesn't agree to their ridiculous price increases they can threaten to pull their catalog from iTunes? They consistently refuse to learn from their mistakes. Tsk-tsk, I think they underestimate the relationship and influence that Apple and Steve Jobs have built with the artists directly.

vasic
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07/02, 01:18pm | report spam | close Reply |
Stunned growth???

Let' me get this straight; downloadable music has been growing so fast before Apple invented this iTunes business and locked all those iPods in; then the growth was suddenly stunned because of this???

The music industry execs can spin all this without shame only because few people who listen actually know what they're talking about. One out of every 10 dollars their business makes is coming from Apple and iTunes. If Apple weren't there, none of the competitors would have had as many customers as they do have now. The iTunes/iPod ecosystem has raised awareness among consumers that there actually IS a legal way to buy and download music. Most of those consumers, having been educated by Apple, chose the iTunes as their shop; some, however, went to the competition. Napster, Rhapsody and others should be grateful that Apple raised their profile and made world aware that music can be downloaded legally, not just P2P.

This is just PR. The Music industry desperately needs as much leverage as they could possibly get against the juggernaut that is iTunes/iPod. Universal is the best candidate to try exert this force. While so many of us here dismiss Universal and vow never to buy Universal tracks, it is a bit more difficult said than done; one in three of all the artists out there is under Universal label (including Apple's big champions, U2, among others). I'm still hoping Steve will not blink. If anyone has any leverage today, it's Apple. For the good of all the consumers out there, he should use it whenever dealing with the labels.

Feathers
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Joined: Oct 1999

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07/02, 01:27pm | report spam | close Reply |
all we need is U2

...and if the headline read that U2 has decided not to renew it's distribution agreement with Universal except on a month to month basis, the game would be over. The fact that so many established musicians still choose to align their distribution with bullies like Universal says as much about them as it does about the record companies themselves. Typically, U2 and Bono particularly, talk the talk but when it comes to walking, the don't.

ClevelandAdv
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07/02, 01:28pm | report spam | close Reply |
User experience

iTunes / iPod has grown so fast because the iPod is simple to use and cool, and the ITMS is simple to use and cool. Other companies never got this so Apple now dominates this market. If Apple had not created this combination - and record companies controlled online downloads the way they wanted them - illegal downloads would be growing faster then ITMS and they would be getting nothing.

As a side note...the iPhone was done the same way and will quickly become the #1 selling smartphone.

vasic
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07/02, 01:30pm | report spam | close Reply |
funny subjects here

It's quite amusing to see several of us burst at the same time, with same subject, saying more-or-less same thing.

It's obivous, we all love Apple...

appleisgreat
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07/02, 01:41pm | report spam | close Reply |
This won't weaken Apple

This will weaken Universal. Let them offer their tracks to other vendors. They will spend a lot of time and money doing so and then see that Apple was the right choice from the start. Apple is best because they are only interested in selling iPods and iPhones. The music on iTunes is simply a vehicle to do so.

testudo
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07/02, 01:40pm | report spam | close Reply |
Re: are they serious

Month-to-month contract? What for? So if Apple doesn't agree to their ridiculous price increases they can threaten to pull their catalog from iTunes? They consistently refuse to learn from their mistakes.

First, yes they are serious. Second, vasic is basically right when he says its a power play. Of course its a power play. The labels want to have a say on how much their catalog sells for, they don't want to be dictated a price by the person doing the selling (Apple, in this case). At this point in time, Apple is the big bully, with Universal the bratty kid saying "Waaaa! I want it my way!".

BTW, neither of them are in it for the customers. They're in it for only one thing, to make money. If Apple was concerned about the listener, they'd open up Fairplay. But that's one thing they refuse to do. And with this, Apple insists that their one-price strategy is best, yet they don't even have a one-price strategy. Songs are either 99 cents or $1.29. I've seen albums anywhere from $4.99 up. New albums almost invariably cost more than $9.99. Movie pricing is $10 or $15, depending on the flick.

And, really, you think you all would WANT apple to accept universal's deals. Let 'em raise prices. Then, no one will buy the music, and the company will only go out of business sooner. Don't you see. Apple is actually trying to keep the labels alive and thieving forever, instead of forcing their demise!

danviento
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07/02, 01:41pm | report spam | close Reply |
Got 2 understand

that the labels seem to think they get MUCH more $$$ out of CD sales than online sales. Even though the delivery system is slower, takes a great toll on monetary and environmental resources, and administration. I guess part of that plays into the wide range of CD prices based on what they think they market will bear for that particular artist/genre.

iTMS has managed to set a lower STANDARD for priced music, so the no-name group verses the pop-mega-star are rated same for consumer price from song to song. Don't forget how iTMS charges less for albums, or doesn't force one to buy a whole album if they want one song. iTMS seems to be good for consumers and doesn't have the same gouging capabilities built into CD sales.

Despite the distinct direction of selling more volume for = or ≥ previous profit margins, they're not all that willing to break away from a tried and true money-maker. Plus, even though CD's aren't copy-protected (as they rightly shouldn't be) they still cringe at a system that puts tracks on a computer where they *might* end up on a filesharing network.

Perhaps they're waiting out for some other major label to become hugely successful with a non-DRM online sales format. In any event, the current trends still have me wondering; if you're willing to take a chance on a some people's musical ability (and your promotional system) why not on a format that shows more promise that ever before?

Here's a little sidenote for you analysts: My music library as a whole had very few CDs for reasons of cost, but when iTMS came into being, it grew 50-fold in a matter of a few years. Good luck with pushing old-school.

jarod
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07/02, 01:48pm | report spam | close Reply |
Another moron

to bite the dust. Universally stupid is more like it. Death to all the labels! FREEDOM!

testudo
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07/02, 01:44pm | report spam | close Reply |
Re: all we need is U2

and if the headline read that U2 has decided not to renew it's distribution agreement with Universal except on a month to month basis, the game would be over. The fact that so many established musicians still choose to align their distribution with bullies like Universal says as much about them as it does about the record companies themselves.

Or maybe it should show you that the labels offer benefits to musicians you're too blind with hatred to see. For why else would they sign?

And I've never heard of a band with just a 'distribution' contract. You see that in the movies, but I didn't think musicians did that.

testudo
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07/02, 02:06pm | report spam | close Reply |
Re: got 2 understand

that the labels seem to think they get MUCH more $$$ out of CD sales than online sales. Even though the delivery system is slower, takes a great toll on monetary and environmental resources, and administration. I guess part of that plays into the wide range of CD prices based on what they think they market will bear for that particular artist/genre.

It also has to do with being able to sell enough CDs to people because they like just one or two songs. With iTMS, they can just get the songs they like, which means, actually, less sales in total. (Its the same way the software industry calculates how much piracy costs them - don't base it on how many you'd actually sell vs. stolen, just assume every one stolen is a lost sale. So, every single sold is a lost CD sale. Thus, they're losing money!)

iTMS has managed to set a lower STANDARD for priced music, so the no-name group verses the pop-mega-star are rated same for consumer price from song to song.

Well, that's not actually a bad thing for the consumer. Shouldn't the no-name group and older stuff be priced "lower" then the pop-mega-star? If 66 cents per song goes to the label, and 20 cents go to the songwriter (or whatever the damn breakdowns are), shouldn't the indie bands cost less, or are they actually gouging us for a bigger piece then the label artists get (hey, then we should be supporting the label artists, not those money-grubbing indie artists!). Or is Apple keeping more of the money from that? Either way, you're not better off. Its just whether Apple gets the money or Universal.

Don't forget how iTMS charges less for albums, or doesn't force one to buy a whole album if they want one song. iTMS seems to be good for consumers and doesn't have the same gouging capabilities built into CD sales.

Not all albums. Some newer albums still cost $12 or $13, and higher, depending on the amount of music on the album.

vasic
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07/02, 02:12pm | report spam | close Reply |
A sad system

Unfortunately, if you're musician, you're screwed. You can have two career paths: a successful one, or unsuccessful one. If you aren't as lucky as the big acts, you don't sign a contract with a label, and toil away in anonymity.

If you're lucky, get a break and sign a contract with a label, you get a chance at fame. They produce your stuff, promote you, sell your music, etc. However, you give away your rights. When you visit corporate offices of your record label, you carry that Vaseline tube in your pocket...

Universal is the biggest label out there. The sheer breadth of the talent under contract with Universal labels is nothing short of amazing:

http://new.umusic.com/artists.aspx

from U2, to Tom Jones, to 50 cent, to Leonard Bernstein, and everything in between.

They have very little control over their creative work. Unfortunately, the system was set up like this long before iTunes (or CDs, for that matter).

It's a system that will be very difficult to change.

chotty
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07/02, 02:18pm | report spam | close Reply |
Re: A sad system

A contract with a major label is no guarantee of making a red-cent. $ comes from publishing & touring. Period. Just ask Adam Durvits of Counting Crows. One year, they had the #1 CD and single. He split the $ w/ the other guys, each made a whopping 14K.

Deal
Mac Enthusiast

Joined: Apr 2001

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07/02, 03:55pm | report spam | close Reply |
Scary

I am siding with Tustudo on this one. I know, I know... don't encourage him :)

There isn't one price on Apple. Apple really tried, but face it, they couldn't do the one price structure. Since there isn't one price, Apple aught to open this up and let the labels put the price on that they want�let people buy what they want. The songs that are too expensive will undoubtedly get pirated. The songs that are reasonable will get purchased legally.

Apple needs to start wooing these musicians so that when their contracts are up, the musicians can cut out the middle man (namely, Universal). That will truly be a win-win-win situation.

testudo
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07/02, 03:57pm | report spam | close Reply |
Re: a sad system

They have very little control over their creative work.

No, you have as much control as you give yourself. If you sign away all your rights, then you have none. If you keep your rights, you have more. I can't imagine U2 are just Universal a**-kissers doing whatever they're told.

A contract with a major label is no guarantee of making a red-cent. $ comes from publishing & touring. Period. Just ask Adam Durvits of Counting Crows.

Yeah, but the Counting Crows wouldn't get any money from touring without the label behind them promoting their music. So, they may not have made much on their CD, but they certainly made more from the tour and overpriced t-shirts then they would've done without the label.

And how much money did the crows' label front them for recording, producing, and promotion of said album? And of previous albums? Or are the labels supposed to be charitable organizations giving away all that time and effort and not expecting anything back?

elroth
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07/02, 04:33pm | report spam | close Reply |
testudo, you're a joke

I can't believe you're such an a**-kisser to the record companies. Do some research on their history - you can start with companies stealing the publishing rights from the artists in the 1950s. Continue to the present day, where an artist will sell millions of CDs, only to be told by the record company there's no profit.

The record companies are well known for their confusing accounting systems, which seem to always show little or no profit on every record, no matter how successful.

A group like U2 can get a better deal, and the supergroups do get better deals, but until you get to that status, you have no control.

cblackmo
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07/02, 04:54pm | report spam | close Reply |
for too long...

...the labels have gotten away with anonymously controlling the consumer experience without the consumer really attributing it to the labels. I love that Apple's amazing products and leverage have forced their names into the spotlight for greater public scrutiny.

Aside from UMG or Apple's motivations and intentions - the bottom line is still that the majority of consumers approve of the iTunes ecosystem as is. It isn't by accident that iTunes surpassed Amazon.com. And no one forced all those consumers to choose iPod and iTunes.

I'm guessing that Walmart became the #1 cd reseller by offering a similar ecosystem of simple pricing and seamless shopping. Consumers find it irresistable to have cereal, detergent and cds all in the same shopping experience. So it's no surprise they'd prefer Apple's wide variety of legal, high-quality, popular music in a simple format on the same desktop they use everyday.

If UMG wants to tamper with that consumer experience for profit gain - more power to them. But this time they have in Apple a company that isn't so easily made into a pawn or shield.

rtbarry
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07/02, 05:07pm | report spam | close Reply |
testudo...

...where does your understanding of the record labels/music industry come from?

i was a professional musician for years (no, you haven't heard of me), worked in the distribution part of the industry for years, and my brother is currently a successful musician in NYC.

anyone who works in the industry can tell you: the industry is flawed beyond repair, too greedy for their own good, and destined for upheaval.

it is easy to smugly say "artists should not sign their rights away". unfortunately, they have little choice. you play their game or you don't get signed. every dime they spend on you gets charged back double or more before you see a dime, and then they still take the vast majority of revenue. bands only make money off their merch and their hard work touring.

so if you're an aspiring musician, you have 3 choices: 1) embrace programmed impoverishment and suck record company d***, but launch a career

2) embrace obscurity and decline a major deal - play bars for the rest of your life

3) tell them to fvck off and forge out into an independent career - almost impossible, but occasionally some acts get so much momentum that they can call the shots when they finally sign, because they have enough of a fan base to make it

why is it like this? because the people who run the industry are no longer the artists and producers who used to nurture a career. you would never see a band like rush, or the beatles or zeppelin get a chance to evolve over a series of releases where they grow and improve.

currently the industry wants one thing: put out first album and hit big. if not, dropped and into pariah status. if 1st is success, 2nd has to top 1st. if not, dropped. it's all about making as much money as you can and moving on. hence the advent of boy bands and c*** like kid rock.

an industry that no longer believes inits own product is ripe for change. and that revolution is upon them. they're just too slow and stupid to embrace it. and as they are trying to, it's too little too late.

robttwo
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07/02, 05:08pm | report spam | close Reply |
What is really going on

Whats scares universal (et al) is that Apple (or online entities in general) could become THE distributors. Right now, what the labels have going for them is that the have clout and connections. (With radio, venues, etc) - But the internet is eroding away the importance of "airplay" and therefore their heavy-handed control of radio is slipping away.

Suppose Apple said, "we just bought Apple Records and we are going to be our own label. We have distribution and publishing rights to an artist who wants to sign with us, and we are signing a large group of producers to work with us. And, oh yeah, we will license CD distribution to companies like Universal if they want to agree to our terms."

I think Artists would FLOCK. Look at how many indy artists have no "record deal" but are on iTunes.

At this point, only EMI seems to understand any of this.

By the way, dont think Universal isnt peeing their pants imagining these same changes happening to movie distribution and DVD sales/rentals. In 10 years, do you think we will be going to the video store, or even buying DVDs?

rtbarry
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07/02, 05:12pm | report spam | close Reply |
robttwo...

also *ding*!

the big media companies of the last century are just starting to realize that they have no pulse. and instead of listening to the doctor, they're self-medicating by cannibalizing their own artists and partners.

good riddance.

bobdapoet
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07/02, 06:43pm | report spam | close Reply |
Boycott in order?

Should there be an organized effort to Boycott purchasing Universal's artists?

sailin74
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07/02, 08:36pm | report spam | close Reply |
Artists

Universal is in a tough position. Apple's the #3 distributer, and the artists can go direct to Apple. It's tough when you lose the strangle hold on a market. Welcome to the internet, Realtors are next. Universal's value added is Marketing, and perhaps mixing. An artist doesn't need universal to sell the music to the majority of consumers. They better find value added, and fast. Jobs has a great point, CD's effectively have no DRM, so why should online music?

ZinkDifferent
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07/02, 08:49pm | report spam | close Reply |
stunted???

Yeah, good job - bite the hands that kept you from fading into obsolescence... If it weren't for Apple, Universal wouldn't be selling any online music.

Well, like all such brilliant decisions, they will come crawling back to the negotiating table, and will then have to settle for Apple's terms. The usual.

Fast iBook
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07/02, 11:58pm | report spam | close Reply |
Testudo.

be banned, stop filling macnn with your nonsense. anyways, getting lower cost DRM-free music from emi, and then offering that model across the line is what we need. The labels are ONLY out to make money, they don't give a c*** about music. This isn't just some biased rant. I have managed bands, and labels always want money money money money money money money money money money money money money money money money money money. Bunch of nonsense! Also, there needs to be way more "big" labels, so not so many artists are tied to one titanic company. That, is also a bunch of c***. Also, if the beatles catalog were to be made exclusively available on itunes, universal would look foolish in the eyes of many, including investors, and will at some point come to it's collective sense.

Guest
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07/03, 12:13am | report spam | close Reply |
sigh....

some of you should go work for a label someday.

-Bobby

MacnnGregor
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07/03, 12:13am | report spam | close Reply |
testudo isn't all wrong

First, U2 uses Universal as much as the other way around - they don't have to do all the business stuff and they can go to Africa and know they have 1,000 people making sure their stuff gets on radio and Jobs keynotes.

Second, the industry is very very flawed and has no real way to transition yet. All of the equipment and such that goes into studios and the byzantine contracts that keep the money flowing is almost impossible to follow - thus there is no flexibility in the system to try things truly new. Their own fault.

Third, "Freedom" calls do nothing.

Fourth, this worries me. Universal, if it sees continued decline may think holding on to their bluff as no less of a problem than the status quo. They could give MS a real boost.

Fifth, this doesn't worry me, because in one year enough iPhones may tie consumers to iTunes that Jobs may be able to open FairPlay to other distributors without hurting iTunes sales too much. Why? iTunes sales makes Apple money, but if Universal's own websites sold only in FairPlay and thus only to iPod/iPhone/aTV then Apple still does very well. This delays the day when Apple needs to open music to other devices, which would be the REAL end-game.

Apple is going to have to decide to monopolize one segment or the other, sooner or later.

robttwo
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07/03, 01:39pm | report spam | close Reply |
U2 nonsense

Please stop bringing up U2. Their relationship to Universal is as DISTRIBUTOR. U2 has their own management and publishing company, and is one of the probably half dozen bands with ties to a major labels that is allowed creative control over their careers. (Seriously, last year only 4 groups under Universal contract had rights to determine their own album art, much less anything else.)

U2 provides Universal with an album, and they market and distribute it. 99.999999999999% of artists are told by Universal exactly what they will do, and that is what people (artists especially) object to.

I dont know how many of you are "artists" - but can you imagine creating anything - a song, painting, etc. and there is someone sitting there the whole time telling you what you are suppossed to do, and often doing it for you. Well, the name of that person is "Producer"

Guest
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Joined: Nov 1999

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07/04, 01:10am | report spam | close Reply |
robttwo....

Where the heck are you getting these facts from? Do you always write fiction?

Stephan

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Universal declines 2-year iTunes contract

updated 12:45 pm EDT, Mon July 2, 2007

Universal: no new contract

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yeah...

stunted the growth?

stunted growth????

are they serious?

Stunned growth???

all we need is U2

User experience

funny subjects here

This won't weaken Apple

Re: are they serious

Got 2 understand

Another moron

Re: all we need is U2

Re: got 2 understand

A sad system

Re: A sad system

Scary

Re: a sad system

testudo, you're a joke

for too long...

testudo...

What is really going on

robttwo...

Boycott in order?

Artists

stunted???

Testudo.

sigh....

testudo isn't all wrong

U2 nonsense

robttwo....

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