07/04/2007, 9:30am, EDT
Wednesday, July 4th
Universal rebuffs long-term iTunes contract
Despite assertions by Apple to the contrary, made just yesterday, Universal Music has issued a statement saying it has in fact changed its agreement for the iTunes Store. "Universal Music Group," the statement reads, "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." This echoes original reports circulated on Monday by Reuters.
The news marks a potentially important blow to Apple, since it gives Universal the freedom to negotiate special deals -- including non-iTunes exclusives -- with other vendors, such as Napster. Prominent artists on Universal include the Black Eyed Peas, Macy Gray and U2, with the complete roster representing nearly a third of all music published worldwide.
The label seems to have bristled at its relationship with Apple. While the two companies were originally united in a three-year deal, after the rise of the iTunes Store to dominance, a subsequent deal was limited to one year. Universal has also come out strongly in favor of DRM, something that Apple has been seeking to dismantle with iTunes Plus.
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No love for Universal or the majors, I'm just pointing out this doesn't represent a total ship-jump.
Universal isn't leaving iTunes, even they aren't stupid enough to ever leave the service that has a 75% market share of the music download business....
means that Universal Music will be meeting its end in fairly short order. If Apple manages to get most of their online store DRM-free, but Universal sticks with DRM... seriously, who does Universal think they're kidding? And this is independent of the fact that the iTunes store does more online business than Universal in the first place.
I still believe Apple has greater leverage here. It is obvious, even to Universal execs, that downloads are rapidly gaining traction, and it is all thanks to Apple. For now, they must be in bed with SJ in order to survive. Maybe later on the landscape will change (after the death of SJ, perhaps...). With the current move, they are just jockeying for leverage. Fortunately (for consumers, or unfortunately for Universal) SJ isn't calling anyone's bluff. If they try anything funny, he'll dump them. While it might be a big blow to iTMS catalogue, it would be an enormous gamble for Universal, which they would ultimately lose. I'm sure they know this, which is why they are not cutting the arm that feeds them.
Good luck, Universal, in your attempt to gain leverage. You are going to need lots of it, if you're to take on Steve Jobs and win anything at all.
But it'll be interesting to watch how this plays out. Universal will be publically humiliated if they go crawling back to SJ, so that's unlikely.