Universal Could Fashion IPod Royalty Fee
Posted November 29, 2006 — in Music News
How do labels survive in the techonoligical transition? First,
technological transitions are great times to make gobs and gobs of money. You need to start thinking about creating new revenue streams.
Universal Music Group chief executive Doug Morris said he may try to fashion an iPod royalty fee with Apple Computer Inc. in the next round of negotiations in early 2007.
Universal was the first major record label to strike an agreement with Microsoft Corp. to receive a fee for every Zune digital media player sold.
“The Zune (deal) was an amazingly interesting exercise, to end up with a piece of technology,” he added.
Or how about Apple just tells Universal to go F themselves, and yanks their catalog from the iTunes Store, cutting off that revenue stream completely. Apple will still lots of other catalogs, but Universal will lose all that download $$. Seems Apple is the one with the upper hand here, not Universal. Microsoft were the desperate party in the Zune deal, but in this scenario, it’s Universal.
Comment by Ryan Catbird — November 29, 2006 @ 11:34 am
Great idea, but not without complications. Apple has shown that they don’t need to have all music available (see the lack of Beatles catalogue on iTunes, for example). However, that was when they held 70-80% of the mp3 player market.
Of course, they still have a gargantuan market share now, but what happens when Microsoft inevitably eats into it, and Apple drops to, say, 45-55% of the market (though still far more than any other single manufacturer). At that point, can you really afford to be without the catalog of one of the Big 4?
I suspect that a lot of this is early negotiating tactics…that Universal would be just as happy seeing Apple cave in to their desire to raise the per album download price. But only time will tell.
Comment by mondogarage — November 29, 2006 @ 11:45 am
Mondogarage, you speak in past tense as if Apple doesn’t still own this market. It’s possible that Microsoft will gain market at Apple’s expense but certainly not in 2007 when the iTunes deal is negotiated. Also consider that the iTunes Store is not the primary method to fill up an iPod, so the impact on Apple is questionable. Most likely, iTunes customers will be alienated by UMG.
I do agree completely that UMG is going to use this as a bargaining chip for having more price control in iTunes. Ryan is exactly right that Microsoft only conceeded due to their desperate need to have a full catalog to compete with iTunes.
Comment by Som — November 29, 2006 @ 2:13 pm
While Apple claims the current market, keep in mind that UMG claims the current global catalog….both in physical and digital sales.
Yes, it’s true that Zune had no choice but to concede as they simply couldn’t roll out without UMG’s vast int’l catalog — it’s like smiling and missing your front two top teeth. They’d be sorely missed. There’s no argument there.
But it’s similarly obvious that Apple will evenutally concede to UMG as well, as some form of concession HAS to be made. Why? Because as much of an impact as you think the digital format has made in overall music sales, physical scans still topple sales charts. One day soon, however, yes seamless mobile/digital platforms will help equalize physical vs digital sales but until that day comes along (which realistically won’t be for another few years), CDs win. Apple knows this. Bear in mind just how VAST UMG’s global catalog is… all their international labels like Mercury, Polydor, Island UK, and their various ventures like SRC (which AKON is signed to) or their various distribution and P&D deals with labels like Ecstatic Peace which is owned by Sonic Youth’s Thurston Moore. Now imagine if UMG pulled the ENTIRE catalog from Apple — it’d be horrific for Apple and their customers.
Granted, not all mp3 playing device owners buy their music from iTunes (or buy them period for that matter :P) but all in all, that’s where middle-America does and a good cross-section of the major markets otherwise. Blogs, sites, forums are popular but only for some, not all.
Comment by Kindell — December 6, 2006 @ 10:09 pm