Universal gets tough with Apple
2007-07-03 08:00
Los Angeles - Universal Music Group is seeking a month-by-month licensing deal with Apple Inc's iTunes that would no longer guarantee the online music seller access to all Universal content, a person familiar with the negotiations said on Monday.
The monthly arrangement would allow Universal to offer exclusive content deals to rivals of iTunes - something Universal has not been able to do as part of its previous one-year deals, according to the person, who spoke on condition of anonymity because of the confidential nature of ongoing negotiations.
Universal is the world's largest recording company with artists such as U2, Sting and 50 Cent.
Universal currently has monthly deals with several major music retailers, including Wal-Mart Stores Inc, Best Buy Co and Yahoo Inc, the person said.
Universal's previous deal with Apple expired at the beginning of June, the person said.
Apple spokesperson Tom Neumayr said the company was still negotiating with Universal.
'Their music is still on iTunes...'
"Their music is still on iTunes, and their not re-signing is just not true," Neumayr said. He declined to elaborate.
The bid by Universal represents a break with the way the industry has done business with Apple, which has grown into the No 3 music retailer in the US on the coattails of its iPod music players.
Four years ago, the major record labels agreed to licence their music to Apple at a time when online music services were failing to attract significant interest from music fans.
Apple Chief Executive Steve Jobs' vision of a one-price-fits-all store that blended seamlessly with his company's sleek iPods proved a success. That has given Apple considerable leverage in its dealings with the recording industry.
"There's some feeling among some music labels and some executives that Apple, because it's so dominant with iTunes, has gained a disproportionate power in the equation," said Susan Kevorkian, an analyst with market researcher IDC.
"This looks like tactics to enable Universal to regain some control over the situation, at least as they perceive it," she said.
Last year, pricing dominated licensing talks with iTunes, as some of the big music companies urged Jobs to consider charging more for some songs than others.
'It was only a matter of time...'
The dispute percolated for months, but Jobs did not budge, not wanting to complicate iTunes' simple pricing scheme of 99 cents for most singles.
Eventually, the music companies each signed one-year deals that were up for renewal at various times this year.
Representatives of the other major record companies - EMI Group PLC, Warner Music Group Corp, and Sony BMG Music Entertainment, a joint venture of Sony Corp and Bertelsmann AG - declined to comment on the status of their deals with Apple.
Universal, a unit of Paris-based Vivendi SA, went into this year's negotiations with Apple after wresting significant concessions last fall from Microsoft Corp.
The software giant entered the online music player market with the release of its Zune player but ended up agreeing to pay Universal a royalty of just over $1 for every player sold.
Microsoft later extended the same terms to other major labels.
Rob Enderle, principal analyst with the Enderle Group, said other record labels may seek to follow Universal's lead again.
"Apple has had a pre-eminent position against the labels for some time," Enderle said. "It was only a matter of time before the labels tried to exert control."
- AP