Universal To Apple: We're Not Renewing For iTunes
July 2, 2007 at 5:35 AM (PT)
UNIVERSAL MUSIC GROUP has notified APPLE that it will not renew its annual contract to sell music through ITUNES, according to a NEW YORK TIMES interview with executives briefed on the issue who asked for anonymity because negotiations between the companies are confidential.
Instead, UNIVERSAL said it would market music to APPLE at will, a move that could allow UNIVERSAL to remove its songs from the ITUNES service on short notice if the two sides do not agree on pricing or other terms in the future, these executives said.
Representatives for UNIVERSAL and APPLE declined to comment. The move, which comes after a standoff in negotiations, is a boiling over of long-simmering tensions between the major record labels and STEVE JOBS, the co-founder and CEO of APPLE.
In the four years since ITUNES popularized the sale of music online, many in the music business have become discouraged by what they consider to be the near monopoly that JOBS has held in the digital sector -- the one part of the music business that is showing significant growth. In particular, JOBS' stance on song pricing and the IPOD's lack of compatibility with music services other than ITUNES have become points of contention.
By refusing to enter a long-term deal, UNIVERSAL may continue to press for more favorable terms from APPLE or even explore deals to sell its catalog exclusively through other channels. If UNIVERSAL were to pull its catalog from ITUNES, JOBS would lose access to record labels that collectively account for one out of every three new releases sold in the UNITED STATES. .
But if APPLE were to decide not to carry UNIVERSAL's musical recordings, the music company would likely sustain a serious blow: Sales of digital music through ITUNES and other sources accounted for more than 15% of UNIVERSAL's worldwide revenue in the first quarter, or more than $200 million.