Is Universal Angling For A Piece Of Every iPod Sold?

from the good-luck-with-that dept

Tue, Jul 3rd 2007 8:33am — Mike Masnick

With Universal Music Group threatening to pull its music from iTunes, some are speculating that the real end game isn't just to change the pricing on iTunes, but to get some money for every iPod sold. After all, Universal somehow convinced Microsoft to pay up for every Zune sold, even though there's no legal, moral or business reason for doing so. Of course, Zune's sales are nothing compared to the iPod. However, Steve Jobs is playing a different game here and seems a lot less willing to give in. After all, Jobs knows that the music is simply a loss leader so he can sell more devices -- where he can actually make some profits. He's unlikely to give up those profits very easily -- especially when there's no compelling reason to. Given Jobs' position here, it wouldn't be totally out of character for him to call Universal's bluff, and pull their songs from iTunes. Then let's see who needs who more.

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

23 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

alex, 3 Jul 2007 @ 8:35am

I love it when these behemoths start playing chicken with each other.
[ link to this | view in thread ]
W.B. McNamara (profile), 3 Jul 2007 @ 9:08am

Doug Morris said as much last year
Back in November of 2006 Reuters reported that Doug Morris (Universal Music Group CEO) was pretty confident that they would make a move in this direction in their 2007 negotiations:

## START REUTERS
NEW YORK (Reuters) - Universal Music Group Chief Executive Doug Morris said on Tuesday he may try to fashion an iPod royalty fee with Apple Computer Inc. in the next round of negotiations in early 2007.

Universal, the world's largest music company, owned by French media giant Vivendi, was the first major record label to strike an agreement with Microsoft Corp. to receive a fee for every Zune digital media player sold.

"It would be a nice idea. We have a negotiation coming up not too far. I don't see why we wouldn't do that... but maybe not in the same way," he told the Reuters Media Summit, when asked if Universal would negotiate a royalty fee for the iPod that would be similar to Microsoft's Zune.

"The Zune (deal) was an amazingly interesting exercise, to end up with a piece of technology," he added.
## END REUTERS

http://www.topix.net/content/reuters/1126863025273698548728102347541812106732
[ link to this | view in thread ]
jLl, 3 Jul 2007 @ 9:09am

Watching Universal freak, when their music gets pulled, would be funny as hell...
[ link to this | view in thread ]
W.B. McNamara (profile), 3 Jul 2007 @ 9:13am

Re: Doug Morris said as much last year
And how could I have forgotten? Daring Fireball's "Conjectural Transcript of the Upcoming Negotiations Between Apple and Universal Music:"

[...]
Jobs: But I have a better idea.

Jobs leans forward, and arches his eyebrows.

Morris: OK, sure.

Jobs: How about you take one of those white Zunes and you turn it into a brown one, Doug.

Jobs beams the full Steve Jobs smile.

Morris: Pardon?

Apple Attorney: Mr. Jobs is suggesting that you take a white Microsoft Zune 30 gigabyte digital music player and insert it into your rectum.

Jobs: In fact, how about one for each of you? (Gestures to Universal attorneys.) Seven Zunes – that should double their sales for the week.

Morris: –

Jobs: And Universal Music will get seven dollars.

Jobs sits back in his chair, beaming proudly.

Morris has broken out in a bit of a sweat. He wipes his forehead.

Morris: Steve, I don’t think this…

Jobs: Doug, it’s not a problem at all. The Zunes are on me.
[...]
[ link to this | view in thread ]
Rainer Paskiewicz, 3 Jul 2007 @ 9:16am

Maybe they need a little hardball...
May this is a little bit of what the Recording industry needs to snap it out of the dream it seems caught up in. I mean, really, what right do they have for taxing iPod sales? I know people who don't have a SINGLE universal license on their iPod.
[ link to this | view in thread ]
Anonymous Coward, 3 Jul 2007 @ 9:27am

Re:
gay chicken
[ link to this | view in thread ]
Anonymous Coward, 3 Jul 2007 @ 9:39am

They're grabbing at anything. greedy bastards
[ link to this | view in thread ]
Phillip, 3 Jul 2007 @ 9:48am

Re:
more likely desperate bastards, than greedy. They see their traditional business model failing and want some new guaranteed revenue.
[ link to this | view in thread ]
Kevin, 3 Jul 2007 @ 10:19am

Hilarious!
W.B. McNamara, that is the funniest thing that I've read in a long time. (Maybe I need to get out more)

At any rate, Apple should give Universal a free taste of what it's like and pre-emptively pull all Universal music from iTunes. It's certainly not going to hurt Apple at all. It will definitely cause a dent in Universal's profits. And then Universal isn't negotiating for a better rate for songs sold via iTunes anymore. They're negotiating to get their music sold by iTunes at all.
[ link to this | view in thread ]
name, 3 Jul 2007 @ 10:24am

Re: Re: Doug Morris said as much last year
lol
[ link to this | view in thread ]
Drew Robertson, 3 Jul 2007 @ 10:27am

Sony
In the old days, they'd call Apple both a monopoly and a monopsony. If you want to buy digital media, you have one place to go viz. iTunes. Apple has it pretty well wrapped up. OTOH if you want to sell digital music you have to play by Apple's rules as well. In the old days they'd worry about abuse of market power. Now weenies on TechDirt think it's way cool.
[ link to this | view in thread ]
Anonymous Coward, 3 Jul 2007 @ 10:36am

wake me up when elected officials stop referring to the public as "consumers".
[ link to this | view in thread ]
ScaredOfTheMan, 3 Jul 2007 @ 11:02am

Re: Re: Doug Morris said as much last year
That was Hilarious! Nice work!

Seriously, why should any company pay the Universal content Tax? And what next tax the iphone too?

Why should Joe consumer be forced to pay this, because the cost will be passed on to the consumer (weather or not he listen to their music)?..and didn't I already pay universal when I give them my $0.99?
[ link to this | view in thread ]
Shane C, 3 Jul 2007 @ 11:25am

This idea's been around for some time...
This is no different from the idea of taxing blank CDs. What's next, hard drives, because they store the music? Head phones / speakers because they radiate the music? Radios / Stereos because they play the music? Monitors because they list the music? Human beings because they listen to the music?

"Congratulations Mr. & Ms. Smith. It's a bouncing baby boy! Make sure you pay your RIAA excise taxes on the way out the door. You wouldn't want little Johnny to be an indentured servant, would you?"

At some point in time there has got to be a sanity check. Let's just hope it doesn't bounce!

Shane
[ link to this | view in thread ]
ScaredOfTheMan, 3 Jul 2007 @ 11:48am

Re: Sony
Which 'Internets' are you on?

I can buy any DRM free music I want and stick it on my ipod. Just because Apple has to DRM its itunes tracks on behalf of the labels, don't blame them. Yes its to apple's benefit that they did not share their DRM scheme, so what...its no different than needing real player to play real audio streams.

As for abusing their market power with the sellers, ANYONE who wants to go toe to toe with the big music labels to keep the price of my music down (to a reasonable $0.99)is doing a good thing. Since none of us on our own could possibly do it. So who is the real winnie now Drewski?
[ link to this | view in thread ]
anonymous coward, 3 Jul 2007 @ 1:10pm

how much of that money would Universal give to the musicians?

if Apple agrees to pay Universal (or anyone) without guaranteeing that a substantial portion flow to musicians, they are guilty of a crime that should stop anyone from owning an ipod ever again.
[ link to this | view in thread ]
Anonymous Coward, 3 Jul 2007 @ 1:37pm

Re:
You act as if apple would actually ever agree to this. They have the position of power, Universal doesn't, and Jobs has already repeatedly told the labels that their business model is outdated. Now he'll be able to show them.
[ link to this | view in thread ]
SkippyTMut, 3 Jul 2007 @ 1:53pm

Get 'Em Steve!
Jobs should just pull all of their music without hesitation and then let Universal keep offering more and more money to put it back. In the long run this is only going to end up costing Universal more of its limited profits anyway. Dumbasses!
[ link to this | view in thread ]
David Sternlight, 3 Jul 2007 @ 6:35pm

Let's tread carefully here
Let's tread carefully here. Universal may be trying to suck Jobs into pulling their music so they can sue him under business law for trade discrimination or some such. Jobs' best strategy is to stonewall Universal and let THEM pull their music, if they dare.
[ link to this | view in thread ]
David Sternlight, 3 Jul 2007 @ 6:41pm

Too bad
And just when I was starting to like the French again for their new President and shift to a more balanced policy on Israel. Well, Vivendi has damaged American public opinion about the French, though they may not realize it. This is not just business--it is an attempted hijacking of every buyer of an iPod who does not use Universal Music's producrt.
[ link to this | view in thread ]
Anonymous Coward, 4 Jul 2007 @ 6:14pm

Apple should respond to Universal by starting their own music label. They could sign a bunch of big names and sell this music for $0.99/track without DRM. Any music that is unDRMed would get front and center on iTunes. Now that would really get the folks at Universal tights in a bunch.
[ link to this | view in thread ]
John Duncan Yoyo, 5 Jul 2007 @ 9:05am

Universal going out of business sale
This just in. Universal is willing to trade a dollar per iPod for their portion of the $0.99 per song they were getting. Most iPods can contain significantly more than one song. Even if it was only a dime per song ten songs isn't a difficult hurdle for sales unless of course their misc really sucks.

Just goes to prove most CEOs couldn't survive as accountants or talent scouts.
[ link to this | view in thread ]
kslim, 17 Apr 2008 @ 2:40pm

Backwards
Music as a "loss leader"? Maybe for now, but digital music is a potential goldmine for Apple. No distribution, no packaging, no silly in-store mark-up fees, endless supply of offerings...quick, easy, dirty, cheap. Apple is making tons of cash off of iTunes. If anything, I say they are making too much, but it is so damn easy, I really can't complain.
[ link to this | view in thread ]