Filed under: iTS
Drudge: Universal Music will not renew iTunes contract
The Drudge Report has posted a newsflash claiming that Universal Music Group will not renew its annual iTunes contract. So what's going on? Hard negotiations? The recent EMI/iTunes Plus deal? Or maybe UMG just doesn't like earning a ton of money through iTunes? I'm not all that familiar with the Drudge Report and since no sources are cited I suspect this "flash" should be taken with a rather large grain of salt.
Thanks to everyone who sent this in.
Update: Pretty much confirmed by WSJ--Thanks Charles
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Reader Comments (Page 1 of 3)
Joel said 9:11PM on 8-12-2007
He's usually pretty reliable. Too bad if it's true.
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Charles said 10:18PM on 7-01-2007
It seems to be confirmed by the WSJ, although they are careful to specify that it doesn't mean Universal songs are in immediate danger of being removed from iTunes:
http://online.wsj.com/article/SB118334130094154901.html?mod=home_whats_news_us
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bearrock said 10:20PM on 7-01-2007
drudge will post his sources. he always does. when he posts a flash, its just so you will check the site again later to find out the complete story.
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David said 10:24PM on 7-01-2007
Wow, this is really fascinating. WSJ point is important - it will do short-term deal instead.There is no way that Universal can pull its whole catalog. To do so would be financially stupid. But then again we all remember the story of Icarus...hope Apple does too
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bearrock said 10:24PM on 7-01-2007
this seems a bit of cutting off your nose to spite your face, with iTunes the 3rd largest music retailer in the country.
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Chase said 10:31PM on 7-01-2007
The Drudge Report is a reputable news syndicate most commonly known for being the first to report the Monica Lewinsky Scandal to the public after Newsweek, having received the story, chose not to publish it. If and when Drudge does make a flash, it is almost always followed soon after by an actual article from a recognized media outlet. In this case that media outlet appears to be the Wall Street Journal.
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John said 10:37PM on 7-01-2007
I think 3 things could happen:
Apple gives in. Which a tidal wave of Music companies will pile on. Causing a rock in their profits.
Apple doesn't give in. UMG loses more money, the CEO is out and they come back to Apple.
Apple doesn't give in. UMG loses money. Apple doesn't have certain songs and people just download them illegally.
It will take more than that to hurt Apple... I just feel people who have spent money on an ipod and started using iTunes will just start stealing music again.
Anyone else agree?
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Paul said 10:39PM on 7-01-2007
Drudge is respectable?
What a load...
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Rubbinz said 10:40PM on 7-01-2007
I'd personally love to see Jobs force UMG to go DRM-free or dump them from the service.
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bradah said 10:42PM on 7-01-2007
This is pure market manipulation in my opinion. The timing of this news is almost too obvious.
Jobs releases the iphone with great success on Friday. Sunday night there is news that UMG will not renew the contract. This is designed to scare Apple shareholders into selling their stock. Tomorrow the market will dip.....brokerages will buy these shares up.....and in a few days there will be news that negotiations are on-going and eventually both sides will kiss and make up.
I'm betting this is the case because it makes no financial sense for UMG to do this. Why would they stop a good source of revenue -- which will also be increasing with new iTunes account activations via iphone.
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GridReaper said 10:48PM on 7-01-2007
Remember when UMG forced Microsoft's hand and extorted a deal to get $1 per Zune sold as compensation for what UMG CEO Doug Morris calls "a repository for stolen music"?
UMG is getting greedy again and wants a bigger piece of the Apple (iTunes) pie.
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Ben said 10:48PM on 7-01-2007
I think another option is that artists, at least artists with established fan bases, start abandoning major labels and distributing music on their own through iTunes. Lots of smaller labels and indie bands do that already. If a major label is only good for hype and promotion, perhaps bands will start to look for alternative means of achieving it for themselves. Or artists might refuse to renew their own contracts without iTunes distribution. Major labels seem increasingly irrelevant, and this kind of thing doesn't help. Who knows.. I can only assume this is a power play of some kind, but this move seems incredibly dumb.
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Alex said 11:10PM on 7-01-2007
Until I hear the official word form a reputable source, I will not believe this report. Even if true, big deal. If Universal wants to lose the iTunes income it's no skin off my nose. I guess their business isn't bleeding enough red ink and they want to make sure they lose more money. I'd be happy if all the big music publishing leviathans went under. The paradigm has changed and they are holding on to the past instead of adapting to the new world. This is surely some desperate, misguided and pathetic attempt to increase their sales.
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Mike said 11:29PM on 7-01-2007
The WSJ says Universal is "considering" the move. Could be a negotiating ploy.
Drudge is very unreliable. Google "drudge" and "inaccurate" for examples.
I'd wait for a more reliable and complete story before getting concerned.
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Quix said 11:29PM on 7-01-2007
"I think another option is that artists, at least artists with established fan bases, start abandoning major labels and distributing music on their own through iTunes."
That is the day I'm praying for. And it's coming, eventually.
If Universal hurts my AAPL investment with their lame posturing, they're officially going on my boycott list. Good luck selling your stuff in Zune Marketplace, Universal, what with the *tens* of thousands of Zune owners out there.
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Victor Agreda, Jr. said 12:01AM on 7-02-2007
Ben, I wish at least a few (more) high-profile artists would do that. Makes more sense than shaving your head bald for no particular reason.
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Marc Edwards said 12:47AM on 7-02-2007
Most artists are (unfortunately) on longish term contracts (5 albums at the label's option etc) and can't make demands like that.
If Universal do leave, I'm sure they'll regret it.
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phil said 12:21AM on 7-02-2007
"Drudge is unreliable."
Actually, I often find stories on Drudge hours if not days before other sites or the evening news has them. And Drudge doesn't really "report" so much as he keeps the public informed of other people's reporting.
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cdn_apl_fanboi said 1:17AM on 7-02-2007
Yes iTunes is one source of revenue for them, but it's still relatively early in the age of the digital music market. What Universal is saying here is they won't relinquish control of their product to one dominant reseller no matter how popular, and it's in their interest to hold on to whatever power they have left. Remember digital sales revenue is still miniscule compared to brick and mortar retailers.
Second, while we would all love for iTunes to be the new record label of the 21st century it isn't gonna happen anytime soon . Apple is not in the business of developing and promoting musicians and has shown no interest in doing so. Only once (legitimate ie. paid for) online distribution seriously competes with physical distribution will this become a possibility.
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andrew harrison said 2:37AM on 7-02-2007
"Remember digital sales revenue is still miniscule compared to brick and mortar retailers."
I don't know about miniscule: The NYT article about this says:
"sales of digital music through iTunes and other sources accounted for more than 15 percent of Universal’s worldwide revenue in the first quarter, or more than $200 million. (Vivendi does not break out revenue from Apple alone)."
Note that it says Revenue, not music sales. I can't find reliable info [the vivendi universal site only has financials up to 2005.]
If Online Music Sales altogether are making up 15% [$200m] of their total revenue per quarter, and iTunes has about 85% market share, that means iTunes is making up about 12% [$170m] total revenue for Universal per quarter.
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