Just when Apple CEO Steve Jobs is languishing in all the favorable publicity surrounding the debut of his revolutionary iPhone, he gets word that Universal Music is not going to renew its iTunes deal with Apple.
So let's think this thing through.
Who needs whom here?
Does Apple need Universal's music to sell on its iTunes online web store?
Of course.
Does Universal need iTunes to turn its year around?
No, nothing could do that.
Do young consumers need to buy music on iTunes?
Are you kidding?
So what's it all about, Alfie?
Can you say more money.
It appears Universal is using the occasion of its renegotiation with Apple to get Steve Jobs to pay the company more for its music. After all, Apple pays EMI more for its DRM-free music. And, hell, DRM is as big a goner as the record labels are. Microsoft's Zune media player -- the competitor to iPod -- cuts the record labels in on a piece of the action for each Zune sold. So there is precedent.
Unfortunately, Apple by far sells the most players and the majority of the legal online music. Record stores have come and gone and iTunes gets bigger.
So the question is -- does Steve Jobs want to cut any record label in on his iPod sales?
You're kidding, aren't you?
Okay, would Jobs cut Universal a better break on the songs it sells online taking it out of Apple's already slim profit margin?
You are kidding.
Sooner or later, someone had to step up and challenge the 800 ton elephant in the music industry. I guess Universal is performing this public service.
There is always the risk that one or more of the other big three labels could join Universal. But when has a record label ever made such a huge strategic mistake?
Now I'm kidding, aren't I?
You see, Universal has the right idea. It's the American way to cut the best deal that you can. I watch Entourage. I know these things.
Unfortunately, again, for them, Universal is holding no cards. It has next to no leverage over Jobs -- a bigger than life figure that has become even more important thanks to the missteps of the major record labels.
So, what are the options?
Universal folds and says "never mind". Not a good one.
Apple folds and says, "Okay Universal, we'll give you more money and we'll wait by the phone while the other three labels demand the same deal". Not a chance.
Universal finds another online music store or combination of stores to pick up the digital sales slack that would be caused by abandoning iTunes. Lots of luck. Apple is Clear Channel here -- so to speak.
Here's the theory I think is most likely.
Consumers steal more music.
That way Apple doesn't have to share the profits any further and record labels don't have to unwittingly help Apple make all those profits.
It's just another zany day in the record business.
For those of you who would prefer to get my daily posts by email for free, please click here.
Blog Archive
Popular Posts
-
The U.S. Supreme Court has agreed to hear a case concerning vulgarity on the airwaves -- you know, Bono using the F-word in an unscripted br...
-
With the NCAA's March Madness annual collegiate basketball frenzy underway, I see too many parallels to the music media business to not ...
-
By Jerry Del Colliano There is a military term for a situation caused by too many inept officers -- clustering -- referring to the insignia ...
-
I was just blown away when I saw the front page of Inside Radio Friday in which they described the results of their special survey on voice...
-
It's hard to fathom that a consumer electronic device that is both so cool and so hot may have finally peaked. In my work with college s...
-
The introduction and suspension of media services is becoming a regular occurrence and the combined effects of multiple false starts is crea...
-
Clear Channel went private yesterday at long last. Thomas H. Lee Partners and Bain Capital Partners are in charge now. They are investment ...
-
All too often lately the major broadcast groups have been firing able and talented people to save money. Last week CBS pulled off a double f...
-
The Big Trend: Social Networking Not just Facebook and MySpace. The concept of building a social network around almost anything and having...
-
A Washington Post article says "Women who have historically wielded serious power of the purse as consumers are now buying all kinds o...