Apple could split device sales with music labels
Updated: 8:10 a.m. PDT
Is Apple rethinking its music strategy?
As part of a deal to offer devices featuring preprogrammed music, Apple would have to agree to share sales revenue from the devices with the labels, says a source close to the deal. Cutting the labels in on iPod or iPhone revenue would mark a sharp turn in Apple's strategy.
The deal being discussed by the labels and Apple calls for the company to license the music and also "kick in a piece of the device sales," said the source. The Apple device, which hasn't been determined yet, would come preprogrammed with a certain amount of music that after a period of time, perhaps six months or a year, would roll into a subscription type of service plan, the source said.
Apple began informal discussions six months ago with Universal Music Group, the largest of the four major music labels, about offering preloaded music on devices, according to the source, who requested anonymity. Talks began in earnest two months ago, the source said, adding that Apple has opened discussions about the offer with all four of the major labels.
An Apple representative said: "We don't comment on rumors and speculation." Representatives from the four top record labels either did not return calls or declined to comment.
The talks are still in a preliminary stage and nothing has been decided, the source said. The Financial Times was first to report on the negotiations between Apple and the record companies.
The service being discussed is similar to one struck between Universal Music and Nokia last year. In December, Nokia announced its "Comes With Music" service, which allows users to buy a Nokia device preprogrammed with a year of unlimited access to a subscription service featuring Universal's songs.
"Comes With Music" is due to start in 2008.
With the Nokia deal, Universal Music receives a share of device sales, just as it does with Zune, and those sold by Sirius Satellite Radio and XM Satellite Radio.
The days of allowing Apple and other device makers to earn enormous profits off the backs of music artists is over, said the source. For a long time, many in the music industry have chaffed at the success of Apple's iPod. They acknowledge iPods were expertly designed and marketed, but they argued the gadget's real attraction was the loads of music that owners could store on them.
"At this stage in the game, the music industry feels it is entitled to something," said the source.
Apple hasn't discussed specific devices with the labels, according to the source. So one could only wonder whether the company would offer the preprogrammed music on a new high-end device, the next-generation iPhone, or some iPod models.
The FT reported that subscriptions would currently work only for Apple's iPhone devices, because it already has a monthly billing relationship with customers through the mobile phone operators offering the device. The "Comes With Music" model, on the other hand, would work with iPhones and iPods.
Universal Music has been driving the preprogrammed idea for some time in an effort to inject some excitement into subscription services, which have seen only lackluster consumer interest.
The record company is in talks with other carriers in addition to Apple as it attempts to expand its relationship with device makers, said the source. Universal Music is dissatisfied with only licensing music. The plan now is to "partner instead of just being a vendor," said the source. Universal Music has aspirations of becoming more of an all-around entertainment company, the source added.
Cutting a slice to Universal Music is one thing, but what about the other three labels? That could mean some serious money and at the very least cut into Apple's margins.
Greg Sandoval covers media and digital entertainment for CNET News. He is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at http://twitter.com/sandoCNET. 
Now if this discussion is perhaps with Universal for movies and not music then perhaps we have something to start a discussion with for subscription models.
backs of music artists"?
That is really sublime.
Don't you mean "off the back of the music industry"? because we know the artists aren't getting much money!
I think the labels wanting portions of the sales of these devices is garbage ... now they have less of a reason to make good music ...
they haven't been paid for every track bought off the iTunes store
already? The music industry sucks.
Disclaimer : I'm not a Apple fanboy by any means and in fact I resisted the ipod all the way until the iPhone in which case there was no real competition from anyone else....
sux, had to leave the subscription model but since Microsoft has said they're definitely not coming out with a Zune phone, I had to do it, :(((
weekly, monthly, annual basis for so many things.
Having my music, once, and for all, is really nice. Some people like
to subscribe, a lot more do not. We all have are reasons.
model is: renting music. I want to keep it: I paid for it!
I don't rent movies, either: Blockbuster/Netflix aren't getting MY
money. If I want it, I BUY it!
"renting" *and* "owning" music? Those choices aren't mutually
exclusive and any arguments treating them that way seem selfishly
narrow-minded.
A subscription service can be more cost-effective than purchasing
all the content you want to listen to or watch.
this. iPod sales are slowing down and Apple is making unproductive decisions to corner a extra market.
I only want a 1.5 touch size comic book reader and cheap content,
that's all.
I thought this line summed it up. The music industry has become so bloated that they now feel a sense of entitlement to anything connected to them. They claim that the ipod's success is somehow leaching off the music industry, I see it as the ipod and similar device is making the music accessable - who's helping who. Instead of turning green over other companies success, the music industry needs to focus on providing high quality service and products in an affordable way. Old business, new world, bad mix.
Disclaimer : I'm not a Apple fanboy by any means and in fact I resisted the ipod all the way until the iPhone in which case there was no real competition from anyone else....
sux, had to leave the subscription model but since Microsoft has said they're definitely not coming out with a Zune phone, I had to do it, :(((
doing! You'll LOSE those songs when that subscription lapses.
Even the ones on your device will be disabled when that happens.
Man, people are gullible!
don't own the songs. When your subscription ends-
either immediately or after a set time- you LOSE THOSE SONGS. I
want my songs! I PAID for them! I want to KEEP THEM! It's why
physical sales haven't disappeared yet (Diminished, yes, but not
gone away), nor will they- They just shifted from storefronts to
online retailers- because people want to own the things.
They obviously have the non-Internet distribution abilities - you can buy iTunes gift cards EVERYWHERE.
They already create/sell/partner all the software and much of the hardware you need for a recording studio.
What's really left? They need to hire a few payola promoters to get their artists on the radio? I bet a DJ these days would get more hyped up about a free iPhone than about hookers and blow.
iPhone, I'll pass. Even at 6 million tracks, their library is far too
small for my music listening needs.
Let's do some basic math.
6,000,000 tracks @ an average of 4 minutes per track is 24,000,000 minutes of music.
24,000,000 minutes of music equates to 400,000 hours of music.
400,000 hours of music divided by 15 hours per day a person is awake (assuming you wake up 6am and sleep 9pm) is 26,666.67 days of music.
26,666.67 days of music equals 73.06 years of music (365 days per year).
So in order to listen to each song in the iTunes 6,000,000 track library once, you have to listen to music 15 hours a day for the next 73 years.
music player, let alone an iPod. What is really strange, as an Apple
enthusiast, I find it counter to Apple in general.
Who is thinking up this stuff, or is it just a rumor?
For example...
Any artist can join Apple Records for $99, then they can sell their music on the ITMS. Apple Records will distribute the music and collect all payments, then give the artist 70% of the selling price. The selling price is set by the artist, and the artist still retains all rights to their music.
I'm not a musician/artist, but I'm guessing that's probably a better deal than the artists currently get from the other music labels.
(however the correct name is, the Beattles label), would have
something to say about that. In addition, it would violate anti-
trust laws, under the current situation. You can also bet they can't
contractually do that (their deal with the labels).
speaking. Individual artists, who aren't under any contract, are
and have been able to make the kind of deal with iTunes for
some time. There needs to be a break-through artist, who is
independent, to make this generally visible as an option.
Many musicians have managers, some good, some bad. I think
this is an opportunity for a great manager to blur the lines
between "indie", and "popular". No labels required (could be the
name for a new band, someone please do it).
LABELS! I can't believe that source actually had the gall to make
any statement counter to that.
The music industry has done everything to try and quell
technology where it concerns the consumer, out of supposed
fear of losing profits. This is why they manufacture their own
CDs, and DVDs from the ground up, and charge as if they
purchased these things wholesale. How are they entitled to
revenue on devices that play media!?? Does that mean we
should be paying the media industry taxes on our TVs, radios,
analog players, and digital players?!
The only thing they are entitled to is a visit to the tar pits, where
they can sink their fat bottoms into, like the dinosaurs they are.
Artists no longer NEED these fat-cats. The unions should
enable the artists towards independence.
True, buying vs subscribing are not mutually exclusive, but if I really dig an album, I want to buy it. And if I've already spent money on buying albums, why spend more for a subscription? Conversely, if I really like some music, why would I choose a subscription as my means to listen to that music, knowing that the only way I am assured perpetual access is to pay for it in perpetuity?
- Dislike the concept
- by Travis Ernst March 20, 2008 1:53 AM PDT
- Why waste money every month? Think about it. IF, this is a big
- Like this Reply to this comment
-
Showing 1 of 2 pages (44 Comments)if; IF the charge is 15/mo that means $180 EVERY YEAR to listen
to the tracks you have on your player. Do you listen to it daily
for more than a few hours? Is that time worth that expense? Or
are you ahead to BUY a CD and have a backup on the shelf in
case something goes wrong with your digital player.
You are on a Netflix account but for music..
The concept of preloading some tracks without penalties is an
idea. It gives new artists promotion and possible sales.
However what a person likes is far and wide. You can't please
the entire market in what you have loaded for sample tracks.
We are also (this was briefly mentioned) getting back into Payola
again. This time the cause is the FCC dropped the ownership
restrictions of radio stations. Mother Company owns a sizeable
chunk of the broadcasters in a city, and in turn THEY decide who
gets played (more play, more sales) and who gets burned (no
play, down the drain). Listen to the radio. There is a list of 50-
100 tracks that you'll hear cycle; with a few random ones kicked
in to throw you off. However the play list overall is the same.
I've given up on BIG radio and went with indies and small time
stations. Similar with my music. I like a LOT of indies (artists),
and they play just to pay for the gas to put in their tanks. The
gig hardly helps with rent. I've helped acts out before. Merch is
the larger income they hope for sales at.
Apple (computer) and Apple (Records) had an agreement from
YEARS BACK first about the logo, so the two wouldn't be
confused; then a second part was that Apple Inc (computer)
would NEVER get into the music industry. This was long before
the concept of MP3's and even the format was even a twinkle in
the computer world. When iTunes and the iPod came out you
can imagine the papers filed by Apple Records. However being
Apple Inc (computers) is not a recording studio, or releasing
their own artists, they managed to squeak by somehow. I can't
remember the last round's details.