Why is Universal Music cozying up to Apple?
Doug Morris is supposed to be the music industry's hard-liner.
The chairman and CEO of Universal Music Group, Morris yanked music videos off Yahoo and sued MySpace for copyright infringement. He threatened to pull songs from Microsoft's online music store unless Bill Gates forked over a $1 for every Zune music player sold. He seethed over Apple CEO Steve Job's refusal to let him and the other label execs set song prices on iTunes.
So why is he now offering Jobs a plum of a deal?
Morris has approached Apple with an idea to offer a device that comes preprogrammed with Universal Music's entire library on it, sources told CNET News.com. A music industry source said Wednesday night that Apple has broached the idea of bundling music with the other three major labels but didn't show much enthusiasm for the plan. "Apple was just inquiring about whether this kind of thing would interest (the other record companies)," said the source.
It's clear now, two days after The Financial Times broke the news about the Apple-label discussions that Morris, not Jobs, came up with the idea.
Insiders say Universal Music, whose artists include U2, DMX, and The Killers, wants to pump life into subscriptions, and is tired of seeing Apple selling songs cheap and making fat margins on the music players. Not surprisingly, he wants a slice of device sales from any gadget maker that licenses his music. Morris also has ambitions of turning Universal Music into a total entertainment company.
The plan now is to "partner instead of just being a vendor," a source close to the label told News.com.
Universal revamping strategy
In the proposal Universal Music pitched to Apple, the device would come with all-you-can-eat music for a period of time, perhaps a year, and then owners would be "rolled over into a subscription service."
Label wants to breathe life into subscription services
(Credit: Universal Music Group's Web site)Subscriptions services, such as Napster, Yahoo Music and RealNetworks' Rhapsody are dwarfed by Apple's download store but are still very important to executives at Universal Music, say insiders. They see it as a way to get people to keep paying for music and to keep tabs on what audiences are listening to, sources say.
Universal Music was a big backer of an ISP tax, according to reports. And last October, BusinessWeek reported that Morris had also toyed with the idea of enlisting the other three majors to create a music-subscription service. The plan seemingly was derailed when the U.S. Justice Department began investigating whether such a consortium would violate antitrust laws.
"These guys at Universal," said one music insider, "are so obsessed with this subscription thing...but there are publishing issues involved with bundling and I don't think they make much money off it."
What can't be overstated is Universal Music's desire to get a taste of device sales, insiders say. Back when Apple's iPods became the rage, everybody in the music industry realized they missed an opportunity. While Jobs made pennies on song sales at iTunes, he pocketed 50 percent profits on some iPod models, according to estimates by iSuppli.
It's safe to say that almost all the major players in the music industry see that as unfair. They argue that what people want isn't a music player. It's the music.
That's why Morris went after--and got--a share of the Zune as well as devices offered by Sirius Satellite Radio, XM Satellite Radio and Nokia.
The FT reported that Morris wants $80 for any Apple device bundling Universal Music songs, while Apple has offered $20.
Getting a share of music players is smart, said Forrester Research analyst James McQuivey, even if it is late. But he warns that whatever gains the labels make on device sales, they could lose in other areas. Allowing Jobs to place their music catalogs on a single device might allow him to offer a breakaway handheld that could overshadow any other gadget or music service out there.
"The labels would just be turning over their music to another Apple-only environment," Forrester Research analyst James McQuivey said. "Nobody would want anything else."
"This kind of offer would kill CD sales far more quickly," McQuivey said. "You'd be giving people that typically buy music a reason to quit buying. Besides killing off CD sales, the music industry would harm two areas that are going strong for it right now. One is MP3 sales and the other is the (free streaming) music offered by social networks Imeem and Last.fm. If I were the music labels, I would tell Apple to come back in 2009, after I've given these other services opportunity to grow."
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. 
this is happening and it's really a textbook example of yellow
journalism to repeat these rumors as if they were fact.
subscription service and most other people or not either. As for
Universal, well, they know where they can go.
Yeah, they can go to every other music player vendor. AND THEY CAN TAKE THEIR 40% OF ALL RECORDED MUSIC WITH THEM. Until the other 3 big labels get smart & do what Universal did & pull their content, fascist a-holes like Steve Jobs will continue to rape them & screw over the actual artists. The articlemade one intelligent point. People don't care about iPod, they care about the music. That is what they really want.
good for a small portion of consumers. People just don't want it!
And for the millionth time the record labels required Apple to have
DRM! Stop blaming Apple! Just because it blew up in the record
labels face.
As a music fan, I have hardly found any music since 1995 (none
on major labels) that I would like to listen to. I was born in
1986. My dad, born in the 60's has hardly found any music
since the 80's that he enjoys. If he gone for the subscription
model, he would have paid for 40 years of music, while listening
to only a few 100's of dollars worth of albums.
Some people, who like to listen to everything and anything, will
enjoy subscription. That does not mean it is the most economic
or best system for everybody.
Also, people who have huge CD libraries, have NO reason to
switch to a subscription model.
Apple is foisting upon them", you lost any semblance of
credibility.
Also... I tried Napster and I HATED it. After a month, I realized
that I'd be paying and paying and paying and paying, so I
dropped out and went back to a "I paid ONCE and I can listen to
it FOREVER without paying another dime for it" model.
I also took a good look at every single online store that SELLS
music, and not ONE of them fits into the "top 100 songs over
and over" category. Since EVERY ONE of the online stores sell
what appears to be MILLIONS of songs, you're just being silly.
Oh, and have I mentioned that Real is raising the subscription
fee of their music store? Subscription based services can do that
at the drop of a hat, you know, and if you don't agree to pay
more than you did when you signed on, "POOF!", there goes
your music that you've already paid and paid and pad and paid
and paid and paid to listen to.
Lastly (and anyone with access to the net and can read can verify
this), it was THE RECORD LABELS, NOT APPLE, THAT WANTED
DRM. That was such an utterly absurd (and easily disproved)
statement to make, that if it weren't such a biased "hit piece",
it'd have been sadly laughable.
I suggest Googling "apple jobs statement DRM EMI". In case you
don't recall, Mr Job's famous "Thoughts on Music" open letter to
the music industry was, at one time, the hottest topic related to
DRM (and the music industry in general) on the internet.
http://www.apple.com/hotnews/thoughtsonmusic/
Come to think of it, your post made no sense whatsoever, except
in pointing out that yOu hAtOrz teh aPPleZors.
:-)
As you know, it should be "breathe".
piece of every DVD or TV sold or how about car companies
wanting money for oil companies.
While I agree these companies need to find new sources for
revenue, this is not a valid argument, in my opinion.
The smartest thing I read about their plan was wanting to
convert Universal into a media company, which by the way, isn't
there a Universal Movie company already? What do you think the
CEO of that sister company think of that, if it's not the same
guy.
Care to guess how many songs, movies, audiobooks (etc. etc...)
are loaded on MY iPod?
ZERO. NONE. NADA ONE.
My 'Pod is loaded with the tools of my trade (I'm a tech).
My 'Pod is used to boot ailing computers, then troubleshoot
them.
The thought that some greedy little piggy wants to charge ME
for music that IS NOT, NOR WILL EVER BE on my 'Pod disgusts
me.
subscription services. They have recognized with the internet,
there is no need for the music label middleman, since music
acts can sell music directly (or give it away for free, and make
money of concerts, and memorabilia). The music subscription
business is the only way to make labels relevant, because the
only way for an artist to get into this deal is through a music
label.
Even if subscriptions mean less money now, it is a great future
play for the music labels.
proprietary DRM when you yourself use it (Napster uses Janus -
a version of Windows Media DRM). While I agree that Apple
should open its DRM or help create a new universal standard, I
think it best we go for Apple's chosen codec, AAC (a
standardized codec that was designed to be the successor of
mp3). Even better would be the elimination of DRM altogether as
that would solve a host of problems, including platform
interoperability (I switch between Mac OS X, Windows Vista, and
Linux on more than a daily basis) and device interoperability
without the added cost of developing a new standard or
switching to another.
I was replying to "reality" by wyly295.
The economics of arts middle men was once dictated by the fact that the real producers of music and the other arts (musicians, artists, writers, etc) had no other way of reaching a significant audience. We needed them and they behaved as though they had us over a barrel. They had real power, and they liked it.
The Internet has changed that and the record industry likes to behave as though they deserve a profit, but why? They don't earn it any more, at least not like yester-year. They have a role but it is diminishing, and they need to realize that their slice of our pie needs to reflect the new reality.
It is not true that music standards will fall as a result of the record industry making less money. It is more likely to improve as most independant artists discover that they can make more from their music by being independant than by signing away their rights to an arrogant record company. Most artists prefer the independence of working for themselves than becoming the hack of the marketing department at Universal and other heartless entities.
It is a new world that will benefit both artists and consumers alike. Folks you have to pay the artists, but it isn't nearly as much as the record company wants, and in this brave new world lets not support their old ways of profiting from both of us, nor their crazy schemes to rake in undeserved dollars from the technology company's that have pioneered the new reality.
standards will fall as a result of the record industry making less
money."
Man! I was at SXSW in Austin last week, and to everyone
suggesting that "music isn't as good as it was when I was
young", I suggest to them that they'll soon be yelling "get off my
lawn!".
Those same people prolly walked 10 miles to school, too. Uphill
in both directions, in blinding snow... yada yada
:-)
People buy into the ecosystem as opposed to just the device. But
even just considering the iPod by itself, though it may not have
been the first portable jukebox it was certainly the first to combine
that kind of capacity with an appealing form factor and simple
interface. That's a pretty compelling value proposition on its own.
Clearly content is central, but to say that it's the music people want
and not the player is to miss the bigger point. Like it or not, it's the
overall experience of accessing and interacting with a large music
collection that Apple has really nailed.
them to my iPod. Why should I pay a premium for something I
don't use? If apple goes down this route they will lose a lot of
customers.
They just don't seem to understand what the connection is between a person and a piece of music.
Its music, not some tasteless "white-bread" diner roll.
don't want? Besides, CDs are cheaper than crummy-sounding
digital downloads.
format. DRM, I can live with as long as it's like Apple's Fairplay
(which is more than fair, imo). I have over 2,000 legitimately
purchased CDs and I'm a big spender. Apple or some other
service will not get my business until they offer lossless
downloads.
Also, I want FULL album art in a high quality PDF format. That
includes liner notes, lyrics, front and back art.
Oh, and it better have full ID3/tags like NIN's recent Ghosts I-IV
did.
The way out is through...
Read the book "Hit Men" by Fredric Dannen to understand about how the music industry operated back in the glory days. Then tell me they aren't trying to resurrect those days now.
Jobs and everyone else should tell him to F-Off. There's a ton of content available out there without Universal's crappy catalog. Nothing but a bunch of hackneyed artists past their prime with overpriced recording contracts.
- "So why is he now offering Jobs a plum of a deal?"
- by AJ Pants March 22, 2008 5:34 AM PDT
- Because he has no choice!
- Like this Reply to this comment
-
(50 Comments)He looks like even more of a fool now.