Univeral Music to Steve Jobs: Go i Off

I was a little surprised to hear that Universal Music Group of Vivendi is not renewing their contract with Apple for the iTunes Music Store. I thought that Apple had the whole selling music electronically nailed down. I thought they were in the power position when it came to dealing with the music labels. It looks like someone has the guts to go against Apple.

I am not saying that is a good thing. I have read before that the labels want more pricing control when it comes to music sold on the iTunes music store. The labels want to be able to charge more for the latest albums and Apple has said no (sorry I do not have a footnote for this)

This is a strange game for Universal Music to play. Apple iTunes is the top electronic music store, but it has not taken over the music world yet. Electronic sales has not grown at the rate it was expected to grow. Getting rid of 15% of sales is a big thing, but if you think you can back another player in the electronic sales space it is worth the risk.

The problem with going against apple is DRM. The iPod has something like 72% market share for digital music players. It is larger if you look at the installed base. If you want to sell electronic music to most of your customers, you have to see it in MP3 format. Your customers with iPods will not be able to play it in a non-Fair Play DRM system. I do not see Universal selling non-DRM music.

What I don't know is how the average music fan makes buying decisions. Let's say that Fall Out Boy is putting out a new album. How many sales will they lose if they are not on iTunes? Some percentage of users will choose a different album on iTunes, but how many? Is it different for different artist? Is the risk of not signing the contract with iTunes worth it?

I want to know what Universal music's plan is. I do not think at will marketing to iTunes is a good plan on its own. I think there needs to be some other plan along with it. I wonder if Universal also sees it this way. I wonder if this is a sign of weakness for iTunes?


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