Is Universal Angling For A Piece Of Every iPod Sold?

from the good-luck-with-that dept

With Universal Music Group threatening to pull its music from iTunes, some are speculating that the real end game isn’t just to change the pricing on iTunes, but to get some money for every iPod sold. After all, Universal somehow convinced Microsoft to pay up for every Zune sold, even though there’s no legal, moral or business reason for doing so. Of course, Zune’s sales are nothing compared to the iPod. However, Steve Jobs is playing a different game here and seems a lot less willing to give in. After all, Jobs knows that the music is simply a loss leader so he can sell more devices — where he can actually make some profits. He’s unlikely to give up those profits very easily — especially when there’s no compelling reason to. Given Jobs’ position here, it wouldn’t be totally out of character for him to call Universal’s bluff, and pull their songs from iTunes. Then let’s see who needs who more.

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Comments on “Is Universal Angling For A Piece Of Every iPod Sold?”

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W.B. McNamara (profile) says:

Doug Morris said as much last year

Back in November of 2006 Reuters reported that Doug Morris (Universal Music Group CEO) was pretty confident that they would make a move in this direction in their 2007 negotiations:

NEW YORK (Reuters) – Universal Music Group Chief Executive Doug Morris said on Tuesday he may try to fashion an iPod royalty fee with Apple Computer Inc. in the next round of negotiations in early 2007.

Universal, the world’s largest music company, owned by French media giant Vivendi, was the first major record label to strike an agreement with Microsoft Corp. to receive a fee for every Zune digital media player sold.

“It would be a nice idea. We have a negotiation coming up not too far. I don’t see why we wouldn’t do that… but maybe not in the same way,” he told the Reuters Media Summit, when asked if Universal would negotiate a royalty fee for the iPod that would be similar to Microsoft’s Zune.

“The Zune (deal) was an amazingly interesting exercise, to end up with a piece of technology,” he added.

W.B. McNamara (profile) says:

Re: Doug Morris said as much last year

And how could I have forgotten? Daring Fireball’s “Conjectural Transcript of the Upcoming Negotiations Between Apple and Universal Music:”

Jobs: But I have a better idea.

Jobs leans forward, and arches his eyebrows.

Morris: OK, sure.

Jobs: How about you take one of those white Zunes and you turn it into a brown one, Doug.

Jobs beams the full Steve Jobs smile.

Morris: Pardon?

Apple Attorney: Mr. Jobs is suggesting that you take a white Microsoft Zune 30 gigabyte digital music player and insert it into your rectum.

Jobs: In fact, how about one for each of you? (Gestures to Universal attorneys.) Seven Zunes – that should double their sales for the week.

Morris: –

Jobs: And Universal Music will get seven dollars.

Jobs sits back in his chair, beaming proudly.

Morris has broken out in a bit of a sweat. He wipes his forehead.

Morris: Steve, I don’t think this…

Jobs: Doug, it’s not a problem at all. The Zunes are on me.

ScaredOfTheMan says:

Re: Re: Doug Morris said as much last year

That was Hilarious! Nice work!

Seriously, why should any company pay the Universal content Tax? And what next tax the iphone too?

Why should Joe consumer be forced to pay this, because the cost will be passed on to the consumer (weather or not he listen to their music)?..and didn’t I already pay universal when I give them my $0.99?

Kevin says:


W.B. McNamara, that is the funniest thing that I’ve read in a long time. (Maybe I need to get out more)

At any rate, Apple should give Universal a free taste of what it’s like and pre-emptively pull all Universal music from iTunes. It’s certainly not going to hurt Apple at all. It will definitely cause a dent in Universal’s profits. And then Universal isn’t negotiating for a better rate for songs sold via iTunes anymore. They’re negotiating to get their music sold by iTunes at all.

Drew Robertson (user link) says:


In the old days, they’d call Apple both a monopoly and a monopsony. If you want to buy digital media, you have one place to go viz. iTunes. Apple has it pretty well wrapped up. OTOH if you want to sell digital music you have to play by Apple’s rules as well. In the old days they’d worry about abuse of market power. Now weenies on TechDirt think it’s way cool.

ScaredOfTheMan says:

Re: Sony

Which ‘Internets’ are you on?

I can buy any DRM free music I want and stick it on my ipod. Just because Apple has to DRM its itunes tracks on behalf of the labels, don’t blame them. Yes its to apple’s benefit that they did not share their DRM scheme, so what…its no different than needing real player to play real audio streams.

As for abusing their market power with the sellers, ANYONE who wants to go toe to toe with the big music labels to keep the price of my music down (to a reasonable $0.99)is doing a good thing. Since none of us on our own could possibly do it. So who is the real winnie now Drewski?

Shane C says:

This idea's been around for some time...

This is no different from the idea of taxing blank CDs. What’s next, hard drives, because they store the music? Head phones / speakers because they radiate the music? Radios / Stereos because they play the music? Monitors because they list the music? Human beings because they listen to the music?

“Congratulations Mr. & Ms. Smith. It’s a bouncing baby boy! Make sure you pay your RIAA excise taxes on the way out the door. You wouldn’t want little Johnny to be an indentured servant, would you?”

At some point in time there has got to be a sanity check. Let’s just hope it doesn’t bounce!


David Sternlight (user link) says:

Too bad

And just when I was starting to like the French again for their new President and shift to a more balanced policy on Israel. Well, Vivendi has damaged American public opinion about the French, though they may not realize it. This is not just business–it is an attempted hijacking of every buyer of an iPod who does not use Universal Music’s producrt.

John Duncan Yoyo says:

Universal going out of business sale

This just in. Universal is willing to trade a dollar per iPod for their portion of the $0.99 per song they were getting. Most iPods can contain significantly more than one song. Even if it was only a dime per song ten songs isn’t a difficult hurdle for sales unless of course their misc really sucks.

Just goes to prove most CEOs couldn’t survive as accountants or talent scouts.

kslim (user link) says:


Music as a “loss leader”? Maybe for now, but digital music is a potential goldmine for Apple. No distribution, no packaging, no silly in-store mark-up fees, endless supply of offerings…quick, easy, dirty, cheap. Apple is making tons of cash off of iTunes. If anything, I say they are making too much, but it is so damn easy, I really can’t complain.

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