Wednesday, December 5, 2007

Universal Music plays iTunes hardball with Apple

Does Apple’s iTunes store need U2?
That’s the crux of a game of chicken being played between Apple and Universal Music Group, which counts U2 and other big name artists in its stable. Who’s going to blink?
The New York Times and others are reporting that Universal Music Group told Apple that it will not renew its annual contract to sell music through iTunes. The reports, which cite unnamed sources, indicate that Universal Music is looking to market its music at will. The bottom line there is that Universal can pull its music at any time if there’s a spat.
Clearly, Universal Music is looking for leverage. This anonymous source sure seems to be getting around. Meanwhile, it doesn’t hurt that Universal Music’s move can ride the iPhone publicity wave a bit.
What’s truly shocking about this showdown is that it didn’t come earlier. The music industry has chafed as Apple CEO Steve Jobs has become the industry’s kingmaker. Music companies want subscription services on iTunes. Jobs says no. Music industry wants to raise prices a bit. Nope. You get the idea. At some point, music firms need to make Apple a little less dominant.
Meanwhile, other music services abound and Universal probably wants the best deal it can get. The problem with this strategy: iTunes dominates the music scene.
So what’s going to happen? Universal will raise a ruckus that may amount to a little more leverage, but in reality both parties need each other. And unless all the music companies revolt–Sony BMG has reportedly reupped–Universal doesn’t stand a chance.
Ultimately, Universal’s spat could alienate iPod users, who happen to be customers. Not that annoying customers is anything new to the music industry, but it’s not the brightest strategy.

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