“Apple Computer Inc. is in discussions about buying Universal Music Group, the world’s largest record company, for as much as $6 billion, according to a published report Friday. Talks between Apple and Vivendi Universal, Universal Music Group’s parent company, have been held secretly for months, the Los Angeles Times reported. Apple may offer $5 billion to $6 billion for the music company before Vivendi’s April 29 board meeting, the newspaper said, citing sources it did not identify. When reached by the newspaper, representatives for both Apple and Vivendi declined to comment about the possible deal,” Associaed Press is reporting today.
The Associated Press continuies, “Apple, which has annual sales of about $5.7 billion, owns less than 3 percent of the desktop computing market but has indicated that supplying music to customers may be its future. The Cupertino, Calif.-based company has been testing a service that allows users to buy and download digital music for their computers. The service is expected to debut by the end of April. Universal reaps about $6 billion in sales annually from artists such as 50 Cent, Shania Twain and U2, but has seen operating profits slide 23 percent last year. It accounts for about 25 percent of all CD sales and has such top labels as Interscope and Def Jam. Vivendi first approached Apple CEO Steve Jobs in December, not long after its music executives visited Apple’s headquarters to view a demonstration of Apple’s new digital service, sources told the Times.” Full article here.
Chuck Philips, Los Angeles Times Staff Writer, writes, “In a pairing that would alter the architecture of the music business, Apple Computer Inc. is in talks with Vivendi Universal to buy Universal Music Group, the world’s largest record company, for as much as $6 billion, sources said. Such a seemingly unlikely combination would instantly make technology guru Steve Jobs, Apple’s co-founder and chief executive, the most powerful player in the record industry.” Full article here.
MacDailyNews Take: At first blush, we thought it was April 1st again. After thinking about it for five minutes, we still don’t see why Apple would want to take on a massive debt load to get an extremely fickle business (artists come and go and hit and flop regularly) that Apple can’t begin to understand. (It could be argued that with their current 3-4% market share Apple doesn’t even understand the computer business; read “marketing computers,” not making them). Sure, Jobs’ Pixar background lends understanding of the “entertainment” business, but, as Jobs surely knows, Pixar isn’t Pixar without John Lasseter. And staking $6 billion on an enterprise dependent upon talent that can walk out, suck, make hits or bombs at whim, or simply drop dead doesn’t seem wise to us. We see “Mac OS X on Intel” as happening before Apple buys Universal Music Group for $6 billion, but then again, this *is* Apple we’re talking about here…
Spot on, MacDailyNews! This *is* Apple we’re talking about here – let the soap opera roll on…
Maybe they plan on inserting subliminal messages in all new CDs, telling listeners to “Switch to Apple, Switch to Apple, Switch to Apple”.
Ain’t gonna happen.
The “fickle business” applies well to the “new music” part of the company. Nurturing and marketing artists isn’t easy. But Apple is probably looking at the established catalog: those “old” songs that people want to hear, but can’t find. That’s the “cash cow”.
And if Apple can get some of those old master tapes onto CD — the albums that have only been released on LP — then there will be less “lost music’ in the future. (Although, I can think of several songs that ought to have been lost before they were ever released.
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“an enterprise dependent upon talent that can walk out, suck, make hits or bombs at whim, or simply drop dead doesn’t seem wise to us” — sounds like Apple to me…
Some of you dudes ain’t getting it.
The folks at Vivendi must have been REALLY impressed with the “tour” of the music service that was to be offered by Apple. And they said…”this is cool”…let’s let Steve drive it. Let me remind you that half if not ALL of the record execs don’t know what to do with the digital age with music. I think the execs at Vivendi saw it as an opportunity to be the FIRST to “do it right” before the other record companies get it. Therefore this increases the chances of other Artists wanting to sign up with Vivendi because they “got it right” and they are the FIRST one doing it….AHHHH that spells more revenues for them on the cutting edge of technology. And they think this is “Frickin’ Cool”.
This is good news for us….I was really dreading the way RIAA and Microsoft were coming up with the DRM (Digital Rights Management) schemes. They just seemed too arcane and too controlling that was imposed without my consent. Steve was the only one that REFUSED the use of the DRM in the iPod if I am correct.
Steve will play the same kind of role as he does with Pixar or no role to the record industry….he knows nothing about music but he loves it. However, he may play the central role of what and how it should play in the digital age.
Oh this is just the tip of the Iceberg!!!! Ahhhhhh! Now I see why “.mac” is going to be the next hottest thing NOT “.net” *snicker* Fringe benefits like weeks advance on listening to a song before release or advance screening on music videos to “.mac” members. This is getting interesting.
I don’t like this tie-in.
If this is the future, everytime we launch QuickTime, we’ll get an add for the next U2 CD.
I look at the labels as buggy-whip dealers. They are distributers and promoters of music. Usually, the distributor can really be the one in control–look at produce in your supermarket. The supermarket gets about 1% of the profit, and the farmer gets just enough to get by–where’s the profit? Distribution.
But since the Internet occured, distribution can become, for music, close to free. And promoting an artist can help, but with so much social interaction on the internet, a future artist can be discovered and promoted directly by fans by “not sucking”.
So, this is like an AOL+Time Warner arrangement. Universal is like AOL; big and fluffy at the moment but mostly hot air.
The only thing keeping the air from totally coming out of the labels is their lawyers, and by extension this pro-business (anti-consumer) supreme court. Although, the current trend is to guarantee profits for companies, this blatant greed is not sustainable.
So, for short term, this may be great. But Apple would then become a major RIAA supporter–which will really suck. Constantly fighting the OS for my stuff is what keeps me from Win XP. This is only slightly worse rumour than Microsoft buying Macromedia; which means I would quit using Flash and Director and make a living as a landscaper or something.
Definitely NO. Please no…
As other more clued-in readers pointed out, Apple (nor anyone else with taste) could care less about “50-piece” or “Lewda-krisps” or any of this other (so-called) “new talent’…its the 35-year+ wide-ranging catalog that they, and everyone else really, has their eye on. That’s where the dolloars will come from, probably instantly, from *Apple’s* music customers.
If Apple doesn’t know anything, it damn sure knows about the tastes of its current customers and those like them. You can believe that they picked Univeral for a reason
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MJ I understand your concern….and sympathize with you. BUT I dont think it will be on Qucktime that will have the AD’s. The AD’s will not be infringing. Instead they will be more subtle. Honestly what is the closest thing to advertising that Apple has imposed on us? I can tell you that; it’s the Quicktime free player to upgrade to Pro upon launch. That is the only thing that seems close to imposing. What I think it will be is iTunes being “connected” if you are a .Mac member. And based on YOUR preferences it will display what YOU please. Think about it. Do you think Steve likes pop-up’s? Hell no! I don’t. And certainly not most Mac users and MOST consumers. He is quite careful about that I believe (or at least Apple is). The OS X on updates is a prime example COMPARED to MS XP that sends little tidbits of user info to Microsoft on a daily basis.
Of course…I could be wrong. I just hope not.
While I don’t like the potential financial situation this will put Apple in, remember that there only in talks. Apple might have offered $5 to $6 billion for the portion of Universal that only brings in $6 billion annually.
But think for a moment, Apple’s not stupid (stubborn but not stupid) with Universal profits down 23% what does Apple hope to cut between the two companies to curb operating expenses. What duplicate services could both companies hope to aliminate.
Look at Sony. Heck if it weren’t for console game and digital imaging products they’d be sunk. Neither of which Apple could provide with a Universal merger. They’d be the worst divisions of Sony in one company.
Can Apple put themselves in severe debt for the potential of profit in an untested business model?
At the very least, let Apple have a few more quarters of profit under their belt before you even think about pursuing this.
Apple buys Vivendi. Business flops. Dvorak heads investor group which buys assets of Apple at bankruptcy sale and implements intel strategy from his last article. AntiMicrosoft movement sweeps PC world. Time to wake up.
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Seriously, the entertainment industry is filled with risks and is very far away from Apple’s core competency. Many businesses have become smaller after taking the plunge into entertainment. Even Disney has had trouble. Apple could cease to exist if they get this wrong.
Could Jobs want a greater hit than the iMac?
MP3’s mostly suck at 128kbps and even over broad band it is usually easer to actually go out and BUY a CD (assuming its good of course).
What is really puzzling is that CD technology was developed in the 70’s and released in the EARLY 80’s – 16bit/48khz (or less)…
The net is good for finding those things that just arent in the stores anymore… sometimes.
.Mac is pretty good… but a 100MB is pretty small if you want a good music collection (even at 128kbps).
.Net blows since it is MS marketing corruption of XML and JAVA… there is more than a dozen ways MS can avoid the DOJ!
Shania Twain! – I’ll buy that!
re: The folks at Vivendi must have been REALLY impressed with the “tour” of the music service that was to be offered by Apple. And they said…”this is cool”.
Michael —
The folks at Vivendi Universal probably had no such thoughts. The company is mired in debt from overexpanding under Messier and is talking to any interested party out there about selling its music division to them. Warner Music Group is similarly on the block. Stop being such a disciple, open a newspaper.
additionally, once the label is sold, they take the money and run. there’s nothing long term for Vivendi about it.
Jacob:
Disciple? Hardly, stop being so shortsighted and condesceding look beyond your normal vision if you can. And explain to me why Microsoft wants to go into a bidding war with Apple for something that is “destined to fail” as some would say. Microsoft must certainly sees something that you fail to see. Second of all…you dont know what goes on behind the corporate doors and neither do I. I was just merely running free with my mind on the possiblities based on what I have read thus far about Apple and made my assesment. True you are entilted to your opinion…without being condescending. So, I say to you what you say to me….open the newspaper.
Additionally…if I remember correctly Jean-Ren� Fourtou is in charge, who stepped in after Messier got the shove. Messier just had a wild idea with one of the divisions it was Vivendi Universal Net. It was Messier’s idea that VUNet was to carry Vivendi Universal content such as music, movies, games, TV shows for consumers around the world. BUT, it was riddled with mismanagement, confusion, and cost overruns, flushing money with $33 billion in debt and no way of paying it back. Jean Fourtou was a pharmaceuticals executive with NO experience in the entertainment or the internet business, but Barry Diller, his main man in the US, had a name for himself in both fields. Last year, he also took charge of Universal, thanks to a deal that turned it into a joint venture between USAi and VU. Now Universal, like most of the properties Messier assembled, is up for grabs as Fourtou jettisons assets to raise cash, and Barry Diller has been the one in charge. Messier gave Barry Diller great leverage over Vivendi’s future that Universal’s film, television, and theme park businesses became, joint ventures between Vivendi and USAi, with Barry Diller as its CEO. There is no telling what kind of deal it is and what is to happen. BUT, anything is possible and the bottom line is: profit.
Once again, dont just open the newspaper, read the magazines too.
Excellent….publicity stunt. As Homer Simpson would say: Doh!