Universal Music Group parent Vivendi calls Apple iTunes contract terms ‘indecent’

&mpApple iTunes“Vivendi condemned as ‘indecent’ the contract terms between its Universal Music Group (UMG) unit and Apple Inc, the computer maker whose iTunes online store dominates the digital music market,” Astrid Wendlandt reports for Reuters.

MacDailyNews Take: If it was so “indecent,” why did they sign the contract? Of did it have some “indecency time bomb” built into it that only just now went off?

Wendlandt continues, “Vivendi is one of many large media companies that are trying to challenge Apple’s grip on the digital entertainment market and obtain more control over pricing. It said it was in talks with rival distributors.”

MacDailyNews Take: Oooh, we’re sure Apple’s shakin’ now!

Wendlandt continues, “‘The split between Apple and (music) producers is indecent … Our contracts give too good a share to Apple,’ Vivendi Chief Executive Jean-Bernard Levy told reporters at a gathering on Monday organized by the association of media journalists in France. At present, UMG, the world’s largest record company, gets 0.70 euro ($0.99) out of the 0.99 euro retail price charged by iTunes, Vivendi said. Among other things, Levy called for the remuneration of a new release to be higher than for a 30-year-old classic. ‘We should have a differentiated price system,’ he said.”

MacDailyNews Take: Reuters must have left out some things because we swear we heard someone say, “We should have a differentiated price system, so that we can charge more. After all, we are a greedy music cartel. We want a ‘differentiated’ system, which (wink, wink, nudge, nudge) really means we want to charge more for what people are buying and less for what they’re not, thereby giving the false impression of lower prices while we’re actually charging and making more money. They don’t call us fargin’ greedy bastages for nothin’. Capisce?

Wendlandt continues, “UMG renews its music distribution contracts with Apple every month after having failed to agree a longer-term arrangement earlier this year. The music publisher can end its contract with Apple at one month’s notice, but Levy declined to say whether UMG was ready to bypass Apple altogether. ‘We are in a phase during which many different actors are talking to each other … We are trying to put in place several projects to ensure that music is better remunerated … We are not just talking to Apple,’ he said.”

MacDailyNews Take: Oooh, big man. Go ahead and do it, Mr. Big. Come on, do it, we dare you.

Wendlandt continues, “Levy forecast that ‘in the not so distant future,’ traditional music products such as DVDs and CDs would make up less than 50 percent of music publishing revenues. At the half-year stage, digital music sales made up 15 percent of UMG’s total music revenue.”

MacDailyNews Take: 90% of which comes from Apple’s iTunes Store which is why Levy talks like Mr. Big to reporters, but dutifully signs the dotted line of his monthly iTunes contract like the neutered wimp he is.

It’s a good thing that no reporter named Penny was there or Jean-Bernard Levy would have smashed right through the podium, grabbed her, and started screaming, “It’s mine, ya understand? Mine, MINE, all MINE!”

Full article here.

63 Comments

  1. “At present, UMG, the world’s largest record company, gets 0.70 euro ($0.99) out of the 0.99 euro retail price charged by iTunes, Vivendi said.”

    So does Apple make .20 euro a download, or is that .70 euro just the label’s cut and the artist’s cut is counted separately? I was under the impression that Apple was making less than .10 euros a download in profit.

  2. In priciple, I have no problem with stratified pricing. Like anything else, some music is worth more than others. I just don’t trust a company such as UMG to decide where to place the pricing demarcations.
    And if some new, hot release is going to cost more than $ .99 then old cuts ought to be a lot less.

  3. I think there is a typo in the report…

    Quote:
    “Wendlandt continues, “Vivendi is one of many large media companies that are trying to challenge Apple’s grip on the digital entertainment market and obtain more control over pricing. It said it was in talks with rival distributors.””

    I think it should read:

    “Vivendi is one of many large media companies that are trying to challenge Apple’s grip on the digital entertainment market and obtain more control over overpricing. It said it was in talks with rival distributors.”.

    There! Now it makes much more sense!

    — Hano

  4. And this is why Apple doesn’t license Fairplay.

    Because if it did, Universal would remove the tracks from iTunes and go out and sign a deal with Microsoft, Best Buy, whoever, with new track downloads costing $5-$7 a song.

    And from NBC’s latest thing we now know what they were referring to when they said they wanted Apple to toughen iTMS DRM–what they were probably asking for was the ability to time-limit files so they would become unwatchable after a week, as NBC is doing with their own service. (Kind of a wasted effort, though, given that most of NBC’s shows are unwatchable while they’re being aired.)

  5. Vlad, Apple has to cover its overhead costs on running the store (fileservers, bandwidth, transaction processing, staff, etc.) out of the cut they receive. Apple’s bottom line profit is said to be about five or six percent of the track’s price.

  6. ” I was under the impression that Apple was making less than .10 euros a download in profit.”

    Apple’s .20 euro is what they take in. Out of that they must take out credit card fees, advertising, and all their overhead — computer centers, electricity, heat, cooling, bandwidth, etc.

    Leaving Apple with less than .10 euro profit per song. It could easily be less than .05.

    And the artists’ cut comes out of the labels cut.

  7. “Vlad, Apple has to cover its overhead costs on running the store (fileservers, bandwidth, transaction processing, staff, etc.) out of the cut they receive. Apple’s bottom line profit is said to be about five or six percent of the track’s price.”

    Yes, I know… I just thought that they were making about 10 cents revenue and 5 or 6 cents profit after overhead costs, but that suggests they are making 20 cents revenue and I find it hard to believe it’s costing them 14-15cents per track for overhead.

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