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“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.
@Tergenev
“Being a (near) monopoly does have its benefits”
Apple with its iTunes Store is not a monopoly in anything. It has 80% out of the 15% of the music sales (about 13%). So they don’t control the music sales. They are only the #3 retailer. They have a very tiny percentage of the total credit card transactions (trillion dollars industry). They can’t put any pressure on Visa or MasterCard.
Big market share for paid music downloads doesn’t equal monopoly. If you wanna see what a monopoly means: DeBeers, Microsoft.
“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.”
Uh…isn’t that, like…illegal? You know, acting as a cartel, fixing prices, eliminating competition….
People generally like to cheer for the underdog,
and hate those who dominate.
iTunes is the exception though when comparing the digital music market.
Booooooo – Vivendi!!!
And you smell bad too!
As I say in my blog, Apple needs a content subsidiary that bring fresh music, tv programs and videos. An independent content creator, unsigned bands and unemployed producers ready to make anything Apple requests.
–
whataboutmac.com
what is Walmart’s cut on a sold CD?
And what’s the share that the record companies like Universal Music Group (UMG) give to artists out of their $0.70?
Couple of cents I wouldn’t be suprised.
What a depressing industry to have to work with. I hope Apple is isolating their iTunes contract negotiators from the people who are designing the store, the iPods, the Macs, etc. Otherwise I’d say there’s a serious risk of all the hope and joy being sucked out of these people by contact. Yes, record company execs are kind of like the dementors in Harry Potter…
So, do the greedy bastards charge more for a CD by a big name artist? Nooooooooo! Is it not actually less than a no name CD or an old CD you have to look for? Big names sell more and that is where the money is. More volume, more money. How complicated can it be. Books follow the same principle and so do movies. The price for a DVD or a movie theatre ticket is not higher because they are more critically acclaimed or just because it cost more than 10x to produce than the next movie. Volume, volume and volume, that the key. Better or more well known sells more.
What is indecent is what the record industry has been doing to artists for the last… well, since the beginning of the record industry, starting with piano rolls. 70% of the revenue isn’t enough for Vivendi? When they have $0 invested in digital distribution? Literally zero, by the way, as my understanding is that Apple does the digitizing for the iTunes store. .70 US dollars or .70 Euros for doing absolutely nothing but sitting on their fat, indecent asses collecting cash.
Mr. Jack and Vivendi deserve to be repeatedly reamed for the next 50 years by any distributor that can manage it, and it still wouldn’t be enough for what they’ve done to the creative people who actually create the product Vivendi sells.
I take that back: Vivendi deserves to be reamed by the artists they have exploited, but the artists don’t have the power to do so.
I feel the major labels are the most blatant example of pure, diseased greed in the corporate world today — well, maybe M$ is worse, but if so only barely — and as a small business owner myself I think their actions are beyond reprehensible.
MW: western, as in the record companies must be stopped, before they cause the fall of western civilization! (Okay, that part was hyperbole.)
differentiation can bve accomplished by not releasing new music to itunes until after it is not new. then i can be priced witht he 30 year old music. the fact they do not do that indicates the “differentiation” is a charade as many have stated for getting the buyer to pay more to get it early or go buy the cd. this is a strange corollary to apple’s early adopter tax. the difference is apple holds the keys to the kingdom in music downloads and is unlikely to misplace them.
mw-miles, as in miles apart from understanding and connecting to what the consumer is willing to pay.
It’s “Fargin corksoakers”
Iceholes.
I’m surprised he doesn’t call for a cut of iPod sales, as they did with Microsoft’s Zune. Maybe they *are* learning.
But, yes, they *are* greedy bastards who screw the artists while enriching themselves. Just how much work are they doing beyond delivering a digital master to Apple? It is iTunes that is doing the real work and bearing the cost.
But, hey, it’s a free market. If they think they can make more money going with someone besides Apple, go for it. They’ll be crawling back soon enough.
@why oh why
In physical distribution, you could argue that it is legitimate to charge more for a “big name” music artist or a “tent pole” movie, because the promotional costs are higher. In store displays, TV ads, etc.
But in digital distribution, like at the iTunes store, who’s doing the advertising? Apple is, by putting someone on the opening store page. There are no extra costs, there are no “in store” displays, it’s all — to the labels — free money. Charging more for a “big name” artist may actually lose money for the label, as the more money someone spends on the big artist the less likely they are to click on the “customers also bought” or “related artists” buttons. If I have a budget of $20, say, and a popular new release is $12.99, that is all I’ll buy. But if it is $9.99, and so is a related artist or a catalog album by the same artist, I’ll probably spend $19.98. That’s ~$4.90 less going into the pocket of the label at $.70 out of every $.99.
Why doesn’t he just make more and better music to compete against the publishing companies and stop complaining about his distribution channel.
I said this a while ago in this forum, and it is still applicable today. Apple does have a weak spot with respect to iTunes Store music and video content right now because the vast majority of content ownership is concentrated in the hands of a few industry giants.
The ability that the internet provides to independently produce and distribute media at low cost will change this situation over time, and the industry knows that. Some of the big names that were no longer under contract went their own way, and I’ll bet that a lot of small independents have sprung up since iTunes started, too. But these independents may or may not choose to be part of iTunes. Eventually that could prove to be a challenge.
Long term, there is no guarantee that any existing powerhouse will stay in power. Historically, industries and companies have risen and fallen (and sometimes risen again, like IBM) over the course of decades, such as the railroad, steel and coal industries and companies like Xerox, Atari and Wang. I personally consider Microsoft to be near the beginning of a long downward trend.
Apple has done extremely well so far in evolving the iPod and iTunes and branching out with the iPhone. Hopefully, that trend will continue for many years to come.
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.”
What’s all the bitching about, this guy is right on!!!!!
iTunes should charge 99 cents for new release’s, and 59 cents for 30 year old classics
All the record companies have to do is set up websites where they offer their music without DRM. Then they could bypass Apple, MS and everyone else who is making such indecent “profits” on their music.
But then of course the bilinous and bloated fantasy of a never-ending subscription model would have to be exposed for the vile and vacuous nightmare it really is.
Apple has a weakness in not owning content which is completely overshadowed by the media conglomerates’ weakness in delivering content and total misunderstanding on how the consumer would like to buy and use content.
You’ve got to love this asswipe.
Earlier today, Apple and Starbucks announced a deal to distribute 50 million tracks – the latest in a series of promos over the last several years. Did UMG or Vivendi go and chase down those deals? No, they didn’t – they sat back on their cocaine-filled asses and let Apple do all the heavy lifting and take all the risk, just as they did when Apple took the risk of setting up iTMS and all they had to do was digitise a whole load of content.
When Apple goes and signs a massive promotion deal, UMG will – if statistics are to be believed – normally reap the benefit of around 25-35% of the redeemed tracks; on a 50 million deal, that’s about 15 million tracks and $12 million.
How many physical albums does UMG have to flog in order to earn $12 million? Let’s look at record industry math.
For an average CD, this is the way the money gets divided…
$0.17 Musicians’ unions
$0.80 Packaging/manufacturing
$0.82 Publishing royalties
$0.80 Retail profit
$0.90 Distribution
$1.60 Artists’ royalties
$1.70 Label profit
$2.40 Marketing/promotion
$2.91 Label overhead
$3.89 Retail overhead
Out of a $16.00 album, the record company and the artists/MU/publishers absorbs $11.30 (or around 70%).
In other words, it takes a million albums – the equivalent of discovering and developing a Platinum disc album.
Now let’s look at the source of the complaint: under iTS, the record label takes a gross 70.7%; under physical distribution, the label takes a gross 70.6%. So it’s not like as if the record label takes a decreased share of the pie.
But that’s not the industry’s complaint: their complaint is that they should be allowed to charge more for their digital product, whilst neatly ignoring the fact that their digital product costs less to make and sell.
Distribution through iTS (or any digital store) removes around $1.70 (around 17.5%) from the label’s costs of physical manufacture and distribution and shifts those costs to the online retailer.
By my reckoning, that means that digital distribution would have the ability to make the record companies around 21.5% more money if Steve Jobs would simply allow the labels to charge for digital product on pari passu basis. And the basis of their complaint is that he doesn’t and they merely have to contend with the same level of profitability they had before “the digital age”.
It doesn’t occur to these dinosaurs that a) they are not providing an equivalent product, b) that they took no commercial risk in developing a successful digital downloads marketplace (or that they fucked up numerous attempts in the era before iTMS/iTS), c) that a vibrant digital downloads market allows them to leverage a wider range of assets than would be practical under physical distribution or d) that pricing pari passu combined with DRM would simply recreate the conditions which led to massive piracy in the first place.
In short, Levy doesn’t have a leg to stand on!
A couple of to-be-fairs regarding the MDN commentary:
MDN:If it was so “indecent,” why did they sign the contract?
I don’t know the hirings & firings, but it’s entirely possible that this guy did not sign the contract — was he even at Vivendi when the contract was signed?
MDN:we want to charge more for what people are buying and less for what they’re not
This is standard supply-and-demand, which is one of the fundamental pillars of capitalism. Isn’t it? If you had two websites, one called MacDailyNews.com and one called WindowsDailyNews.com and you got a million visitors to MacDailyNews.com and only 5 visitors to WindowsDailyNews.com, wouldn’t you charge more to advertisers on the one that got the hits?
Just sayin’… not everyone who disagrees with Apple is automatically stupid or wrong. The guy wants a better deal and believes he can get it. We’re gonna MOCK him into not? He owns a friggin’ US broadcast network. He’s doing just fine without Apple’s help.
WWHHHHAAAAAAAAAA!!!! WWHHHHHHAAAAAAAAAAA!!!!!
we care… really we do.
PC Apologist,
He doesn’t own “a friggin’ US broadcast network.”
You have no idea about which you hunt and peck.
NBC Universal is 80% owned by General Electric. Vivendi holds 20% of NBC Universal.
Indecent because they have been stripped naked by Apples policy and can no longer hide their pricing policy.
They cannot Drink Camel’s Milk because if they were to fart after drinking it, their Arseholes would be blown wide open for all to see. Of course that sight would cause plenty of people to keel over!!!
Fuck all of you GREEDY FSCKING ASSHOLES IN THE MUSIC INDUSTRY. YOU SHOULD ALL DIE HORRIBLE PAINFUL TORTUROUS DEATHS. YOU’VE SCREWED MUSICIANS & CONSUMERS FOR YEARS… AND NOW YOU’RE STILL TRYING TO FSCK OVER THE WORLD.
It should be noted that Feist is a UMG artist, who got millions of dollars worth of cross-promotional exposure from Apple through the iPod commercials, resulting in expanding sales and enormous increased visibility.
No good deed goes unpunished.