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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.
who’s mah bitch now?
.70 out of .99 euros isn’t enough for him? The music execs are excellent at shooting themselves in the foot. All SJ has to do is let them keep talking and the customers will keep ITMS running for many years to come.
“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.
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.
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
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.)
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.
@Vlad
0.70 Euro is the labels cut. The other 0.29 Euro is shared between Apple, the Artist and the other interests. Artist’s cut is generally about 0.08 Euros.
” 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.
“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.
Fargin’ corksuckers!
I’ve spent roughly 2-3 times as much on music since the iTMS opened then I did in the full 20 years combined. It is too easy to legally buy music now thanks to iTunes. The record folks are morons.
First it was NBC Universal not renewing its contract for TV shows available on the iTMS because they could not earn enough money on those sales. Now they’re talking about music not being profitable enough. Do they hope to ditch the iTMS here too and lose a big part of their revenues ?
@ Vivendi Chief Executive Jean-Bernard Levy:
Sir, if I buy your shit music at all I buy from iTMS and you get .70 – not bad for you.
Screw the deal up so that I don’t want to do that and I go BitTorrent and you get .00 – do you like that better?
Or is that indecent?
I don’t understand… I thought they actually made more per album on downloads compared to the cost of a CD (shipping, packaging, distribution, etc.). Why the heck are they complaining?
Vivendi is (intentionally?) ignoring the fact that they benefit from the extended reach (world wide) at nearly no extra cost. 10 – dollars or Euros – is more than what they get for their archived CDs and it comes at little cost – a little parasitic leaching does go on. When the iTunes (Music) Store opened its doors it was expected to lose a little money while promoting the sale of iPods. Well … it worked out and it not only “sold” many iPods – generating much profit – but it also sold enough songs – and now, movies/videos – that it turns a decent profit. Not quite what the studios were told to expect when the contracts were first offered. It isn’t Apple’s fault and Apple ought not be punished for doing so well.
Dave
“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.”
A huge portion of those 29 cents go to Visa and MasterCard. Transaction processing fees for micro-transactions are huge (because transaction cost are something like $0.30-$0.60 + 2-4% of the total ammount). If you buy only a song at a time, I bet Apple is incurring a loss.
I’m confused by the recording industry’s approach. Wouldn’t the advent of digital music dramatically lower their costs? Shouldn’t they be making more money now than ever? No more packaging required. Much lower marketing costs if they can distribute promo tracks to radio stations and music rags electronically rather than via shipped CDs. Or do they have a bunch of midlevel marketing and senior level execs who are no longer necessary, but they refuse to lay them off, hence keeping their overhead costs artificially high?
You know what it is? I think they’ve all gotten a huge amount of easy money in the last 15 years off of $4 for 3 months ring-tones. That’s found money that escalated their quarterly earnings. But now that that that money is part of their bottom line, they need to grow profit even more in the future. (They are public companies after all, and the only thing more important than last quarter’s earnings growth is NEXT quarter’s earnings growth.)
How does one make more money by not producing the product, having no talent of their own, not being very good at nurturing new talent, not being very good at nurturing OLD talent, and being completely clueless about how to take advantage of lower production costs? Oh, I know . . . hold up the customers for more. We can call it ‘information superhighway robbery.’.
Apple should send this to the EU. It only proves how rotten the labels are and should be heavily regulated and fined. There are the ones causing different prices across borders.
iSteve gets it exactly right: I spend more in a month on iTunes than I did for many, many years in brick-n-mortar music stores. The music industry got me back as a customer because of iTunes (and I switched to OSX the day the ITMS was announced). Now these greedheads want to screw things up. Between the fools who run the record companies, and the suits that run the networks, there isn’t 100 IQ points to be found. These guys deserve whatever awful fate awaits them.
@Marian,
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Do you really think Apple is paying the going rate for per-transaction credit card processing fees for the iTMS? (I’m not being snide. I’m just curious what people think. Wouldn’t such a business have a huge incentive and a huge trading card to offer the credit card firms in order to lower these transaction costs? Apple must be a fairly large customer of the credit card companies these days and should be able to swing some significant deals in this area. Being a (near) monopoly does have its benefits
This whole price stratifying thing from Universal / Vivendi mystifies me, and I can’t see how it could not be related to plain and simple greed.
For as long as I live (‘m 45) prices of NEW singles and albums (and later CD’s) have ALWAYS been the same. And ofcourse they have, if people in a shop would see one single/album two to three times the price of other ones, they most likely would reconsider. Being in a factual shop and having to pay with your physical wallet are strong guards against impulse buying.
It seems that they are now betting on a larger impulse buying potential when all people have to do is push a on screen button.
Greed, plain and simple.
And I too challenge them to make it happen outside iTunes. Give the general public prices two to three times of those on iTunes for “popular” releases, ans see wave after wave of consumer activism come over you…
I’m sure that they don’t pay the rate that is paid by a regular web merchant. But I am also sure that they don’t pay less then $0.20-0.25 + 2% per transaction! Look at the oligopolistic position of the credit card companies and their profits and you’ll understand that nobody can get dirt cheap rates.
Let them leave. Apple doesn’t need them. And we don’t need NBC either. And the rest can leave too…. Woooo Hoooo Steve!!!!
If Steve says that the only thing we need on iTunes is EMI music, Disney movies and ABC TV, then as a fanboy, thats all ALL of us will watch… Anyone who wants to watch or listen to anything else is a Troll!!! Wooooo Hooooo …. Steve isn’t scared, we don’t need content!! Wooo Hooo
Woooooo Hooooooo – Let them all go!!!!!
Mr. Jack, you are a real marketing genius!!!!
They arent going to be happy until a system is in place that charges people for every single time they listen to a song.