Universal Music looking to extract royalties on every iPod sold?

We aren't exactly sure who's getting the shorter end of the stick in Universal Music's "deal" with Microsoft to extract a set fee from every Zune sold, but now its oh-so-mettlesome CEO is thinking of putting the same pressure on ole Steve. While Jobs has certainly had a rather sour relationship with the labels over the years, and has flat our refused to boost music prices (twice) at the iTMS, this predicament could be a fair bit stickier. Doug Morris is reportedly considering asking demanding a royalty fee from every iPod sold now that he's already won the war over at Microsoft, touting Universal's massive music collection on iTMS as something fairly essential to the program's continued success. But things aren't as clear cut as the previous deal, as the Zune Marketplace was (and still is) in a position trying to grab any sliver of market share it possibly can, while Apple's rendition basically owns the digital download realm already. While it's easy to assume that both companies will agree on a ridiculously small fee just to save face, it begs the question of other labels trying to cash in at Jobs' expense if this deal goes down -- but hey, what goes around, comes around, right?

[Matt B @ Nov 29th 2006 1:53PM]

Isn't this called extortion? Demanding a fee for something you have nothing to do with is almost governmental. They should be shot for this.

[suntiger @ Nov 29th 2006 1:55PM]

It's meddlesome, guys. Meddle and mettle are two completely different words.

Also, Universal are getting to be worse than the RIAA at this point. Fortunately, I don't think there's a chance in hell that Jobs will give into them. MSFT had to, but Apple has the dominant hand, and they *need* Apple's business to even survive.

[suntiger @ Nov 29th 2006 1:56PM]

Whoops, I mean "give in to". Wouldn't want to be a hypocrite... *grins*

[Darren @ Nov 29th 2006 2:00PM]

It's mettlesome.

Mettlesome: willing to face danger; possessing or displaying courage

[suntiger @ Nov 29th 2006 2:05PM]

Ah, thought perhaps you meant meddlesome, "Inclined or having a tendency to meddle or interfere in other people's business." Sorry!

Personally, I wouldn't call this courageous. At all. In fact, I'd call it outright slimy.

[404error @ Nov 29th 2006 2:02PM]

Thank you, Microsoft for giving music labels the ground they needed to start doing crap like this.

[donlphi @ Nov 29th 2006 2:05PM]

WHAT GOES AROUND COMES AROUND??? WHAT DOES THAT MEAN? This is rediculous... Apple stand strong... let them take it all away... we'll find the music somewhere else.

Apple doesn't make any money on the iTUNES they sell anyway... so what do they care? iTunes is really just giving an option to buy in a world of pirated music.

If anything happens there will be an exchange. Apple will give a percentage of iPOD sales for a much larger percentage of iTUNES sales.

Stupid either way...

[TexRob @ Nov 29th 2006 2:05PM]

I am a big fan of the MS gaming division, and love my X360...but GD if Microsoft corporate didn't blow this for everyone. MS caving to Universal sets a prescedent. MS set back the entire digital distrubition world by allowing such an asanine demand to be met. Universal will just toss their business to MS most likely, screwing the mass market who uses iTunes for iPods, and hurting their own sales, just to prove a point.

[Darren @ Nov 29th 2006 2:36PM]

S'all good :-)

And yeah, it's a rather interesting situation. Can't live with 'em, can't live without 'em!

[Lou @ Nov 29th 2006 2:16PM]

The problem is that I don't think Universal's online sales rival their other sources of income. So they don't NEED iTunes for now. However, I'm pretty sure that Universal isn't iTunes' biggest seller. So Apple doesn't need Universal.

Who tells who to screw off first?

I hope it is Apple who sends a message back saying that they need a cut of every CD sold because it may end up being ripped into iTunes at some point.

[Brad @ Nov 29th 2006 2:20PM]

Just how greedy can Universal get?

[Bruce Biganho @ Nov 29th 2006 2:21PM]

Those greedy @#$%

[dennis @ Nov 29th 2006 2:24PM]

My personal decision is to not contribute to this business model. I wouldn't buy a Zune because of the issue with Universal, and if Apple makes the same deal, I won't buy an iPod either. I like buying CDs for the higher quality audio files and don't want anything to do with this downloading of crap audio files business.

That said, I don't know that there are many others who are keeping track of this outside of the gadget enthusiasts, who are probably split or apathetic on this issue.

[apeguero @ Nov 29th 2006 2:42PM]

I think MS did this on purpose in order to force Apple to lose money on this. Also, wouldn't it be nice if Steve J told these greedy bastards to screw and stopped selling their music? Just let the people pirate the hell out of it. Apple won't lose much if they did that. Not as much as these greedy fucks would!

[ether @ Nov 29th 2006 3:29PM]

http://en.wikipedia.org/wiki/Blank_media_tax

Quote from Wikipedia: "Thanks to a precedent established in a 1998 lawsuit involving the Rio PMP300 player, MP3 players are deemed "computer peripherals" and are not subject to a royalty of this type in the U.S."

This is why this is simply a business deal and nothing to set a precident with any other company it's a deal to get exposure for Zune and a chance for Universal to do a dog and pony show to be apparently the 'bedrock' foundation for all that is Music (I could have sworn that was the artists and entertainers). I also like how 'business' deals are being used to give the illusion that they are getting around decisions already made by our courts in a vain attempt to pressure others. Egos are an astounding force.

Give me a link to donate to an artist who's EP song I'm downloading and you'll see me a whole lot quicker to be throwing money at the music industry.

Thought on the topic:

They should simply create a media player which it's music download service requires a separate fee option for each record label which wishes to have their content controlled - if you don't purchase it you can't download their music from the players services. Simple, and it gives users the choice whether or not to support record labels attempting to do poor business practices and it gives them their menial 'cut'. Apparently good business practice logic is a lost art where the consumer makes the choice of what they do and don't pay for.

Cheers

[Jake @ Nov 29th 2006 2:43PM]

Can I ask why anyone cares about this? Seems a bit of a reach by Universal but, really, who cares? It's not like Apple isn't making heaps and heaps of cash off of iPods. Why does anyone care how they slice up that profit.

Are there honestly still people out there that think Apple is some hip, benevolent company out to do good for the trendy of the world?

[Colin @ Nov 29th 2006 2:45PM]

Donlphi...didn't you read what the statement refered too?

Universal has every right to try and maximize its profits...as a shareholder I want that and if you own any kind of stock or mutual funds you would want YOUR companies to be doing the same.

If Universal believes it can make more money this way then more power to them. If Apple believes it can make more by dropping Universal then go for it.

The bottom line is the Bottom Line.

[George T @ Nov 29th 2006 3:01PM]

Mettlesome meddler.

[Njoli @ Nov 29th 2006 3:02PM]

Apple will never agree to this, the reson I belive M$ did this is to get on Univerals good side for furture support of for the Xbox 360 movie and tv downloads, think about it Disney will never have there movies or the movies of any of the studios they own sold through the Xbox because of there ties to Apple and you can garenty that you will never see any movie made by Sony Pictures avaible for download on your Xbox, that only leave a few major studios left, Paramount, Warner Brothers (both of witch already have tv shows and movie for download with M$) and Universal(witch i belive is the largest of the 3) M$ needs there backing to make the video market place work. Apple on the other hand dosn't need Universal for anything so they have no leverage. Plus Apple sees no profit from Itunes but a huge profit from Ipods, expect Apple to tell Universal to go f--- them selfs.

[Brandon @ Nov 29th 2006 3:03PM]

I just went through the whole list of Universal music artists. Of the hundreds, I listen to about 13 of them. I have legitimately purchased all of their albums that I own. How does Apple owe anything to Universal for me putting my purchased CDs on my iPod? Out of 12,000 albums so far on my iPod, that's a very low percentage. How does Universal justify this extortion? In fact, those Universal bands that I do listen to are okay, but aren't my favorites [with the exception of the Hellacopters] great, and I think I will probably boycott Universal from this point forward.

I don't advocate or practice piracy, but a$$holes sure tempt me.

[Brandon @ Nov 29th 2006 3:43PM]

should've read "a$$holes like this sure tempt me."

[Scooter @ Nov 30th 2006 12:26AM]

Brandon: 12,000 albums maybe, but all on your iPod? I seriously doubt (unless you mean a track from each). 12,000 tunes, that's possible. Or did you rip theem at 48k?

Bigger point is that Universal gets no more income unless you actually buy your iPod tracks through iTunes. You ripping CDs means that it is missing potential revenue, and so it is looking to the device makers.

Some countries, e.g. Japan, tax DAP sales and some tax digital media (blank CD) sales to 'compensate' music companies, as a result of the same pressure that faced Microsoft. Anybody who buys a Zune in such a market (should it ever get there) will be paying twice - government tax and MS/Universal tax.

[Jake @ Nov 29th 2006 3:06PM]

The real rip-off would be if Univeral tried to sell you CDs that would only play on CD players manufactured by Universal.

Oh . . . Wait. Apple does that with iTunes.

[jason @ Nov 29th 2006 3:12PM]

The problem is going to be when you have to go to Zune for Universal and Maverick artists, iTunes for Sony and Arista artists, Yahoo! for Elektra and Murcury artists.

The labels should only have rights to moneys from sales of music they produce, not any device it plays on. If that's the case should part of my BMW purchase go to each record label for the songs I'll listen to over the radio?

[Colin @ Nov 29th 2006 3:15PM]

Brandon...

You have '12000 albums' on your ipod? You have a 900 GB iPod?

Seriously?

You have approx $120,000 dollars worth of music and you don't practice piracy?

Perhaps this is WHY Universal wants an little love from player sales.

[dt @ Nov 29th 2006 3:17PM]

this should not be allowed to happen. If it does, every single music label should be paid. There is no proof and no reasonable prudent means to determine that whoever buys an ipod will be listening to music from the universal label. stupid stupid stupid.

[donlphi @ Nov 29th 2006 3:36PM]

They should try maximizing profits on items they actually create. They certainly won't increase profits if iTUNES says "Nice knowing you... enjoy your battle with piracy!"

It is also not in a stockholders interest to become everybody's worst enemy. The zune thing was rediculous. Everybody knows it. Universal is trying to get something for nothing, and they haven't earned it PERIOD.

My issue is, Universal says, "IT's for the musicians!", but the bottom line is, these rich bastards are just greedy. You said it Colin, "THEY WANT MORE PROFIT!"

I would love it if you could see the garages of these corporate slime. They wouldn't know good music if it farted on them. These guys could end world hunger with a months salary, not that they should, but they could (slight exageration). Just turn on MTV and watch MY SUPER SWEET 16 and see what is happening to the next generation of kids because of this greed. This is what we are paying for. YES, WE will end up paying for it in the long run.

Now as far as us "buying expensive Apple stuff" and Apple is "the man too". Sure they are... but at least I know where they are coming from. Sure it only costs $50 in parts and cheap labor to build an iPOD, but the marketing that has gone on to get this product off the ground and the cost of research and development behind this product is priceless. If you own an iPOD, you know what I mean. Apple didn't invent the mp3 player, they just made it better.

Music continues to get worse every year. Record producers (like Universal) have created this false sense of "KIDS LOVE NEW MUSIC". As a teacher, I can tell you this is not true for the most part. More kids still go for the classics like Zepplin, Pink Floyd, The Ramones, The Beatles, etc. This new stuff will never withstand the test of time... it's not inovative... so we better find a new way to make money other than actually selling music.

Sorry for the rant... if you skipped it... you may have been better off. I got a guy making noise cleaning my vents and I'm not in a real good mood.

[Dimitri @ Nov 29th 2006 3:37PM]

I don't think other labels wanting a piece of the action would cause too many problems for Apple. Any such piece of the pie would most certainly be pro rata (meaning all labels would get a proportional share of some amount, probably related to each label's track sales.)

[walk2k @ Nov 29th 2006 3:51PM]

Well Apple needs their music a LOT more than they need Apple's sales. Plus they probably figure every ipOd sold actually costs them money in lost sales to piracy.

[Rob @ Nov 29th 2006 3:54PM]

All of you can STFU if you buy any DRM'd music. You are supporting these dip-shits. And how's Universal getting a buck for each iPod sold any worse than 99 cents for one song? It's the same--a rip-off.

[The Jeremy @ Nov 29th 2006 3:54PM]

At this point, I'm using my iPod to listen to free podcasts and my own music. Universal Music Group can sit and rotate because they don't deserve any money from any iPod that I've purchased and will purchase in the future.

Why can't Google, Yahoo, and Apple all just buy up the RIAA dinosaurs and put them out of their misery once-and-for-all? If they disbanded the RIAA, that would cut about $0.25 out of the cost of the $0.99 song purchase price at the iTunes Store.

[dennis @ Nov 29th 2006 4:07PM]

The reason I take issue with this business model is not that I'm against companies trying to make a profit, but because the justification of it is this: since most people are going to listen to illegally obtained music on their DAP, record companies deserve to get a piece of the profit on every single DAP. (A quote that states this basic argument has been attributed to David Geffen.) The way they can implement this strategy, ironically, is through the availability of their music through online distribution in DRM form. Just to demonstrate the irony more explicitly: in order for consumers to download music legally and put it on their DAP, they have to pay some money to Universal Music who are trying to get compensated for illegal music sharing.

Now, first, I don't like to download music files, because I prefer high quality audio sources. If I'm going to bother to buy an artist's music, I want the CD. I want to hear the music in compressed format on my DAP and the same music on the CD or in lossless format through my Slimserver set-up. I don't download music illegally OR legally. Therefore, I'm not interested in my money going to record companies who assume that I am going to listen to music that I haven't purchased, for the privilege of downloading music legally, which I won't do and have no interest in.

I don't want to support this kind of twisted sense of entitlement. I don't really care if online music distribution of lower-than-CD quality DRMed audio files succeeds or fails. I don't want CDs to disappear because they are no longer profitable and have been overshadowed by online distribution. I support Fair Use, which most record companies couldn't care less about if they don't actively dislike it.

Peter Travers said it best: record companies never have fans. No one cares if a CD comes from one label or another. Universal Music may have clout because they put out a lot of multi-million dollar products, but I prefer my music to be from artists who spend time developing their body of work, who are increasingly not a part of the mainstream popular music super-corporations because of the sheer greed of these companies.

[Scooter @ Nov 30th 2006 1:27AM]

Dennis,
I disagree (with Peter Travers) that labels never have fans. If they are small (or at least well focused) they can lend credibility to the music, especially to new artists. Some have come to represent a genre (e.g. Rough Trade). I used to follow ECM for this reason and I was more willing to explore their catalogue and hear newcomers.

As a publisher now myself (of books), I would like to think that people will look beyond the artist/album/book and ask 'where can I get more like this'?

The morale here, is that although Universal is big and thus less likely to have a label-based following, it does risk shooting itself in the foot (and potentially harming its artists by association) if it acts in an agressive manner i.e. counter to the interests of its current and potential customers. In other words the Zune deal is bad PR for Universal (and Microsoft, but they are used to that).

[Grant @ Nov 29th 2006 4:40PM]

Apple couldn't invent a big enough ass for Doug Morris to kiss for my liking.

[Jeff Lewis @ Nov 29th 2006 4:49PM]

Uh.. look - I understand why everyone's bent about the fee to Universal, but let's not misrepresent it to make it worse.

The fee is paid by *Microsoft* and not by the end user, unless you honestly believed that without this, Microsoft was going to charge a buck less for the Zune than they are now.

The fee eats into Microsoft's already razor-thin-if-any profits on this device, and I can't remember the last time anyone other than their shareholders got upset about Microsoft losing money on something.

As for whether or not this is a good thing, it depends on what it bought Microsoft. Personally, I doubt it's anything more than just a 'Please don't sue us' play and yeah, it was a bad idea and it's going to get worse. But Microsoft didn't have the leverage Apple did when they started up the iTMS, so they had to do something to get buy-in. Was it the right thing? We'll see.

[Brandon @ Nov 29th 2006 5:19PM]

Colin, ha, I'm glad you noticed that. I meant to say 12000 songs. Checking my itunes now, it says 13,320. I have hundreds more albums but I haven't ripped them to my ipod yet. haha. I have no idea how many albums are on there as my ipod isn't near me right now. They are all purchased CDs though, and full albums. I hate the idea of the "single" and will not purchase or support artists that only have one good song. If I don't have faith that the entire album isn't good, I won't buy it.

Jake, did you know that you can burn actual audio CDs of music purchased on itunes? You can also rip those CDs to mp3s for use on other mp3 players such as my 256mb creative that I use for jogging. So your statement, "The real rip-off would be if Univeral tried to sell you CDs that would only play on CD players manufactured by Universal.
Oh . . . Wait. Apple does that with iTunes.", is completely invalid.

BTW- the only item I've purchased on iTunes is an E.P. a favorite band released that has yet to be released on CD yet. Just because you own an iPod doesn't mean you have to use iTunes store to buy music.

Thanks

[Tracy L @ Nov 29th 2006 5:38PM]

Hey wait a minute!!! You mean Microsoft pays a fee for each Zune sold to Universal (or somesuch music organization) regardless of whether said Zune will ever be used to listen to material created by said music organization?

Does anyone else see the irony here?

For the younger ones here, Microsoft's first cash cow was collecting a royalty for each PC IBM (and some competitors) sold, regardless of whether that PC was ever going to be used to run MS DOS. Eventually this ended up in a court case. I'm guessing around 1987-ish.

[Jake @ Nov 29th 2006 6:48PM]

Brandon, so you mean if you decide at some point down the road that you want to buy an mp3 player that isn't made by Apple all you will have to do in order to transfer your iTunes purchased songs to your non-Apple mp3 player is first burn them all to CD then re-rip them to remove the DRM? How convenient.

If you're happy with the idea that Apple does everything in its power to permanently lock iTunes Music Store customers into buying Apple hardware for the rest of their lives, that's fine by me. But I have to confess I don't understand it.

I own an iPod. I think it's the easiest to use, best looking player out there. I have nothing against iPod. I just don't understand why Apple gets a free pass on its transparently greedy approach to DRM.

[mtt @ Nov 29th 2006 11:27PM]

@ Jake

Apple is not greedy about their DRM. It is not "evil" the way the approach protection of the music purchased through the itunes music store.

A little back story: Apple had a popular and bestselling mp3 player. However they were facing 2 issues as they grew. The fact that the only legit way to add music to the ipod was to buy CDs and rip them into the ipod was holding back sales to less tech-savvy buyers. Furthermore, the record companies were getting ready to come after Apple and the Ipod because they felt that most of the songs played on Ipods were acquired "illegally", and that Apple was making money off of their (the record company's) loss.

Steve Jobs and Apple took care of both issues, by creating the Itunes music store. They made a deal in essence; We will sell your music online directly to our Ipod users, we will make it difficult for those users to copy and share it with others who haven't purchased it, and we will share the proceeds.

It is a simple, straight up, and sensible business deal.

Since that time, Apple HAS stood up for the customer. They have increased the amount of computers each song can be played on, they have held the price low despite the labels demands, and they have continued to expand their library, so that you now have the convenience of nearly immediate previewing and purchase of 2,000,000 different songs from your PC.

Furthermore, it is elementary simple to remove the DRM on these songs, simply burning the downloaded songs to music CDs. Mildly inconvenient, maybe, but no more so then ripping a purchased CD into Itunes.

[Rico @ Nov 29th 2006 7:11PM]

So Universal wants a piece of Apple's pie? Well, as consumers its part of our pie too - in the end if these Aholes succeed - it will be us - the consumer -who'll have to cough up more because of greedy companies like Universal...

[Scootermac @ Nov 29th 2006 8:04PM]

This has even further ramifications if they can get this. What's to stop software companies like Adobe or Mark of the Unicorn to demand money from the sale of computers? Just shows you how greedy the record companies have become because most of them jumped on e-music commerce way too late.

[Brandon Margicin @ Nov 29th 2006 8:38PM]

Enh, It's not too hard, and if I were to buy anything on itunes, I'd definitely burn a new CD of them. I do have another mp3 player than an iPod and I didn't find it that inconvenient with the one E.P. I did purchase on itunes. As far as music purchased on itunes, I don't really understand it. The one E.P. I bought is unavailable otherwise. I would much rather have the full retail CD for the artwork and better audio quality. I'll never understand why people would want just the digital file. Long live CDs and vinyl albums!!!

[CLE @ Nov 30th 2006 12:51AM]

*looks appreciatively and lovingly at his Creative Zen Vision:M*

[dennis @ Nov 30th 2006 2:22AM]

Scooter-

I basically agree with you. The Travers reference came from the Wilco documentary, "I am trying to break your heart", which covered Wilco's experiences with Arista Records. When it comes to big labels, the vast majority of consumers don't know which artists work with which labels; and if they did find that out, it wouldn't prove to mean very much. But smaller labels that are able to have a more focused vision and a smaller catalogue of artists are a different story. Now, a lot of smaller labels end up being a part of bigger labels, but again, the larger company doesn't contribute anything to the identity of the artist or the smaller label in general. Rather, it is more the result of the bigger label acquiring a smaller label so that they can profit from the identity that a smaller label can represent. To further generalize, I would say that publishing houses have more weight with readers than recording companies have with music lovers.

[Adrian @ Nov 30th 2006 3:12AM]

There's a fascinating piece about Universal and it's $1 Zune tax to Miscrosoft at the Register:

http://www.theregister.co.uk/2006/11/29/steve_gordon_zune_royalties/

Steve Gordon points out that Universal gets roughly 70 cents, and Apple takes home the rest about 9 cents - BUT Universal rips off their artists by only giving them 10/15% of the royalties instead of the usual 50%.

Check out the article at the Register - it makes excellent points and I agree with his common sense conclusion.

[James Hare @ Nov 30th 2006 5:44AM]

I, for one, plan to pirate all Universal artists from now on. If the CEO of a company is going to accuse me of theft for owning a portable music player, I'm more than happy to oblige him.

On top of that, I'll just avoid buying audio players if this kind of thing is allowed to stand. I can think of quite a few homemade DAPs you can make, and at least those won't be helping Universal music extort money. Can you imagine what would have happened had Sony been forced to pay a fee for each Walkman sold? I seem to remember home taping was nothing but theft too--me, I just stopped listening the first time they cried wolf.

If online music sales aren't worth anything, why fight with Apple over the terms? If online music sales ARE worth something, what's the deal with calling all iPod owners thieves? Shit, I've bought music off of iTunes--and if iTunes didn't exist I would have continued to download it for free. Given the current DRM situation with CDs (even though Sony got slapped on the wrist, I don't think they're the only one who thought rootkits would be cool) I don't want to risk any problems, so I'm forced to acquire music by different means if its not available through iTunes.

At least now I'll know if it's a Universal artist it's time to fire up BitTorrent.

Note to artists--you can now sell your music through iTunes without a record label. Those creeps aren't in it for you or for music--they're in it for money. Get out now! You'll make more money, be happier, not get screwed over by assholes, and you'll have real control over your music. Sure, you won't get advances--but you also won't get screwed out of 95% of the sales of your music.

I just can't wait until the major record companies have all destroyed themselves with their hubris and arrogance.

[Micha10589 @ Nov 30th 2006 5:54AM]

To anyone who criticizes Apple for their DRM - IMHO it was the record labels who demanded it to be applied for them to allow their music to be offered on the iTMS platform in the first place.

As to the MS-Universal Zune deal - I agree with Dennis. If Apple caves in to Universal and gives them a flat fee for any iPod sold I'm thinking I should never buy an iPod again. If I did, it would be like accepting the Universal assumption that I am going to steal their music.

On the other hand, if I pay Universal by buying an iPod - does this give me carte blanche to download their music illegally?

[chay @ Nov 30th 2006 7:07AM]

"Rio PMP300 player"

The first MP3 player I owned. Had to compress the songs down to 64kbs (ouch) in order to get an whole album on it! Loved that little thing. :D

[alexignatiou @ Jul 2nd 2007 3:49AM]

Ha ha ha ha ha ha!
ROFLMAO!

Best joke EVER!