CE-Oh no he didn't! Part XLIII: Vivendi CEO calls iTunes contract "indecent"

While it's a bit tame compared to some of the CEO outbursts we've seen, Vivendi Chairman Jean-Bernard Levy's reported description of Apple's iTunes contract terms as "indecent" should still be more than enough raise a few eyebrows. More specifically, referring to the contract terms between Vivendi's Universal Music Group unit and Apple, Levy said that the "split between Apple and (music) producers is indecent," adding that its "contracts give too good a share to Apple." To remedy that supposed indecency, Levy suggested a "differentiated price system" for older and newer releases, among other things. Of course, all of this follows a fair bit of back and forth between the two companies, which ultimately ended up with Universal not renewing its long-term contract with Apple, but continuing to work with iTunes "at will." According to Reuters, Levy wouldn't comment about the possibility of Universal leaving iTunes altogether, although he did confirm that "we are not just talking to Apple."

[E71 @ Sep 24th 2007 3:41PM]

Oh no you didn't!... Wait... what do I care, I hate Apple anything.

[wade_reese @ Sep 24th 2007 3:57PM]

Where's the LOVE?

[Dale @ Sep 24th 2007 5:59PM]

You're just as bad as the fanboys.

[Carl @ Sep 24th 2007 3:42PM]

FTA:
"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."

If a 71/29 split is indecent, what words are there to describe the markup Vivendi takes? Since the marginal cost to them of an additional track sold on iTunes is zero, that 71 percent is all profit.

[John @ Sep 24th 2007 3:55PM]

Except that iTunes sales (theoretically) cannibalize sales from other sources. There's no such thing as a free lunch. I still think a 71/29 split is quite equitable though.

[Carlos @ Sep 24th 2007 4:33PM]

@John
Yes iTune sales do cannibalize sales of traditional CDs to a certain extent but on the flip side with digital sales the music industry no longer has to produce millions of physical CDs, CD cases, printed inserts, pay for shipping of this physical media into stores where the stores (like BestBuy etc) has to earn a certain margin on the sale of the CD just to pay the rent, electrical, sales force etc.

I bet Apple is asking for the same margins as the BestBuys and WalMart stores but since for Apple its mostly profit(becuase of the digital delivery)the music industry is crying foul and wants a piece of that action.

it's all about greed - the music industry loves all the millions of iTunes downloads but hates the fact that they cant make profit from selling directly to the consumer.

Someone needs to remind the music industry that its not easy to sell directly to the consumer, look at all the failed attempts -

UniversalMusicGroup/Sony - 'Duet' failed
UniversalMusicGroup /Sony - 'PressPlay' failed
EMI /BMG / AOL - 'MusicNet' - failed

Other failures - the new Napster, Virgin Digital, Microsoft's Urge, Whatever MS music store was before Urge, MS Zune market place (soon), Sony 'The Store', Sony CONNECT, Yahoo music, Google music, WalMart Music, Rhapsody etc

[yoshi @ Sep 24th 2007 5:06PM]

@Carlos

Where do you get your figures that, for Apple, their 29% is mostly profit? I've only heard the opposite. That Apple makes very little profit on each song. As others mentioned, Apple has to store the songs, run the store, pay for the bandwidth, charge the customer (of which the credit card company gets a percentage), and so on.

Apple's model is to have the songs help sell the hardware. That's where Apple gets its money.

[Carl @ Sep 24th 2007 5:53PM]

@Carlos
I agree with you except for one thing. I doubt the margin for UMG is as good when selling CDs through BestBuy, etc. For a CD selling at $14.99 a similar split would require over $10 profit to the label above the manufacture, printing and shipping costs (maybe $1). I believe BestBuy needs a bigger markup than that allows, but obviously I don't know. Does anyone?
Also, UMG should take into account that an iTunes track is less easily pirated & less attractive to share because of lower quality. But I'm sure they'd never admit that.

@yoshi
To the labels it doesn't matter whether Apple makes its profits from iTunes or iPods. The point is Apple makes profit, and so could afford to give the labels a better cut.

[dj-kenpo @ Sep 24th 2007 3:46PM]

nice to know 70 cents for producers is indescent and 3 cents for the artist/band is grrrrrrreAAAT!

someone needs to show up at this guys house with a baseball bat. and not to play baseball.

[JasonAM @ Sep 24th 2007 10:50PM]

By that same token, Apple is charging 30 cents too (ok 29) compared to the artist's 3. So you see, you really don't need to defend Apple.

[dj-kenpo @ Sep 25th 2007 12:10PM]

where in that comment did I defend apple or even mention them?

[Big John @ Sep 24th 2007 3:46PM]

OK, we get it with the CE-Oh blah blah thing. Can we move on, please?

[Reader @ Sep 24th 2007 6:42PM]

Why do "we" need to move on? How about just you move on.

[Ozbone @ Sep 24th 2007 3:47PM]

"Indecent" eh ? Look who's calling the kettle black.

[Matt @ Sep 24th 2007 3:52PM]

While I agree with what he's saying about pricing flexibilty, he actually just wants to charge more.

What he probably wants:
New albums - $14.99
New single songs - $1.99
Older albums - $9.99
Older single songs - $1.29
Ringtones - $50.00

What it should be:
New albums - $7.99
New single songs - $.79
Older albums - $4.99
Older single songs - $.49
Ringtones - $FREE, Thanks for advertising the song you purchased legally

[Rob @ Sep 24th 2007 4:00PM]

You got it. I totally agree with your comment.
That's all he's talking about, they want to charge even more for the same content. It's not like they're going to lower the $.99 for old tracks. They'd probably leave the current price for old tracks, and charge more for new releases. A**holes.

[Zoesch @ Sep 24th 2007 4:13PM]

You know what's funny, that's pretty much the pricing ladder for LP's and EP's back in the dark ages where turntables roamed the land and people traded tapes.

And guess what? The lower price point attracted many more customers than the labels predicted, then they jacked up the price when the CD arrived and the rest is history (Including the label's respective market share)

[Craig @ Sep 24th 2007 3:53PM]

The only thing indecent is the whole music industry not liking the changes that are happening. They have no respect for the consumer. iTunes should drop them, then they'll see more piracy.

[David S. @ Sep 24th 2007 3:54PM]

Yeah! Take that Apple! We'll take our business over to Virgin Digital!

...um....DOH!

[auger282 @ Sep 24th 2007 4:00PM]

Vivendi is a useless company that ABANDONS its own projects when they become nonprofitable.

case in point Tribes:Vengeance a pc game that they released and then decided to not patch or fix because they weren't making enough $$ off of a NEW PRODUCT..

I will NEVER buy anything made by this company and I support their quick and timely downfall.

[Snowdog @ Sep 24th 2007 4:12PM]

Absolutely priceless.

A 71% Vivendi (sitting on ass collecting money)/ 29% (managing the sales, providing the storage/encoding and bandwidty for dowload, creating the market) is indecent?

How does this further jive with the 95% Vivendi/ 5% artist split.

What Vivendi should really fear is if the artist go directly to iTunes, I am sure the artist won't find a %71 cut quite decent.

[nmason @ Sep 24th 2007 4:21PM]

I think that's going to be the eventual model - and that's why there's so much pushback from the major labels on DRM, Pricing, etc - they know they're about to get their cookies took.

[William @ Sep 24th 2007 4:26PM]

I'm personally sick and tired of the record industry , so much so I'm losing interest in music, period.

Besides...there's not much even worth pirating from the major labels anyway. All the good music is from indies, where you can buy from their website, or buying from the band at a show, where I know all of the money goes to the band.

I just want to listen to music - I don't want to worry about DRM, licensing, if I have the right player, or I'm constantly connected to the internet, be able to listen to an album I bought anywhere, or be accused of being a thief. And, i don't think the ability to track me or my purchases, or paying money to the industry every time i hear even one note, is worth the price of a song.

That's why I don't buy major label dreck anymore, I won't buy ringtones, I won't buy drm'ed music, and I certainly won't buy from greedy vultures like Vivendi/Universal.

[dj-kenpo @ Sep 24th 2007 6:15PM]

ohhhhhhhhhhhhhh I could just imagine steve going "BOOM" over apple's own label.

honestly, it would be sweet revenge for anyone bickering at them about profits.

steve, if you read this, and I bet you might. do it dude, .. if you're not already putting this plan intot he works.

hell of starbucks can have it's own label why can't the boys that own itunes.

then artists might see more than that 5% profit.

it's win win for everyone but the shady sales man no one likes anyways.

[paul-engadget @ Sep 24th 2007 4:33PM]

@snowdog: I agree, I have failed to see for a long time why artists can't sell directly to itunes. There again, the smart ones have signed to an indie label who give them a bigger cut.

does anyone remember mp3.com where bands listed themselves directly, people could download samples or entire songs and pay for a copy on CD? It was a great idea, but then a Big Name bought it and killed it.

[Carlos @ Sep 24th 2007 4:47PM]

Its a great idea but the truth is that most artist needs the music label to make it big - the Music labels do a lot of behind the scenes that they don't get credit for.

for example music labels provide
- cash advance
- studio time
- equipment
- producers
- lawyers
- PR
- advertising
- distribution
- management
- merchandising

when you buy a CD you're not just paying for the artist music you're paying for everything listed above.

With that said - I don't particularly agree with the way the music industry is run - I think they are behind the times and afraid on change. Their inability to embrace something like iTunes will lead to their eventual downfall.

Music labels could right now be bundling in music videos, digital artwork, lyrics, bonus material videos into a digital album - all of which I'm sure Apple would love to offer in the iTunes store, but the industry is still stuck on selling just singles and 12track albums. The greatest innovation from the music labels has been charging for ring tones of music you already own! lame

[paul-engadget @ Sep 24th 2007 5:37PM]

@Carlos: sure, the labels do provide these resources, BUT, they deduct them as costs from any record sales. And due to "hollywood accounting techniques" (see wikipedia) they usually managed to swallow up most if not all of the revenue. Some of the biggest hits ever have been barely break-even with the big bands!

[Vanillacide @ Sep 24th 2007 5:24PM]

Which the artists/bands have to repay them out of their tiny slither of a percentage, the labels do not provide those services for free.

[haus @ Sep 24th 2007 4:51PM]

It's not about the split on a song or album. They (Vivendi) want a cut of the iPod players. They consider that profit that Apple makes from their content.

Yes, it is unbelievable but this is what the dispute is really about. They want a cut of the player profits.

[bigazzknocks @ Sep 24th 2007 4:55PM]

Suing high school students, on the other hand, is completely decent behavior.

[ldog @ Sep 24th 2007 5:07PM]

I think his comments are ok considering Apple charges ATT, O2, etc. per activation for their iphone.

Both are crap.

[scum1 @ Sep 24th 2007 5:26PM]

Only an idiot would ever pay for a ring tone. Make your own already. often all you get is to rent a ring tone for 3 months at a time. This make me not want to buy a cd at all and I really try to buy all the cds of that I actually like and delete any I have downloaded that I don't like. I think I would rather just buy band merchandise, go to concerts, or even just send the band 5 bucks if I could than give another dime to these evil record companies. What a bunch of arrogant asses. This Jean-Bernard Levy needs a wooden mallet to the head asap!

[Justin @ Sep 24th 2007 5:41PM]

What he CE-Oh no he didn't talk about is the extra revenue coming from Music Video sales thanks to iTunes. Before, music videos just played on Television and their only source of revenue from it would be the kickback on the record sales and product placement deals made with other companies.

Now with iTunes, people are (foolishly) buying these music videos to play on their devices, thus giving the labels and even bigger stream of revenue because unsavvy iPod users will buy both the video and the song (despite being able to listen to the video as a song). All Vivendi is doing is trying to squeeze another billion out of a dollar. They're trying to maximize their profits on a yearly basis, and if iTunes won't allow them to gouge the customer, then they'll attempt to take their goodies to the crackhouse down the street.

iTunes has better forsight and ten years down the road they don't want to be ruined for overcharging the customer too much on tracks. i'm waiting for the day iTunes starts developing it's own content.

[Darnell @ Sep 24th 2007 5:43PM]

Let's be real here. This latest outburst seems to be indicative of the entertainment industry in general. It's obvious they're biding their time until they can find a viable alternative to iTunes.
If they do manage to band together, they could easily put pressure on Apple--who eventually would have to fold and raise prices. Maybe it's 25 cents or 50 cents... It will go up (in a uniformed way).
I'm not so sure about the tiered pricing because it'd have to be uniform and we all know that some companies are more greedy than others and lets face it, they wouldn't overlook the chance to sell older music at a higher price as well.

[aaron @ Sep 24th 2007 5:48PM]

Death to apple; I equate apple to Bose. They have great marketing and that's about it. People who don't know anything about audio LOVE bose, any audiophile will tell you it sucks. Same with Apple...

[Jeff Foster @ Sep 24th 2007 7:37PM]

how insightful - and relevant!

ass.

[yoshi @ Sep 24th 2007 9:03PM]

An audiophile will be able to go into the excrutiatingly painful minutia of exactly why Bose isn't all it's cracked up to be.

A 'tard, on the other hand, will just say, "it sucks".

[paul-engadget @ Sep 24th 2007 6:12PM]

BTW, best way to make a ringtone is to get the mp3 file, use mp3directcut which allows you to chop the sound file up without decoding/reencoding and the losses involved, save the fragment as a separate file, sync to your mobile, select as ringtone.

[Mohan Nair @ Sep 24th 2007 10:58PM]

As usual French farting through their mouth!

[samirss @ Sep 25th 2007 5:27PM]

Switch to Amazon!