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So, imagine you’re a die-hard fan of Amy Grant, Blink 182, Def Leppard, Elton John or Ja Rule, and you go to iTunes to buy their new release but it’s not there. Nor is any product by those artists. Why? Because Apple may no longer carry Universal product. What will you say to yourself? Well, according to Steve Jobs, CEO of Apple, you’ll say, “So what, I’ll buy another artist that I can easily find here on iTunes. There are thousands of other artists.” But according to Universal Music (UNI), you’ll say, “Na… I’m loyal. Ill just click over to Rhapsody, Napster, Yahoo, or (God forbid) go to a record store and get what I want. Not what Apple wants to sell me.” This is the Mexican standoff that might be created because of UNI’s bold statement that they are not renewing their annual contract with Apple. Publicly, Jobs seems nonplused about this. This may be because he’s betting people are fans more of a “buying experience,” over the artists themselves. Who is right? Well, that’s the $200,000,000 question. This is how much annual revenue UNI stands to lose if they pull out of iTunes. Sure, UNI didn’t come out and say they would actually pull-out. We know how political press releases can be. But, instead of giving Apple the two-year renewal they asked of UNI for their content, the world’s largest record company said, “Let’s just take it a month at a time,” keeping their options open to this quickly changing landscape and putting Jobs on a very short leash. Anyone who has ever rented an apartment knows that when your landlord says he will not renew your two-year lease and puts you on a month-to-month, it’s not good times. If push came to shove, could UNI really afford to boycott the world’s largest retailer of on-line music? Probably not. So what is this really all about? If you’ve read some of the blogs on this ground-breaking issue, “insiders” are saying that UNI is posturing itself so that Apple will allow them to dictate different pricing for different artists. A position they might feel is workable since Microsoft agreed to take a “smooth sailing” approach when they launched the Zune and gave Universal a $1 override for the sale of each unit. But Jobs has stated that he feels staggered pricing would alienate the consumer. Those of you on my list and who’ve read the DRM Manifesto, should be able to figure out that this has nothing to do with overrides, or staggered pricing. There’s really a much broader agenda at work. To read the DRM Manifesto go to:Moses Avalon Y’see, it’s real simple: the majors hate iTunes. Yes, it brings in a lot of revenue, but the majors want everyone to get their downloaded music via subscription based services wherein you have access to a vast music catalog for a monthly fee of about $15. This is the future they are trying to sell. Using this system in the long run, labels, publishers and the artists make far more than they do then when the consumer buys a 128 bit low-res file for a one-time fee of 99 cents that can only play on selected (networked) devices. So why don’t people just use their iPod to subscribe to things like Yahoo? Because Apple will not make iPods compatible for use with subscription services. (And Jobs claims he’s pro consumer). To do this, iPods would need to incorporate a program that generates royalties based off “play events” (a royalty generated from each play on an MP3 player or computer payable to the label/artist and writer.) Without this type of digital rights management software, the iPod remains one of the only music players in the US that passively endorses people experiencing music “shared” from unlicensed sites. Jobs knows this. He ain’t dumb. He has even gone on record as saying that very, very few songs on iPods are bought from iTunes. (He wants you to think that he means most people burn them from CDs.) But he has refused to comply, stating instead that labels should remove the “lock” that disallows copies of music files to be “shared.” (read: labels should let everyone steal their inventory so that Jobs cans sell more iPods and iPhones.) If they could get away with it, every major label would probably bail out of iTunes until Jobs decided to play ball. But they can’t. Aside from the lost revenue, if all the majors conspire to boycott iTunes, Apple would have a billion dollar claim against the RIAA. The far smarter move is for a mega major like UNI to “break ranks” and pull out for personal reasons. No anti-trust issues and yet it would cripple the iTunes experience because UNI is responsible for about one-third of the product in the marketplace. So, UNI’s announcement this month that they are not renewing their annual contract with Apple sends a strong message to Jobs that iTunes Armageddon could be around the corner—any month now. Who would have thought UNI would end up as the rebel label? Will Job’s cave? Is iTunes on its way to Tower Records land? Or will UNI cave and let the tech-master tell them how to run their business? It’s an all-in hand of poker. At stake— just the way we all make money with music in the 21st century. Stay tuned.
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