Since July, UMG, the world's largest record label has held out on renewing a new long term deal for iTunes distribution, preferring to sign a new contract every month instead. Over the same period of time, UMG has been experimenting with ways to promote non-iTunes services, including providing DRM free downloads only through iTunes competitors.
Levy described the situation as a work in progress, saying "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."
Of course, what he really means is that UMG is working with other companies in an effort to either force Apple to offer a more lucrative contract or cut them out of the distribution chain altogether. So far no one has had any luck competing with iTunes, although detractors in the music industry often contend that's a result of a competitive advantage created by owning both the download and playback market through sales of iPods.
The reality is that the iTunes formula of consistently priced downloads that don't make much money individually coupled with profits from hardware sales was a major reason for Apple's success, not just because it was easy for consumers, but also because the music download market was nearly non-existent before iTunes.
The question is at what point it makes sense for Apple to give music suppliers more consideration to avoid losing business to their competition. While no one has come up with the formula for an iTunes killer yet, if one of the other services attains that status Apple may have to show a lot more benefit to record labels if they want to keep the downloads flowing.
Source: Fox News
Written by: Rich Fiscus @ 26 Sep 2007 5:49
