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7/2/2007
02:11 PM
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Universal Puts Apple On Notice -- No iTunes Renewal

Universal plans to sell music at will, meaning that it could withdraw its songs from Apple's online store on short notice. The move is widely seen as an effort to obtain better contractual terms from Apple.

Apple's dominance of the online music market has prompted the world's largest record music company to fight for a greater share of the profits.

Vivendi SA's Universal Music Group told Apple last week that it that it would not be renewing its annual contract to sell digital songs through Apple's iTunes Music Store, according to reports published in the New York Times and The Wall Street Journal.

Instead, Universal plans to sell music at will, meaning that it could withdraw its songs from Apple's online store on short notice. The move is widely seen as an effort to obtain better contractual terms from Apple.

Music companies have long chafed at Apple's insistence on flat-rate pricing for music downloads. If Universal's discontent prompts concessions, expect iTunes pricing to become much more variable.

Universal's move is a risky one, however. Estimates published in the New York Times indicate that 15% of Universal's revenue for online music sales during the first quarter of the year came from Apple and other online stores. And Apple CEO Steve Jobs is not known for allowing Apple's partners to dictate how his company does business.

Apple's iTunes Music Store accounts for about 70% of online music downloads sold, according to the NPD Group, which also said last month that Apple has become the third-largest music retailer in the United States, surpassing Amazon.com and behind only Wal-Mart and Best Buy.

Spokespeople from Apple and Universal were not immediately available for comment.

The iTunes Store boasts more than 5 million songs, 350 television shows, and more than 500 movies. It has sold more than 2.5 billion songs, according to Apple, more than any other online music store.

The North American artists represented by Universal include Akon, Erykah Badu, Beck, Black Eyed Peas, Mary J. Blige, blink-182, Bon Jovi, Mariah Carey, Sheryl Crow, D-12, Daddy Yankee, Dr. Dre, Eminem, Melissa Etheridge, Eve, Fall Out Boy, 50 Cent, The Game, G-Unit, Vince Gill, Godsmack, Hoobastank, India.Arie, Jack Johnson, Jay-Z, The Killers, Diana Krall, Ludacris, Reba McEntire, Nelly, No Doubt, Puddle of Mudd, Pussycat Dolls, Ashlee Simpson, Snoop Dogg, Gwen Stefani, George Strait, Sugarland, Shania Twain, Stevie Wonder, Sting, 3 Doors Down, Weezer, and Kanye West.

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