Universal may not renew iTunes contract
Steve Jobs, co-founder and chief executive of Apple, is an emerging force in the mobile phone business, thanks to the snaking lines of gadget fans who queued up last week to buy the iPhone. But now he faces a headache in an industry Apple already dominates — digital music.
The Universal Music Group of Vivendi, the world’s biggest music corporation, last week notified Apple that it will not renew its annual contract to sell music through iTunes, according to executives briefed on the issue who asked for anonymity because negotiations are confidential.
Instead, Universal said it would market music to Apple at will, a move that could allow Universal to remove its songs from the iTunes service on short notice if the two sides do not agree on pricing or other terms in the future, these executives said.
Universal’s roster of artists includes such stars as U2, Akon and Amy Winehouse.
Representatives for Universal and Apple declined to comment. The move, which comes after a standoff in negotiations, is likely to be regarded in the music industry as a boiling over of the long-simmering tensions between Jobs and the major record labels.
With the shift, Universal appears to be aiming to regain a bit of leverage.
In the four years since iTunes popularized the sale of music online, many in the music business have become discouraged by what they consider to be the near-monopoly that Jobs has held in the digital sector — the one part of the music business that is showing significant growth. In particular, Jobs’s stance on song pricing and the iPod’s lack of compatibility with music services other than iTunes have become points of contention.
By refusing to enter a long-term deal, Universal may continue to press for more favorable terms from Apple or even explore deals to sell its catalog exclusively through other channels. If Universal were to pull its catalog from iTunes, Jobs would lose access to record labels that collectively account for one out of every three new releases sold in the United States, according to Nielsen SoundScan data.
But if Apple were to decide not to carry Universal’s recordings, the music company would likely sustain a serious blow: sales of digital music through iTunes and other sources accounted for more than 15 percent of Universal’s worldwide revenue in the first quarter, or more than $200 million.