Universal Music May Not Renew iTunes Contract

Highlighting ongoing tension between the music industry and Apple Inc., Vivendi SA’s Universal Music Group is set to notify the Cupertino, Calif. company that it is not renewing a long term contract to sell digital music downloads through the increasingly powerful iTunes Store, according to people familiar with the situation.

I would like to back track on my previous post last year where each Microsoft Zune sold, a portion goes to Universal Music as part of their “piracy tax” or whatever compensation to make up for lost revenue due to music piracy. But if that’s their decision then go ahead. But why? Why would they pull out their product off the 3rd largest music retailer (online or otherwise)? If they are making their own music store, then it would be reasonable. But if they are being paid by Micro$oft to move to their Zune marketplace then it makes things a little more interesting. This makes the “piracy tax” very interesting indeed.

Currently, all of the songs (except for the higher quality and DRM-free ones) are pegged at $0.99. There have been reports of other music labels wanting to increase prices for some of their songs to which Apple refuses to do. But whatever the reason for their pullout. I say it’s a bad decision. Would they also pull out their CD’s from Wallmart? Or maybe Virgin?

Let’s look back when the iTunes Store was first launched. Music piracy was rampant. The industry was in a serious decline and other online schemes were offering to “rent” music for a fee. Basically if you stop paying, the music stops playing. Then here comes Steve Jobs and his iTunes Store. Apple talked to the music labels and asked them to license their music. Of course the music industry agreed, they assumed that Apple wasn’t going to make money off it since no one has. Apparently they weren’t ready for the boom that was to come.

Today, iTunes has sold over 2 Billion songs worldwide and has been credited for “saving” the music industry with TV shows and movies now available for download. Songs, videos, podcasts that can ben synced on your mac, iPod, Apple tv, and now the iPhone. And they pulled out? Oh well, maybe they’re getting a better deal somewhere else. Maybe from a Zune? Just so you know, anything you buy off the Xbox Marketplace cannot be transferred to your Zune.