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Vivendi Calls iTunes Contract Terms "Indecent"
Bemopolis writes "Brace yourselves for a shocking revelation: The CEO of Vivendi, parent company of UMG, is not happy with the current deal with the iTunes Store. 'The split between Apple and (music) producers is indecent [...] Our contracts give too good a share to Apple.' The usual argument about older music priced at the same rate as new music is trotted out. No doubt UMG would prefer to make the former cheaper, while maintaining the current pricing for the latter. At least he had the decency not to claim that they were trying to defend their artists against predatory iTunes pricing. Or maybe he just misplaced the index card with that boilerplate on it."
(Where former = older music, latter = new music)
No doubt UMG would prefer to keep the current price for the former, while increasing the price for the latter.
There, fixed that sentence for you.
But Bemopolis clearly didn't misplace his index card with the Slashbot boilerplate for attacking anyone in the music industry for anything that they ever say or do.
I'm not quite sure what the story is here though. The CEO of a company wants his company to make more money? What a shocker.
If Vivendi doesn't like the terms of the contract, no one is forcing them to renew. I don't see what this guy thinks he will accomplish by whining to the press.
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This looks like a case where a company is calling foul on a distributor. In a way, I guess Itunes is like walmart. If you want your music to sell online, you do it thru itunes. If not, you find your own way. Perhaps by not killing online radio.
import system.cool.Sig;
Silly question, but if the contract terms are unfair to UMG, then why the hell did they agree to them ?
...how can a company (UMG) that gets money for nothing be in such dire straits?
Half Word - Will Double, Wire Palindrome, San Francisco
They probably prediced the store to do about 10% of the sales they're actually doing, and thought Apple's profits seemed fair at that level. But the bigger pie only made them want a relatively larger piece.
'The split between Apple and (music) producers is indecent [...] Our contracts give too good a share to Apple.'
Substitute "producers" for Apple and "artists" (musicians) for "producers".
The split between Apple and (music) producers is indecent [...] Our contracts give too good a share to Apple.
:)
I agree. Music PRODUCERS (this is, the artists, and not the greedy intermediaries) should get more share
Strange curiosity: Today's captcha is "authors"
I'm split on this one:
(1) If you think of it in terms of traditional retail, Apple is applying a 41% (.29 retail/.70 wholesale) markup. That sounds like a hefty markup at first, until you figure in Apple's cost of storage and delivery. While there is no "storage" and "delivery" in the traditional brick and mortar store sense, there is still server storage and bandwidth costs. I wonder what Apple's true costs (costs to music producers and IT costs to run iTMS) are on a per-track basis. Know that, and you can get a better grasp on the actual profit margin.
(2) If the deal is so bad for the producers, why did they go in on the deal in the first place?
The second point is more rhetorical, but the first one I think bears further study before deciding if the markup is excessive. Of course, getting Apple's per-track expenses will be damn near impossible so we'll have to settle for speculation and conjecture.
Government's idea of a balanced budget: take money from the right pocket to balance...oh who am I kidding?
This is the most entertaining news I've read all day! Thank you, submitter.
I have mod points but unfortunately "troll" doesn't quite fit, "offtopic" is too light, and there's no mod option for "horribly unfunny" or "epic fail", so I opted instead to comment.
iTunes is pretty decent. Yea people can complain about the media not working on the iPod, but I have an iPod (whether or not you think its the best or worst). But when it comes down to pricing, $.99 for a song isn't half bad. Some people may argue for lower prices, but when it comes down to it, its cheaper than some candy bars and honestly, I get more enjoyment from a song than a candy bar. Sometimes they price new albums somewhat high, especially if they don't have a lot of tracks. It's always nice to see like a 16 track album going for $9.99 (price of 10 & 1/11 songs). (Now, if only eBook stores would do similar pricing, that'd be awesome.) Digital media SHOULD be a HELL of a lot more inexpensive than the physical media. iTunes does the distribution, storage, and virtually everything else involved with selling those songs. The record labels AREN'T DOING ANYTHING anymore. They don't have a right to the lion's share of the profit. Beyond that, they sell the music licenses to Apple, so Apple should be able to charge whatever they want. If Apple wants to charge more, its their right (though it'd be a bad move) and it's also their right to keep the rest of the profit. Now, chances are, the profits are probably in percentages and not flat dollar values and that's probably what is pissing the record labels off... Apple is selling them cheaply, so they're not making as much money. Apple isn't really making that much money off of iTunes either, so the labels shouldn't complain.
I can tell you what it is...
It would only be fair for Vivendi to give Apple the same percentage cut that they accept from the recording artists. Presumably that's less than the 30% that Apple is taking.
-Peter
PS: Please read twice before moderating. There may be lurking sarcasm.
I'd love to see how much of that 70% makes its way to the artists. Perhaps Vivendi misunderstood where the "indecent" portion of the financial split exists...
But anyone who uses the word "monetize" (in any of its conjugations) in a non-ironic manner should never be allowed anywhere near the channels between artist and audience. Go sell chewing gum or razor blades instead.
I don't disagree with the premise that older music could or should be priced differently from newer music. One would expect that with older music the costs of production and distribution have been largely recouped. Of course, to me that means that older songs should be priced from 25 cents to 75 cents and new music remain at the one dollar level.
I doubt UMG/Vivendi shares my pricing philosophy, however. Differential pricing to them is just a lever they want to use to rationalize higher prices.
So UMG gets the fat side of a 70/30 split, and all they have to do is sit on their asses and cash the checks -- and they don't think this is good enough!
And why don't I see them running their own music stores? Because they don't know how to do it profitably. All they know how to do is whine, complain, and demand more money for things they are incapable of ever accomplishing on their own. If there was ever a reason for Big Music to crash and burn, this is it!
Music existed before the music companies, and it will exist after they're gone. With the Internet, artists -- especially the vast hoard of unsigned artists -- don't need Big Music to get their music out. For every big name you've heard of that was signed by the record companies, a thousand others were passed over, and it wasn't because they weren't good enough too. If you want fairness and a level playing field for music, that's what's happening now, and Big Music is terrified. As for those precious recording contracts, you'll have a better chance of hitting it big buying lottery tickets!
"It's the height of ridiculousness to say for those 9 lines you get hundreds of millions."
Are you prepared to pay $30 for a music CD?
I'm much more willing to pay $30 for an 'uncompressed' DRM-free CD than I am to pay $30 for a compressed DRM-laden CD. That's a moot point, since I wouldn't pay that much for either.
I don't think these geniuses realize that music doesn't have the entertainment monopoly they enjoyed a century ago. People like to enjoy recordings of TV, and we have DVD's. We also have these newfangled 'video games'. There's a lot more competition than the local theater troupe and the girl (or guy) next door.
YouTube pretty much proves that we don't need 'content providers' to create and enjoy entertainment.
Basically, the ability to cheaply record music & video - using consumer recording equipment, is starting to break the monopoly of content providers. Artists don't have to go to these companies to get a quality recording made and published anymore.
This doesn't diminish the need for talented non-artists (recording engineers, for example), but it does make most of what a recording company has traditionally done obsolete. So why fight to maintain infrastructure (replication, printing, and distribution) that isn't a competitive advantage anymore? It just costs money they don't need to spend. They're wanting to jack up prices so they can maintain infrastructure they don't even need anymore.
Instead of doing what most businesses do, and cut costs, they're increasing the prices to levels consumers won't tolerate. (Blindly believing there aren't other entertainment options for the consumer's dollar).
I wish media companies would realize what their business is: Record artists, and distribute content at a modest profit. They don't need to spend billions on trying to force tastes on its consumers; just cater to what they want.
It's honestly not difficult (or expensive) to start a recording company anymore. If the 'big' labels don't want to play, Apple can just promote the independent labels (which it is already doing). Then the "big" labels will have to explain to their stockholders why they threw away 30+% of their sales - and in free money, no less.
-- Sometimes you have to turn the lights off in order to see.
"Ok, we'll do a contract based on the contracts you force upon the artist. You'll get 5%, except we're going to use magic bookkeeping to guarantee that you will always owe us money, no matter how well the music sells. That's right, this time you are the bitch."
Alternately, tell them they get an amount exactly equal to what the artists receive, with auditing of the music industry books to verify the money is actually paid. Hell, offer them twice the amount the artist gets. They still won't go for it because they wouldn't want their books audited.
-- Will program for bandwidth
The credit card companies get 7 cents out of every song sold-it comes out of Apple's 'cut'.
Apple gets 15 cents out of every song sold and out of that they have to pay for bandwidth, web design and 1001 other things. Apple gets the smallest 'cut' of all. They claim they only break even on iTunes; that it exists to benefit the iPod-which is their big cash cow. Of course the record companies are ALSO botching abiut that-they want a 'cut' on every iPod sold!Greedy bastards!
That's what I'd expect to hear from a retarded YANK.
I'm happy to live in a country where we don't ask god to bless us like snivelling minions, we TELL god to keep our land glorious and free.
It's been a long time.
So why not release the music in iTunes Plus? More money per song, and the customer gets a better product.
:)
OH WAIT! NO! That would make too much SENSE! Nevermind. I'll shut up now.
One could argue that racism is about self-interest and survival.
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Similar to the upcoming US election results
What do we look like? Those monacle wearing, mongoid worshipping, tabloid devouring failed colonialists with bad teeth, the limeys?
We'd ask again, and be proud for doing it.
(And mods without irony sensors can byte me)
It's been a long time.
Which completely screws with my plan to have bitching tunes blasting from my spinner-equipped nuclear missile.
For years the record labels controlled the music business. They even had a firm grip on the record stores. And now, the tables are turned slightly. Apple is able to call at least some of the shots, and Universal hates it!
And Universal is very scared also. People hop on iTunes and buy music. iTunes tells them what the top sellers are. Heck, they grab podcasts instead of listening to radios. For a lot of people, iTunes is becoming their only interface to music. Soon the record label will be forgotten and iTunes will be remembered.
That's what Apple is hoping for. I really think they're planning to remake the record industry. I guarantee you that software is already done that goes directly from GarageBand or Logic Studio straight to the iTMS. No record label needed anymore.
The future of music doesn't involve record label. Record Labels were f*cked as soon as the CD-R came out.
Andy
Do you really want that to happen? The main problem with music companies now is that they own all of the distribution channels. As brick and mortar record stores decrease in importance, do you really want yet another monopoly waiting to take over? Granted, they would be all about the brushed aluminum and everything will be shiny and chromed... but still :P
That was John Romero, not John Carmack. It's from the infamous Daikatana poster John Romero's about to make you his bitch. Suck it down.
"According to Vivendi, they pull in ~$0.70 per song, while apple pulls in around $0.29 a song (well, TFA cites euros -- but I'd wager that the margins in USD sales are identical). I wonder how different that is from the model of physical distribution."
That's Vivendi's point: they resent the fact that Apple charges a much higher markup than typical retailers. Target and Amazon (the #1 and #2 music retailers in the US; iTunes is #3) make about 15% margin -- half of the iTunes markup.
"I'll bet that the IP owners make more on the CD. It probably costs less than $0.40 to press a polycarbonate CD (total guess w/ nothing to back my numbers up), presuming that you're doing more than 5000 at a time. Add in another buck for packaging, and another few bucks for distribution. You're up to maybe $3.50 (again, total guess) out of a $15 average album. That comes out to netting (before paying royalties, etc) around 78 cents on the dollar - about 8 percent better better than the iTunes model, and that is before you factor in the fact that we're comparing a per song cost to a per-disc cost."
Sorry, I've lost you. CDs haven't averaged $15 for a while; the stuff on the Amazon top 100 tends to be $10 - $11 per CD, with the exception of the double discs, CD+DVD, etc. Amazon buys the CDs for $8 - $10. That $8 - $10 is all that the record company sees.
As for the theory that the record company nets 78% -- well, keep in mind that after several quarters of having terrible net margins (sub-5%), Warner Music lost money last quarter. If Vivendi's financials are like Warner's (and it's a safe bet that they are), they're probably in the sub-5% business as well. This actually isn't too bad (Wal-Mart makes do with similar margins) but 78% net is off the beam.
"To Vivendi, I say: cry me a river."
Agreed. It's just as if they'd signed a deal with Amazon, and then Amazon found a way to sell CDs for $14 - $15 on average instead of the $10 - $11 that they do now. Digital distribution is set to take physical CD distribution, and Vivendi is facing the fact that the successful online distributors (which is just iTunes for now) are making a hell of a lot more margin than the retailers they're used to dealing with. If Vivendi wants more margin, they should sell direct to the consumer.
Sitting in my day care, the art is decopainted.
to see Apple just dump Vivendi!
It would make my day.
Ray Beckerman +5 Insightful
Well, iTunes seems to pay the most of all online stores (as per macjournals). Let's do the maths: The labels get 70%, the credit card companies get 20-25%, and Apple gets 5%. How is that gouging the labels? I doubt Apple makes much money on iTunes at all; most of the money is probably spent on R&D, bandwidth and similar stuff.