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Vivendi Calls iTunes Contract Terms "Indecent"

ScuttleMonkey posted more than 7 years ago | from the better-business-through-greed dept.

Music 288

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."

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Not quite right, I think (3, Insightful)

Calibax (151875) | more than 7 years ago | (#20734951)

No doubt UMG would prefer to make the former cheaper, while maintaining the current pricing for the latter.

(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.

Re:Not quite right, I think (3, Insightful)

Traxxas (20074) | more than 7 years ago | (#20734983)

UMG is pissed that both old and new music is cheap at iTunes. They want all music to be more expense and new music being the highest priced.

Re:Not quite right, I think (5, Insightful)

yo_tuco (795102) | more than 7 years ago | (#20735925)

"UMG is pissed..."

Maybe because now they know how the artist's feel when the middle man gouges you.

Re:Not quite right, I think (1, Insightful)

mrchaotica (681592) | more than 7 years ago | (#20735091)

So, how's the view from that sarchasm?

Re:Not quite right, I think (1)

john82 (68332) | more than 7 years ago | (#20735119)

It did seem the original statement was not sufficiently greedy to warrant the "We must distance ourselves from those money hoarding scoundrels in Cupertino" comment. And certainly UMG has no intention of giving a greater slice of the pie to the actual songwriters and performers as opposed to UMG management.

Re:Not quite right, I think (3, Informative)

Anonymous Coward | more than 7 years ago | (#20735121)

There, fixed that sentence for you.
Did you completely miss the sarcasm in the summary write-up? It was positively dripping, sir.

Re:Not quite right, I think (3, Insightful)

aardvarkjoe (156801) | more than 7 years ago | (#20736237)

Did you completely miss the sarcasm in the summary write-up? It was positively dripping, sir.
Even better is that his post was moderated to +5. The lack of reading comprehension among Slashdotters astounds me sometimes.

I don't understand why (0)

Anonymous Coward | more than 7 years ago | (#20735353)

Why do they feel they need a price differential? More popular music, priced at the same price, will *already* make more money because it will sell more copies. 10000 purchases @ $1 = $10000. 150 million purchases @ $1 = 150 million dollars. So why price them differently?

I'm sure they figure they're leaving money on the table. They'd rather get 125 million purchases @ $2 = 250 million dollars I suppose ( I reduced the number of purchases, slightly, as price would likely have some impact on the number of purchases, but I'm just trying to figure out their mentality, not reality - the number of downloads might go down substantially more than that if they double the price, but try convincing a music exec of that).

Maybe it also has to deal with ala carte pricing? Used to be people had to buy albums full of songs with maybe only 1 or 2 or 3 that they liked, effectively making the price of a popular song $8 - $20. The music industry is apparently hating fair pricing on songs.

Re:Not quite right, I think (4, Interesting)

Hatta (162192) | more than 7 years ago | (#20735587)

You know, the best thing to do would increase the price on old music and decrease the price of new music. Give people the new untested stuff for cheap. That will make it easier for new bands to grow and gain mindshare. People are more likely to take risks if it doesn't cost as much.

Then you charge more for the classics. The market quite simply, will bear a higher price for great classic albums than some new no-name act. People who expect old music to be cheaper are confused. Music doesn't depreciate, it's not electronics.

Re:Not quite right, I think (2, Insightful)

jmauro (32523) | more than 7 years ago | (#20735875)

There is actually two types of old music, the "classics" (i.e. Beattles, Sinatra, Rolling Stones, etc) which can command the higher price than the new stuff on iTunes. And the "non-classics" that cannot command a higher price because the market isn't there due to lack of popularity. Most of the songs don't actually fall into the "classics" group, but would probably generate some money if they were priced lower than the new stuff. When talking about the old stuff though the record labels are usually refering to the "classics" which would make more bank than anything else.

Re:Not quite right, I think-WRONG SIG WISDOM (0, Offtopic)

Nom du Keyboard (633989) | more than 7 years ago | (#20735913)

Patriotism is akin to racism.

Actually it's much more akin to self-interest and outright survival.

Re:Not quite right, I think (1)

morari (1080535) | more than 7 years ago | (#20736129)

People are more likely to take risks if it doesn't cost as much.
So true, I've grown to like a lot of rarely heard of bands by downloading their songs (illegally).

steve jobs backdated stock options (-1, Flamebait)

Anonymous Coward | more than 7 years ago | (#20734967)

that dishonest fuck should be raped of his cash

Re:steve jobs backdated stock options (-1, Flamebait)

Anonymous Coward | more than 7 years ago | (#20735391)

Still bitter you sold all your apple stock to buy SCO back in 2003, eh? Hey, look on the bright side: Maybe Daryl will give you your $699 licensing fee back now.

I guess I'm supposed to put something here about smoking teabags or something like that. Oh whatever...

steve jobs is that you? (0)

Anonymous Coward | more than 7 years ago | (#20735787)

you need to stop posting on slashdot on your spare time..

Boilerplate (2, Insightful)

Bryan Ischo (893) | more than 7 years ago | (#20734979)

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.

Re:Boilerplate (4, Insightful)

garcia (6573) | more than 7 years ago | (#20735215)

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.

Then they are free to pay for the hosting, bandwidth and UI design themselves and not have to outsource it to anyone else in the future. I'm sure that they will quickly realize that the initial investment and then continued operating costs would be more than they are paying to Apple.

Re:Boilerplate (0)

Anonymous Coward | more than 7 years ago | (#20735235)

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.

It's the usual: rich guy earns riches through capitalism, wants to force everyone else into socialism (from each according to their ability, and iTunes has the ability) to keep those riches when his business plan falls apart.

Re:Boilerplate (0)

Anonymous Coward | more than 7 years ago | (#20735305)

The CEO of a company wants his company to make more money? What a shocker.
The shocker is that he presumably wants people to pay the same price for a download as they do a physical CD. The problem with itunes that he does not like is that people can buy the one good song from an album and not buy the whole album as before with a CD. That's what he wants to correct. Saying that he wants to decrease the price for old music (not true - who wants to discount anything?) is a cleverly worded smokescreen i.e. insinuated but nor really meaning that.

Re:Boilerplate (1)

GradiusCVK (1017360) | more than 7 years ago | (#20735565)

Here's where the real story is...

Fleshing out UMG's strategy, Levy said it planned to focus on better exploiting the "monetization of an artist's image" which included branded clothes and TV shows.
"This is what we hope will revive our business," Levy said. "People indulge in piracy but spend a lot of money on many other things that are linked to an artist."

Have they actually discovered that their business model is broken?!? I would laud their efforts to revamp their business model, if only they were smart enough not to shoot themselves in the foot yet again by moving their product off of the world's most popular online music store...

Re:Boilerplate (1)

perlchild (582235) | more than 7 years ago | (#20735779)

It's news when he attacks Apple for doing exactly that, yet calls it indecent...

Parent company? (1)

Orange Crush (934731) | more than 7 years ago | (#20734989)

The CEO of Vivendi, parent company of UMG

Wouldn't GE/NBC be the parent company of the Universal holdings after Vivendi sold 80% to them in 2004?/p.

Re:Parent company? (1, Informative)

Anonymous Coward | more than 7 years ago | (#20735357)

Vivendi sold it's 80% stake in Universal Pictures, but kept Universal Music Group. UMG is still owned by Vivendi.

Re:Parent company? (1)

Anonymous Freak (16973) | more than 7 years ago | (#20735863)

There is "NBC Universal", which is 80% owned by GE (which, in turn, also owns NBC,) and 20% owned by Vivendi, who, in turn, also owns Universal Music Group.

So, no. Vivendi kept complete control of everything EXCEPT the TV and movie arm, of which they still even own 20% of.

They should price music by quality (-1, Flamebait)

Anonymous Coward | more than 7 years ago | (#20734991)

That way, anything past the 70s would be free. Oh wait, by Slashdot's code of ethics, it is.

Actions speak louder than words (4, Insightful)

Paktu (1103861) | more than 7 years ago | (#20735005)

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.

Re:Actions speak louder than words (1)

WhatAmIDoingHere (742870) | more than 7 years ago | (#20735193)

They're under the impression that they can force Apple to change something. It's just like how every year or so Dell "considers" AMD processors. And after a month they sign a new contract with Intel and save a few bucks.

And from what I understand about the iTMS, Apple keeps something like $.10 per song, with another $.10 going to pay for the delivery (bandwidth and servers aren't free, no matter how hard I wish they were). And everything else goes to the label, and after that I believe the artist gets about $.06 per song, but I could be off by a few pennies.

Re:Actions speak louder than words (1)

macdaddy357 (582412) | more than 7 years ago | (#20735671)

Don't assume that any money actually trickles down to the artist. It probably doesn't unless they have already paid back their advance to the label.

Re:Actions speak louder than words-AMD (0)

Nom du Keyboard (633989) | more than 7 years ago | (#20735939)

They're under the impression that they can force Apple to change something. It's just like how every year or so Dell "considers" AMD processors. And after a month they sign a new contract with Intel and save a few bucks.

Time to get your head out of what ever dark place it currently resides -- or 2005, whichever is closer. Dell has been selling AMD-based computers for over a year now.

Re:Actions speak louder than words (-1, Flamebait)

Anonymous Coward | more than 7 years ago | (#20735231)

what do you think you'll accomplish here? why do you bother posting? especially since what you're saying is somewhere between obvious and asinine.
 
or are you one of those asshats who thinks that you have an insight into the workings of the world that no one else does including those who are massively successful while you're busy delivering my 8-cut extra cheese and bread sticks order?

Re:Actions speak louder than words (-1, Troll)

Anonymous Coward | more than 7 years ago | (#20735381)

I don't see what this guy thinks he will accomplish by whining to the press.


Worked pretty well for Microsoft haters and Windows basher.

Re:Actions speak louder than words (2, Insightful)

ciroknight (601098) | more than 7 years ago | (#20735387)

His customers are forcing him to renew, no way he's going to leave iTunes and it's three-billion-songs-sold. He hopes by whining to the press everyone will throw daggers at Apple for being "too restrictive", when in reality their music still costs about 4 times what it's actually worth and the artists are still only getting about 0.5% of what they should be.

Luckily, looking at the Apple-NBC ordeal, we know Apple doesn't play those games.

typo - *its (0, Offtopic)

ciroknight (601098) | more than 7 years ago | (#20735935)

Now please shut up grammar nazis.

Good (1)

LM741N (258038) | more than 7 years ago | (#20735039)

I enjoy seeing these big corporations and trade groups fighting against each other. Only billions of dollars will change the current system. It is too entrenched.

Re:Good (1)

C0rinthian (770164) | more than 7 years ago | (#20735655)

Only billions of downloads will change the current system. It is too entrenched.
Fixed that for you. Change is coming, as much as the current players fight it.

Waa, waa.... (2, Insightful)

larien (5608) | more than 7 years ago | (#20735055)

At present, UMG, the world's largest record company, gets 0.70 euro ($0.99) out of the 0.99 euro retail price charged by iTunes, Vivendi said
So they get 70 Euro cents for every song for zero marginal cost. They get over 70% of the sale price, leaving the remaining At least on a physical CD, they had the excuse of printing, transit, etc, etc to cover, but with this they just get a cheque every month for sitting on their backsides and doing sod all.

Re:Waa, waa.... (5, Insightful)

larien (5608) | more than 7 years ago | (#20735141)

Crap, just re-read what I typed; forgot to escape the "less than". Supposed to read:

So they get 70 Euro cents for every song for zero marginal cost. They get over 70% of the sale price, leaving the remaining <30% to cover costs plus a profit for Apple.

At least on a physical CD, they had the excuse of printing, transit, etc, etc to cover, but with this they just get a cheque every month for sitting on their backsides and doing sod all.

Re:Waa, waa.... (4, Insightful)

no_opinion (148098) | more than 7 years ago | (#20735725)

You're looking at it the wrong way : the labels are like venture capital for musicians. They have to cover their up-front artist payment, marketing, music production (e.g. producers like the Neptunes who bill at 100K per finished minute of music), music video production, fulfillment systems, etc., in addition to the distribution cost. The cost to send the file is not what they're trying to recoup.

Re:Waa, waa.... (0)

Anonymous Coward | more than 7 years ago | (#20735363)

Why does everyone forget that the labels have expenses too? You know, they don't make money on every artist. There is tons of crap music that no one buys (*insert obligatory joke about crap music that everyone buys haha*), but the labels still had to pay for it. Labels front the money so that the albums can be made. They pay promotion expenses and touring expenses. If they didn't, there'd be a hell of a lot less concerts since most artists can't afford to tour without financial support from their label. So yeah, let's get rid of labels. Then there'd be almost no CDs to buy, no big concert tours, no big bands. I'm sure that'd make everyone (yeah, everyone, not just *you*) happy.

Re:Waa, waa.... (1)

Waffle Iron (339739) | more than 7 years ago | (#20735547)

If they didn't, there'd be a hell of a lot less concerts since most artists can't afford to tour without financial support from their label.

What? Without the big labels and their computer analysis-directed funding, only a relatively few good artists would have a viable business? The ones that are *actually* good enough to generate a genuine following? Perish the thought!

Re:Waa, waa.... (4, Insightful)

jandrese (485) | more than 7 years ago | (#20735597)

I think the complaint is that they're basically loan sharks with lots of connections. You can't tour without a label because affiliated companies of the labels (Clearchannel) own a large percentage of the venues in the country. Granted you can always barhop and go to smaller venues, but that pretty much precludes doing it as a day job or getting that "superstar" status.

The idea that people couldn't produce their own records or with the help of a company that doesn't rip them off is getting more absurd by the day. What they really can't do is get those CDs into the hands of major distributors (owned by the record companies again) or get radio airplay (owned by the record companies) on anything outside of AM or college radio. For all of this what is the primary service of the record labels? To front some money to the band (not a salary, a loan) for the rights to everything they make and to get first cut on any money coming to the band. It sounds like you'd have to be crazy to take an offer like that, but really your choice is to wallow in obscurity for eternity or bend over and spread your cheeks for the big record company.

This is also why record companies find the internet to be so scary. Piracy is an issue, but the loss of control is a much more fundamental one. Even if it doesn't catch on directly, it gives bands more leverage at the bargaining table and that is the last thing the record companies want.

well... (1)

PixelScuba (686633) | more than 7 years ago | (#20735431)

Someone has to count all that money.

Re:Waa, waa.... (1)

ThirdPrize (938147) | more than 7 years ago | (#20735475)

Would anyone miss them if they pulled out of iTunes? I don't think so. Apple/iTunes is only the largest supplier of downloads as they have a LOT of iPods out there. People only buy a couple [barrons.com] of tunes each a year, but multiply that by the number of iPods out there and you are talking big numbers. People buying a dozen tunes each year is not a bright future for the music industry. It's better than every other download company but still not brilliant. Twenty songs =1 or 2 albums.

As you say they get paid for doing nothing. I wouldn't be suprised if the record companies got together and formed their own music sales website. Just as NBC is supposed to be doing. That way they still have to do nothing but get the full 99c for it. iTunes was successful as it was first but as it has no control over the content the record companies have them over a barrel.

whats that i hear? (1)

pak9rabid (1011935) | more than 7 years ago | (#20735059)

the moaning sounds of a dying industry?

Re:whats that i hear? (2, Insightful)

Spy der Mann (805235) | more than 7 years ago | (#20735283)

Whats that i hear? the moaning sounds of a dying industry?

I can tell you what it is...

The future's in the air
I can feel it everywhere
Blowing with the wind of change
:)

Print link (4, Informative)

Seakip18 (1106315) | more than 7 years ago | (#20735063)

Print link [reuters.com] for those wishing to skip the ads.

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.

Incompetance or greed? (5, Insightful)

Anonymous Coward | more than 7 years ago | (#20735065)

Silly question, but if the contract terms are unfair to UMG, then why the hell did they agree to them ?

Probably covetousness. (4, Interesting)

Trillan (597339) | more than 7 years ago | (#20735129)

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.

Re:Incompetance or greed? (1)

CodeBuster (516420) | more than 7 years ago | (#20735971)

I am certainly not a friend of the music industry, but in this case I would have to say that it is probably not greed (they want to be able to charge less for old songs and 99 cents for new ones). However, they certainly were incompetent to wait so long to get on the digital music train and now they are paying the price for their lack of vision while Apple is garnering a larger share of the profits than they might otherwise have gotten had circumstances been different and the music industry hadn't dragged their feet. There probably is a market for older music at less than the 99 cents per track price and more than 99 cents per track for newer music. The problem that the music companies have is that prices are not optimal (i.e. they are not the profit maximizing prices) and since Apple effectively controls the distribution the music companies really have no recourse other than "I am taking my ball and going home"...and it may still come to that provided that someone else can break the iPod + iTunes hegemony (which is becoming more difficult with each new iPod sold). Another possible route for the music companies is to dump DRM and sell MP3s directly to the consumer, which could then be loaded into iTunes allowing them to compete with Apple directly, but that would be tantamount to giving up on the piracy problem, at least in their eyes, and the music industry is not ready to do that...yet, but who knows...desperate times can call for drastic measures.

In... (0, Funny)

Anonymous Coward | more than 7 years ago | (#20735075)

...Soviet Russia, Vivendi seeks iTunes contract terms as "Indecent"

Re:In... (4, Funny)

casualsax3 (875131) | more than 7 years ago | (#20735243)

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.

I don't get it... (5, Funny)

maccam (967469) | more than 7 years ago | (#20735125)

...how can a company (UMG) that gets money for nothing be in such dire straits?

Re:I don't get it... (0)

Anonymous Coward | more than 7 years ago | (#20735273)

Money is like heroin to them.

At first they're happy with a bit. It feels great.
Then they want more, take more and for a bit they're still happy.
Soon, its not enough... they need more just to maintain their high.

The entire music industry needs rehab.

Re:I don't get it... (1)

eclectro (227083) | more than 7 years ago | (#20735371)

...how can a company (UMG) that gets money for nothing be in such dire straits?
Because the band has access to drugs??

Re:I don't get it... (1)

p0tat03 (985078) | more than 7 years ago | (#20735411)

What a dumb question, don't you know how much it costs to be sultans of swing?

Re:I don't get it... (5, Funny)

_Quinn (44979) | more than 7 years ago | (#20735439)

Turns out that chicks aren't free.

Re:I don't get it... (5, Funny)

Anonymous Coward | more than 7 years ago | (#20735465)

Because of Steve Jobs. The Man's Too Strong and refuses to be Brothers in Arms to screw consumers. Once Upon a Time in the West, the music industry made money by controlling the distribution, but the Internet makes it One World and people from all Walk of Life can easily download songs for free. Jobs became the Angel of Mercy by opening iTunes Store and converting file sharer into paying customers. He asked the executives "Where Do You Think You're Going? Your Latest Trick doesn't work with the consumers anymore. You and Your Friend must offer music at a compelling price and a reasonable DRM." But the greedy executives issued a Communique calling consumers and iPod owners pirates and thieves. They prefer screwing consumers in their Tunnel of Love and stabbing iTunes in the back with a Six Blade Knife to making honest bucks.

That's how!

Re:I don't get it... (1)

Bender Unit 22 (216955) | more than 7 years ago | (#20736111)

I don't know, something about iNdecent. Perhaps a part of the new iLife?

Sounds familiar... (4, Insightful)

johnny cashed (590023) | more than 7 years ago | (#20735161)

'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".

Re:Sounds familiar... (0)

Anonymous Coward | more than 7 years ago | (#20735641)

'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 artists and (music) artists is indecent [...] Our contracts give too good a share to artists.'

I don't get it. Maybe you meant to replace 'producers' with 'artists' THEN replace 'Apple' with 'producers' =)

I agree with them... (2, Insightful)

Spy der Mann (805235) | more than 7 years ago | (#20735177)

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"

71/29 split indecent? (5, Insightful)

frdmfghtr (603968) | more than 7 years ago | (#20735197)

FTA:

At present, UMG, the world's largest record company, gets 0.70 euro ($0.99) out of the 0.99 euro retail price charged by iTunes, Vivendi said.
My math puts that at 71% for UMG, 29% Apple.

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. :)

Re:71/29 split indecent? (2, Insightful)

TheRaven64 (641858) | more than 7 years ago | (#20735401)

I don't know what it's like for CDs, but for books a 41% retail markup is pretty low. Once you realise that they are also doing the duplication etc. it gets even lower.

Re:71/29 split indecent? (1, Insightful)

Anonymous Coward | more than 7 years ago | (#20735645)

Parent is quite correct. I've seen the numbers in the RPG Publishing Industry. In general, the markup looks roughly like this (numbers are rounded off for ease of use but the percentage is roughly correct as of 2003-ish):

If you pay $20 for a book, the bookseller purchased it for $10 from the distributor. The bookseller marks it up 100% from what they paid for it.

The distributor, who sold the book for $10 to the bookseller, purchased it from the publisher for $5. The distriubtor marks it up 100% from what they paid for it.

The $5 that goes to the publisher has to pay for (1) printing and (2) talent (editor, writer, artists, etc.). The publisher - who did the work of putting the thing together, owns the copyright on the work, etc. - gets roughly 25% of retail price.

Itunes, in this case, is roughly analagous to the distributor/bookseller rolled into one. UMG is roughly equivalent to the publisher - they did the mixing, they own copyright (or at least some of the distribution rights).

To compare:

Traditional Publishing: The publisher gets 25% of retail.
Music Industry: Gets 70+% of retail. That's triple what an analagous industry gets in the physical world. Better yet, once the artists are compensated (i.e., the copyrights bought), costs of production per unit are 0 (compare to physical publishing, where merely paying your artists does not yet pay for the physical books themselves)!

Conclusion: The music industry is correct.. the split *IS* indecent... but not in the way they would like to believe. The MUSIC INDUSTRY, and not iTunes, is the one getting an indecent amount of money in the deal.

Re:71/29 split indecent? (1)

C0rinthian (770164) | more than 7 years ago | (#20735741)

I wonder if someone could run similar numbers for CD sales? I wonder how much the take is there...

Look at gross margin, not markup (1)

sjbe (173966) | more than 7 years ago | (#20735673)

I don't know what it's like for CDs, but for books a 41% retail markup is pretty low.


True enough but the markup is only part of the picture. What's more important is the gross margin [wikipedia.org] of the company. In the retail book/CD industry gross margins are around [yahoo.com] 20% [yahoo.com] which is pretty crappy compared to most industries. Only way to make any real money is with huge scale (i.e. Amazon) because the margins are so bad.

Basically all the money in music is taken by the labels/RIAA-members and in some cases device manufacturers such as Apple or Sony with the labels getting the majority. The labels control the availability via copyright and more importantly distribution. (A copyright isn't worth much if you can't distribute or control distribution of the work in question) Apple is in a position to supplant the labels as the most important gatekeeper in distribution and it rightfully makes the RIAA members very uncomfortable. Should iTunes become the dominant distribution medium, you can bet the profits will start to swing more in Apple's favor in due time.

Re:71/29 split indecent? (1)

91degrees (207121) | more than 7 years ago | (#20735687)

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.

It can't be that much. Giganews will give you 25GB for $12.99 which is about a 20th of a cent per megabyte, and that's what they're offering to consumers. Apple will be able to get much cheaper bandwidth. As a comparison it's a little vague but it shows us the ballpark we're in.

Re:71/29 split indecent? (1)

Jeff DeMaagd (2015) | more than 7 years ago | (#20735797)

The record industry gets a lower net percentage with CDs, the thing is that CDs represent larger chunks of money.

Re:71/29 split indecent? (1, Informative)

Anonymous Coward | more than 7 years ago | (#20736143)

You (as well as most comments) have forgotten to add in the .10 fee credit card companies apply to any (including .99) purchases.

That leaves
71% For RIAA
10% Credit Card companies
19% For Apple

It would probably be safe to say that apple's itunes development / storage / bandwidth could be 5-9% leaving 10% for apple.

Pot Kettle Black? (5, Funny)

EasyT (749945) | more than 7 years ago | (#20735217)

Having a music label (or CEO of a company that owns said music label) complain that someone else's contract terms are indecent is hilarious. It's like a nudist calling someone else underdressed.

This is the most entertaining news I've read all day! Thank you, submitter.

Re:Pot Kettle Black? (1)

Alsee (515537) | more than 7 years ago | (#20735629)

It's like a nudist calling someone else underdressed.

Ewwww! Gross!
Put your skin back on!

-

In my opinion... (4, Insightful)

PJ1216 (1063738) | more than 7 years ago | (#20735279)

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.

Old SJ quote: (1, Insightful)

Anonymous Coward | more than 7 years ago | (#20735289)

Let's talk about the iTunes store. How did you get the record labels, which had been resisting digital music, to sign up?

It was a process over 18 months. We got to know these folks and we made a series of predictions that a lot of things they were trying would fail. Then they went and tried them, and they all failed, for the reasons that we had predicted. We kept coming back to visit them every month or two, and they started to believe that we might actually have some insight into this, and our credibility grew with them to the point where they were willing to take a chance with us.

-Q&A: Jobs on iPod's Cultural Impact [msn.com]

The most interesting jobs to me, are ones where people have nothing better to do than "add value" to a product that already works. Typically, they end up screwing up a good thing.

Let's say that all the music companies do leave iTunes, what then?
1. Multiple services, which would be as annoying to consumers as having to go to different stores to buy different label's music. In reality the majority of consumers would probably rather to pay a little more and go to the "Music store" that carries all music as opposed to the "Vivendi store", "Universal store".

2. They unite and create a new iTunes, without Apple, under a different name. Then, as a side effect, they will also create a new Steve Jobs, who'll probably favor one of them over the others, as opposed to favoring the iPod (and total sales). This establishment will slip away even easier than iTunes.

In either event, consumer cynicism goes through the roof. And piracy will be the largest benefactor. I bet you could figure out more accurate scenarios (I only spent about 5 minutes of thought on this), but I can't imagine something better coming to pass when you are talking about so many assertive people working together without an obvious "boss".

Correction! (0)

Anonymous Coward | more than 7 years ago | (#20735697)

I made a mistake, when reading the article I saw both Vivendi and UMG and in my typing rush (I did admit to only giving this 5 mins of thought) said that they were different entities.

My bad.

Re:Old SJ quote: iPods Won't Disappear !!! (1)

Nom du Keyboard (633989) | more than 7 years ago | (#20736021)

Let's say that all the music companies do leave iTunes, what then?...They unite and create a new iTunes, without Apple, under a different name.

Since over 70% of the consumers have iPods, and very few of them want to switch to any alternative MP3 portable player, all of those music companies will need to continue marking their music to the iPod crowd, and Job's continues to make his money off of iPod sales, and FairPlay licensing fees to those wishing to sell to the iPod market with DRM intact. They have to do this to avoid having all those iPod users resort to services that sell non-DRM music, and the still thriving P2P networks!

Re:Old SJ quote: iPods Won't Disappear !!! (0)

Anonymous Coward | more than 7 years ago | (#20736153)

I fully agree with you (except the 70% part, that seems a little low)...

But from what I've read from the music industry, technology isn't one of their fortes... So I don't think that argument will convince them, sadly. So I just treated it as a solvable issue (which I don't fully believe, but I'm sure they do) to play the Devil's advocate.

Let them win (1)

iamacat (583406) | more than 7 years ago | (#20735333)

See if people will buy an $3 single from UMG when there are $1 singles of similar popularity available from other labels and $5 DRM-free albums available from CD Baby. In fact, let iTunes Suggest feature find similar, cheaper music when the user selects a song. They will be begging for old single price model in no time.

What's next: CDs? (1)

w3woody (44457) | more than 7 years ago | (#20735397)

My understanding is that Vivendi (who is behind Universal and NBC Universal's position on iTunes) wants "differentiated pricing" so they can better "monitize" artists--and for certain hits they want the right to charge $2.49 per song rather than $.99 per song. $2.49 translates (for a 12-song album) into around $30 for a CD.

Are you prepared to pay $30 for a music CD?

Re:What's next: CDs? (2, Interesting)

sl3xd (111641) | more than 7 years ago | (#20735905)

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.

Re:What's next: CDs? (1)

adisakp (705706) | more than 7 years ago | (#20736183)

$2.49 translates (for a 12-song album) into around $30 for a CD. Are you prepared to pay $30 for a music CD?

The better question is are you willing to pay $30 for the *MUSIC* on a CD without any of the positives (uncompressed data format, physical media, liner notes, widely available sales outlets, etc) and with the negativity of DRM-restricted content, lossy data compression with lower data rates, and limited points of sales distribution?

Re:What's next: CDs? (1)

EdipisReks (770738) | more than 7 years ago | (#20736193)

Are you prepared to pay $30 for a music CD?
i already pay that, and more, for Mobile Fidelity and DCC/Analogue Productions releases.

Do not do that (0)

moore.dustin (942289) | more than 7 years ago | (#20735433)

Or maybe he just misplaced the index card with that boilerplate on it.
Why would you go out of the way to mention something that was, as you stated, not even touched on in the article. Vevendi did not elude to this point, so why would you even mention it in that light? You are only serving to put words in others peoples mouths which could only contribute to complicate the message being delivered here. You are introducing doubt only because you think you know what Vevendi really meant to say? Please do us all a favor and leave your personal opinion about what a conglomerate organization is 'really thinking' and let us interpret the reported facts and form our own opinions.

Re:Do not do that (0)

Anonymous Coward | more than 7 years ago | (#20736053)

Vevendi[sic] did not elude to this point...
There's a Freudian slip if I ever saw one. :-P

If the terms of your contract are "indecent"... (1)

grilled_ch33z (1140073) | more than 7 years ago | (#20735443)

Renegotiate. Vivendi realizes that a partnership with iTunes is very profitable for them. They just wish Apple didn't realize it.

Only Fair (2, Interesting)

pete-classic (75983) | more than 7 years ago | (#20735451)

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.

Indecent (5, Insightful)

whisper_jeff (680366) | more than 7 years ago | (#20735453)

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...

Re:Indecent (1)

king-manic (409855) | more than 7 years ago | (#20735499)

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...

That depends on who the artist is. If it's The Rolling Stones it's likely 20% of that. If it's somebody new like AFI it's likely 5%.

Maybe it's just me... (2)

rk (6314) | more than 7 years ago | (#20735503)

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 also heard he said . . . (0, Troll)

SpeedyG5 (762403) | more than 7 years ago | (#20735567)

There were no gays in the UMG, but I am just paraphrasing. Ahmadinejad should consider stepping down as president of Vivendi!

I disagree totally with vivendi (1)

shmack (1161519) | more than 7 years ago | (#20735749)

I agree with everyone out there that paying more money for a single song would be ridiculous, especially since there are other sources of songs out there on the internet. If itunes would raise their prices too much, other programs online like rhapsody would definitely gain much more popularity. Which in the end would cause apple and everyone associated with them to lose money. I do not agree with the idea of differences in prices of new and old songs. More often recently, adults have started to find out about and purchase an ipod and then want to get their old popular songs. Sometimes great oldies are much more purchased than new songs.

Differential pricing... (2, Insightful)

Hamster Lover (558288) | more than 7 years ago | (#20735753)

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.

Re:Differential pricing...ONE QUESTION (1)

Nom du Keyboard (633989) | more than 7 years ago | (#20736051)

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.

And when does new music become older songs? I would suspect that according to the record companies -- never!

What's so hard to understand? (1)

Kap'n B (930959) | more than 7 years ago | (#20735759)

I think most of this discussion is pretty laughable. Its pretty easy to see what the issue is for the labels. Before digital distribution if there was a song you heard on the radio and really wanted to own, you could either shell out $4-$5 for a CD single or pick up a whole CD for around $12. Now if I want to buy a song I like, I can just hop over to (insert favorite online distributor here) and buy just THAT ONE SONG for $1 or less. No $12 album sale, no over priced single sale, no inflated profit margin. Just the $1. That is the issue. You can't make much money on the pop tart of the day selling $1 singles.

Why doesn't Apple just buy a producer (0)

Anonymous Coward | more than 7 years ago | (#20735793)

Why doesn't Apple just buy a music producer? If Starbucks can get into the music business why can't Apple?
Start a shell company (or three) go buying up the catalog of a few houses. Then have a nice unveiling of the new Apple store.
Also, under a shell company, start getting artists to move to your label.

I know they used to have an agreement with Beatles Apple company about not touching the music business, but they re-settled that a year ago.

70-30 Split (2, Insightful)

Nom du Keyboard (633989) | more than 7 years ago | (#20735853)

At present, UMG, the world's largest record company, gets 0.70 euro ($0.99) out of the 0.99 euro retail price charged by iTunes, Vivendi said.

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!

Oh - Cry me a river (1)

ozzee (612196) | more than 7 years ago | (#20735931)

Dear Mr Vivendi - The technology exists to make a competitive product to itunes for reasonable cost. You're welcome to compete against itunes. Before you go and try to compete, there is a reason why itunes is successful and I suggest that by the time you get it, you'll understand that unless you compete on price you're going nowhere fast. The only way to make more money really is to produce more music that people want to buy (WHAT A CONCEPT).

The math?? (1)

j-turkey (187775) | more than 7 years ago | (#20735995)

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. 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.

Here's the problem. Vivendi didn't create the market. They bitched when people took their IP without paying after they couldn't match the public demand for downloadable music. After the continued failure of the industry to create a viable pay-per-download model, a number of third parties stood up and created a new market. Prices were negotiated, and deals were made. Now that Apple's music store has become the most popular digital music store, the IP owners are complaining that Apples margins are just too high. Mind you, this is after Apple invested in the ITMS code, physical infrastructure, client code, players, bandwidth, etc.

Remember that Vivendi used to (in essence) be the sole distributor of their product. They were unable to modernize, and Apple has become a distributor for 15% of Vivendi's property. I just don't see why Vivendi has any course to complain. If Vivendi pulls out of ITMS, the real loser will be Vivendi, since it is currently the most lucrative download market in existence. Bad business. Those guys really know how to whine and make noise. Remember the whining about cassette tape? To Vivendi, I say: cry me a river.

I agree (0)

Anonymous Coward | more than 7 years ago | (#20736061)

Getting 70% of the revenue for doing absolutely nothing IS indecent! Vivendi should be getting much less!

Why? (1)

Newer Guy (520108) | more than 7 years ago | (#20736167)

Because they only get *over* 70 cents of every dollar spent for doing NOTHING? Maybe they want the 7 cents each artist gets too? Or perhaps the 7 cents that Mastercard gets? I know-they want ALL of the NOTHING profit that iTunes makes on each song sold! What they really want is to force iTunes to charge 1.49 with them getting 1.20 for doing NOTHING! Problem is, raising prices would actually REDUCE their profits. Look, so far they've made almost ONE BILLION DOLLARS for doing NOTHING! That's not enough???!!!

Greedy bastards!

How Apple Should Respond (2, Insightful)

rossz (67331) | more than 7 years ago | (#20736177)

"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.
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