Universal Rebels Against iTunes

Universal Music has reportedly refused to renew its annual contract with iTunes, which could end up sparking a showdown between record companies and the retailer.

Could the first cracks in the iTunes dominance of the digital music market be appearing? According to sources, UniversalMusic, owned by Vivendi, has told Apple that it won’t renew its contract to sell music through iTunes. Considering that Universal has a roster of megaartists, including U2 and Akon, that could be a major blow for the retailer.   Instead, Universal will market its music through iTunes “at will,” which would allow it to pull itsmusic with very little notice if the two sides can’t reach an agreement on pricing and other factors.   It’s an indication of the tensions that have risen between Apple and the musicindustry regarding the iTunes dominance in digital music sales. The big issues of contention have been pricing of tracks in the iTunes store and the fact that the iPod, Apple’s flagship device,will only work with iTunes because of digital rights management (DRM). Apple has only recently begun marketing some tracks in a DRM-free format, at a higher price.   All this could create astandoff. The labels under Universal’s control represent one-third of all major label releases in the U.S., whilst digital music sales accounted for 15% of Universal’s sale in the firstquarter of 2007.   With 100 million iPods sold, iTunes accounts for more than 65% of all digital music sales, and is the third overall retailer of music. It charges 99 cents per song download inthe U.S.   Major labels would love to charge more for especially popular songs (or less, in the case of some promotions). They’d also love Apple to remove its DRM, which the companyinsists won’t happen.   The move by Universal might be the first crack in the dam. If so, movement might take a while, though – Sony BMG justrenewed its Apple contract for a year.