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Monday, July 02, 2007, 08:00 am PT (11:00 am ET)

Universal unwilling to renew annual iTunes contract - report

Following a standoff in negotiations, 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, reports the New York Times.

Citing "executives briefed on the issue," the newspaper said Universal will instead look to market music to Apple at will, which could allow the label to yank its songs from the iTunes service on short notice if the two sides do not agree on pricing or other terms in the future.

The New York Times characterizes the move by Universal as a bid to regain a bit of leverage in the near-monopoly that Apple chief executive Steve Jobs has created in the digital download 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 reportedly become points of contention between the two parties. The Apple headman has adamantly demanded that iTunes stick to its original pricing system that charges a flat 99 cents for a song since, arguing that a uniform system and low prices will invite new consumers and reduce piracy.

The big record labels, however, want the right to charge Apple more for popular songs to capitalize on demand or, in the event of special promotions, to charge less, reports the Times. During a recent investor conference, Edgar Bronfman Jr., the chairman of Warner Music Group, reinforced the labels' notion that "not every song, not every artist, not every album, is created equal."

Similarly, Jobs has also refused to bend at calls for Apple to license its FairPlay proprietary copy restriction software to other manufacturers, saying it would dramatically increase the software's susceptibility to hackers. Instead, he has urged the labels to drop copy protection measures on digital songs all together.

In April, Jobs and Apple teamed with record label EMI to do just that: launching premium, unprotected tracks (called iTunes Plus tracks) for $1.29 a piece. The move, according to EMI, has since driven a significant uptick in its digital sales. So far, however, other major labels have been reluctant to follow EMI's example.