Thursday, October 25, 2007, 09:00 am PT (12:00 pm ET)
Warner Music may not renew yearly iTunes contract - reportSteve Jobs helped save a sinking music industry by courting struggling record labels to his iPod + iTunes ecosystem, but his bargaining position hasn't been as strong when it comes to video content. As a result, some music companies are now starting to reexamine their relationships with Apple, writes the Washington Post.
In a three-page report published by the paper Thursday, the Post's Frank Ahrens steps through the turbulence facing the Cupertino-based company's media content business as it simultaneously enjoys smooth sailing on the hardware front.
"[A]fter Dec. 1, when Apple's contract with NBC expires, all shows that NBC Universal owns, past and present, will disappear from the site," Ahrens explains. "That includes shows from Sci Fi, USA and Bravo cable channels.
In a letter sent to Apple on Oct. 9, NBC Universal charged the iPod maker with breach of contract, according to the report. Although it's reported the NBC is unlikely to pursue legal action, "the two sides have stopped negotiating and there appears to be no resolution in sight," Ahrens adds.
Meanwhile, Universal Music Group — the world's largest collection of record labels — told Apple earlier this year that it would not renew its yearly exclusive contract and instead would go month-to-month so it could be free to deal with other distributors.
Over the past year, sales of Universal songs for cellphones around the world have soared, Ahrens says. And Universal, which has 35 percent of the U.S. music market, is now discussing deals with U.S. mobile-phone companies.
These moves and others appear to have emboldened other content providers to take a stand against Apple's stringent licensing terms. Citing a "source with knowledge of the discussions," Ahrens claims that Warner Music Group, whose contract with Apple expires at year-end, is now also considering switching to a month-to-month deal for content it offers through Apple's iTunes Store.
While some industry watchers are calling moves by NBC and others "a mistake," NBC Universal spokesman Cory Shields is quoted in the piece by the Post as saying that his company's programs are one of the primary factors that help drive sales of Apple hardware.
"The iPod is only as good as the content on it," he said.
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