Universal is not renewing its long term contract with Apple .. Instead it will only sign for very short periods.
Let's see ... Apple is now the 3rd largest music distributer behind Wal-Mart and Best Buy -- neither of which have a real back catalog. Best Buy is reported to be thinking about dramatically reducing shelf space for CDs as they are no longer profitable on a square foot basis and aren't doing that much as a loss leader to bring buyers in for more profitable items. Universal probably makes something like $300M with their Apple relationship and Apple is making perhaps $5M on Universal iTMS sales.
Historically the majors have identified and "grown and groomed" (their words) the "right" talent for music consumers. They have had access to and control over most of the marketing and distribution chain. When I talk to people in their music buying prime, I find they support a few groups, but these are often indies - the Internet has given alternative, mostly bottom-up, mechanisms for discovering new music.
The industry has lost its ability to dictate taste - that is ultimately more important than their loss of control over distribution. Their potential customers see them as clueless - and that is worse than greedy (another core talent).
If Universal pulls the plug, they are the ones who will suffer most. None of the competing music stores that support the majors are viable - perhaps they would loose $400M to $500 million next year. As Best Buy pulls shelf space they will loose up to another $500M (that is going to happen anyway).
Steve Jobs has little to loose and much to gain by merely sitting tight. Amazon's rumored (for three years now) digital store isn't going to save the day.
anyone interested investing in Vivendi (the parent company of Universal)?
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