Contract Length Was Barrier to iTMS Deal, Music Indie Group Says
TMO Scoop - Contract Length Was Barrier to iTMS Deal, Music Indie Group Says
by , 8:00 AM EDT, June 16th, 2004
The Association of Independent Music (AIM), representing Europe's independent labels, confirmed for late on Tuesday that a disagreement over the length of a contract to sell their artists music was the main reason Apple Computer launched its iTunes Music Store in Great Britain, France and Germany Tuesday without a majority of music from smaller groups and artists.
AIM spokesman Sam Shemtob told The Mac Observer the sticking point in negotiations with Apple was the length of the agreement and his group's insistence that their be a review of royalty fees every six to twelve months.
"We were far off on a number of important issues with Apple," Mr. Shemtob said. "Whether Apple was negotiating with AIM or with the labels separately, they wanted a three year contract and we wanted a two year agreement. In addition, we wanted a universal price review after six or twelve months. They didn't want to give us that. We were having trouble finding common ground."
Mr. Shemtob said the main reason AIM and indie labels wanted the right to negotiate royalties every six or twelve months was the constantly changing market for online music downloads.
"This market is changing each and every day," he said. "Who knows what growth there will be in the next year. Independent artists deserve the right to look at the situation on a regular basis and re-think their strategy."
Mr. Shemtob said another issue was Apple's unwillingness to have an adjustable royalty price that would go up as the retail price goes up.
"We wanted an agreement that said there would be an escalated royalty percentage paid to indies if and when the retail price went up," Mr. Shemtob commented. "Apple again was unwilling to discuss such a clause."
Mr. Shemtob confirmed that similar contractual agreements Apple rejected were successfully negotiated with other online music services, such as Sony Connect, the old and new operations of Napster, Yahoo, OD2, Wippit, O2 Music and Sony's Japanese operation, Computer Network So-net.
"We don't understand why we could come to an agreement with these other companies, but not with Apple," Mr. Shemtob said. "The terms they wanted certainly hurt the deal."
Executives representing some of Europe's major independent labels confirmed to The Mac Observer Tuesday that while Apple refused a shorter contract length and no price review option, it apparently negotiated such a deal with Vivendi Universal SA's Universal Music, one of the world's largest record labels.
"It's our understanding Apple agreed to a two-year contract with Universal and agreed to re-visit royalty pricing every six months," one executive who asked not to be identified, told TMO. "Why couldn't they agree to a similar deal with us?"
Mr. Shemtob said Apple had opted to negotiate with indie record labels individually when it had the opportunity to negotiate as a whole with AIM. Mr. Shemtob also said Apple had approached many indie groups and labels in just the past few days, making it almost impossible to reach an agreement in time for Tuesday's iTMS announcement.
AIM was on hand at the Apple announcement Tuesday, handing out fliers outside the Old Billingsgate Market on the banks of the River Thames explaining their stance on the negotiations with Apple.
Apple refused comment on its negotiations with the independent European labels, citing its long-standing policy to not comment on its business arrangements.
Missing indies a setback to overcome, analysts say
Industry analysts who watch the European computer and online music business feel the launch of the iTunes Music Stores without a large majority independent music artists is a black eye, but something Apple can overcome and capitalize on if they move quickly.
"They are launching without the indie artists that currently make up 22 percent of UK music sales," said analyst Simon Dyson of Informa Media, based in London. "This is a bit of a downside for Apple. It's almost a quarter of UK sales. I'd imagine they (Apple) are disappointed with that."
"I think indies perhaps want to have an offer of what you'd get as a major record label," Mark Mulligan, a media analyst based in London with Jupiter Research, told The Mac Observer, Tuesday. "The perception, whether it's right or wrong, is that independent labels feel they have been undervalued."
Mr. Dyson said he'd be surprised if the indie labels are not on board soon.
"It's such a big share of the UK and European markets that Apple needs to have them on board very soon," Mr. Dyson said. "I think it will get done sooner rather than later."
"How important is it for Apple to have these indie labels on board? It all depends entirely upon what sort of success iTunes has against its competitors," Mr. Mulligan said. "If Apple believes they really do need to have those labels on board then they will come back to the table with an improved offer, I'm sure. I think they'll come to some agreement soon because I think domestic content is absolutely key to European music services and so much of domestic music is tied up in independent record labels."
Observer Comments
Wed Jun 16, 2004 8:34 am Subject: Apple's Closed iTunes-iPod System Will Fail
This is the sort of press release put out when someone wants to exert pressure they don't really have. If Apple had to do a 6 month price review with Universal, it was because Universal had the clout to twist their arm. But what would happen if they upped the price in six months because, gee, people are buying? People would stop buying. The price fluctuation alone would say to the customer; "why should I get involved with a music service if it is going to pull the rug out from under me." Steve Jobs is no saint, but he is saving the labels from themselves. People want digital and convenient music, but most people are holding back because they are afraid that they could use a service and its proprietary digital security and then be stuck with a bunch of content that won't work with something new in the future. Like a lifetime membership to a health club that has a new owner (remember Holiday Fitness?). Digital security of music is a total ripoff of the consumer, because their are no guarantees that once a consumer shells out their money, that they will have that music in the future.
The perception of online music is critical at this time. Jobs knows this; one price fluctuation and the experiment is all over. The reason iTunes is kicking but is exactly because there is a simple music license. BuyMusic bent over backwards to please every one of the Suits (label executives who think they actually are important to the music experience), and they quickly closed doors. Every song they had had different terms, and while listening (or so I've heard), you would occassionally have to dial out and certify that you had rights to a particular song. And all so that you can play music just on you computer. That sold to about as many customers who enjoy sticking needles in their eyes--but hey, that is a loyal base. Just not many of them not undergoing treatment, so not a lot of downloads.
Personally, I would love to buy music online. But as much as I might trust Apple (well, not too much), I am still waiting for two things; the labels to get a clue, and the prices to get below the discount stores. Until that happens, I'm going to wait on this "digital music experiment". I think the labels are holding back and waiting for someone to just give them billions of dollars and teeming masses of customers. That may be a long wait if they don'g "get it".
Buy an iPod and you're stuck with only one on-line music store, iTunes that has the hIghest prices and worst selection. Get any other music player and you can shop all the other on-line music stores for price and selection.
What consumer wants to lock in to only one limited store for on-line music. No one store will ever have all the music. Steve Jobs greed forcing iPod owners to use only the iTunes store will be a miserable failure, just like his failure to license the Mac OS to other manufacturers.
Wed Jun 16, 2004 11:12 am Subject: shut up and buy something
The urge to buy controls you, and you know it. Doesn't matter if it's cdroms or mp4s. Who cares if you don't like iTunes' selection? Just go buy a used cdrom. It's all gonna end up on an iPod eventually. You can't beat Steve. I'm going to miss the corner record store--not. I haven't been in one for years. And they were never as cool as the one in High Infidelity. And the snot nosed clerks were usually a$$4013$...
Wed Jun 16, 2004 12:49 pm Subject: iTunes is one of the lowest prices and largest selections
Your facts are confused. The European launch puts iTunes much less expensive than the competition (although one of them is lowering prices for a couple weeks to compete) and has a 700,000 tune library! I have not seen anyone with a larger library.
Also, by allowing access to 5 different computers and an unlimited number of CD burns, they have the best terms in the industry as well. So although in theory you have more selection using WMA, in practice the only benefit right now is Wall-Mart singles (full CD's usually are the same or more) and their site is not nearly as convent as iTunes yet.
What are you afraid of that would cause you to post such incorrect disinformation?
What these guys are thinking? Computer sale have raised many hundred percent until these days, the same to blank cd, recording gear, etc. On these days if you are recording your songs digitally you can get the master in less days. So, they are spending less money to produce and sell songs. i'm asking why these people think we are? They want money? Do more work! We want to see more live concerts, and if we are buying these songs we want a ticket too!
Apple is doing right! We are the customers, we want to be able to buy any song, when we decide, and for the same price (or less) that was on the debut day. This is my right as a song buyer! Go Jobs Go, Go! Jobs BGood!
Wed Jun 16, 2004 3:04 pm Subject: AIM needs to look at the US indies
It's fine to put up blocks to keep off the store, but maybe AIM should look at what Apple has done for indies in the US.
The biggest benefits Apple provides are FAIR access to indie music, 30 second previews and a consistent (and fair) price for all songs. If AIM wants to block out this new market, let 'em. It's their loss, as well as their performers' loss.
6 Month reviews: How stupid - when was the last time Apple changed the price on the US store?
Review royalty percentages if prices go up? Duh, if you get X% on the current price you will get X% on an increased price, which will be an increase . . . Hard to figure that out, is it?
'Tis sad that AIM can't figure out the potential of the Apple market, both in the UK/Europe and internationally, including the US. If they wanted to negotiate something that would increase sales and profits then negotiate adding all of their music to the US store and giving it a fair shake on the store promotions.
Wed Jun 16, 2004 3:31 pm Subject: Re: Apple's Closed iTunes-iPod System Will Fail
QuoteAnonymous wrote:
Buy an iPod and you're stuck with only one on-line music store, iTunes that has the hIghest prices and worst selection.
Incorrect. While you cannot buy WMA audio, you can purchase music from MP3 vendors, like http://www.emusic.com , http://www.audiolunchbox.com , and http://www.magnatunes.com , not to mention the two russian sites (of unknown legitimacy) that offer music in MP3, WMA and AAC.
You are entitled to your opinion of Apple's marketing. However, since Apple retains the #1 spot for both MP3 players and audio downloads, Apple has enough of a head start to retain this business model. In my personal opinion, as long as Apple can compete favorably with the WMA collective as a whole, they should continue to do well. As long as they continue to make Quicktime and AAC an integral part of the experience, they can continue to make inroads with Quicktime as a video solution against Real and WMP.
Indies will be on board soon. Synergy is working in Apple Computer's favor unlike the mess with the DELL - INTC - MSFT - hegemony which can't come up with innovation and quality products and cannot offer investors AAPL type gains.
HPQ + IBM and AAPL = great future innovation and quality products, like the iPod! ITunes... with Indies on board.
Enjoy:
http://finance.yahoo.com/q/bc?t=1d&s=AAPL&l=on&z=l&q=l&c=DELL%2Cmsft%2CIBM%2CHPQ
Wed Jun 16, 2004 4:36 pm Subject: kenaustas, in the UK things are different
The indies here get regular airplay on mainstream radio, there are TV programmes that feature their music, and indie bands get coverage in the newspapers. You only have to remember that Oasis are signed to an indie label to realise just how big an indie band can get here through existing channels. American indie bands need iTMS in a way that UK indie bands don't.
Quotedynamicv wrote:
American indie bands need iTMS in a way that UK indie bands don't.
This maybe true in a small market. But then it takes away the meaning of "indie". AIM just becomes another Marjor.
This is a fight about money. This is why p2p will be with us for a long time. Hell, you can get anything you want (and somethings you don't want) and no one makes a penny or pence.
A few months after most legal service started up here came the headline:
Major labels 'force 70% price hike' on Apple http://www.theregister.co.uk/2004/05/07/apple_itunes_price_rises/
The weaker services caved on prices. iTunes held true to the users and keeped the price at 99c. How could this be. I am sure it has something to do with three years.
If Apple prices rise your take should would rise as well. But with each rise you drive the more consumers to the underground. This is were Jobs hit the nail on the head (fair price and people will buy).
More to the point AIM. Stop messing around and crying foul. It time to sign a contract that won't allow price rising for 3 years by either you or Apple.
They wanted a review of prices every 6 months so they could raise them is what they mean. Apple or Steve Jobs is very against raising the prices on music downloads. He said it himself several times. I agree with him that the prices should remain the same or go down even. The independent labels are going to lose money not Apple. Apple has a lot of music out there to sell online and will continue to grow it's library with or without the Europeon independent labels.
Wed Jun 16, 2004 10:27 pm Subject: Look at Southern California...
Namely San Diego... San Diego, L.A. and NewYork, as well as Dallas, has about 95% of the indie bands in the U.S. Here in Laguna Beach, Orange County, CA the only radio stations that I even get reception from play indie. (RFTC, Hot Snakes, No Knife, everything Swami Records, White Apes, Mission to Burma, etc.) On the two major stations, 91x and 94.9 (indie station) the only thing to listen to at night, especially sunday night is indie (Big Sonic Chill!!!). Any way... the indie movement where I go to school in denver is growing too. But any way... all my friends and I listen to indie... my friend is a local DJ and only spins Indie at his stations in Irvine and Santa Clera (i.e. San Jose). Its the culture now... so the argument taht things are different in the UK is only true to a point... but what do I know... I'm just a yank ^_^... any way the indie labels are outa their minds just as kenaustus said... oh ya forgive the spelling.
You are so right. The organizations in charge of artists have failed them for decades. They have resisted every change and have continued to offer mediocre product at high prices. The artists have been screwed, the public has been screwed. Altogether, these 'guardians' have not even come close to meeting their obligations. They are doing it again with Apple but then I suppose, at least they are consistent.
dude, do you work for Microsoft or something? i'm not sure if you haven't read the news in the last year, but the iTunes music store is anything but a "miserable failure". in fact it has exceeded expectations by a huge margin. 85 million tracks in a year may not be putting a dent in peer-to-peer downloading, but it's pretty much wiping the floor with any other download service out there. iPod, at a very high price point, owns over 50% of the market for players, and the iTunes store owns over 70% of legal downloads.
sure this is no guarantee that they will continue this rate of success, but to say "iTunes will fail miserably"? ?
At this moment in time, Itunes uk is rubbish.
I tried several songs including some pretty well known stuff such as 'Itchycoo Park' - Small Faces and 'Big Time Sensuality'(single version) - Bjork, but were they there? Well obviously not since I've already stated that this service is rubbish.
I want Apple to succeed, I really do. I want them to stick one up to Microsoft and dominate this field like MS dominate software. Apple deserve it for all the years of (soon copied) innovation.
I know Steve Jobs wanted record companies to release their out-of-print stuff onto Itunes and maybe it is just the lawyer's obstinacy that is getting in the way of this happening. But, that aside, Apple needs to increase the number and variety of songs available - and quick.
Listen Apple, the Big Bad Bear MS is coming and you don't want to have a 5% share of music downloads now do you?
Fri Jun 18, 2004 12:16 am Subject: Reality Check isn't really that bad . . .
Fri Jun 18, 2004 11:41 am Subject: RC can adapt to his surroundings.
Hmmm, it makes me wonder how some people make their judgements (if they can be called that). Saying ITunes and iPod are destined for failure.
It only takes 5 seconds to look at the statistics!
You may say "stats can lie"? But that is only true for percentages as they can be manipulated in many ways. A flat figure of 85MILLION DOWNLOADS can't be manipulated in anyway at all it will always be 85million.
Dunno what the US thinks, but hell 79p for a song....bye bye record shops!
And over 700,000 tracks online works out to roughly (35,000 different albums). I'm not too sure about you lot, but I don't think many high-street music stores stock that amount that can be walked away with inside 1 minute.
People always seem to harp on yes but I don't want music where you can hear the artifacts of the sound, blah, blah, blah! If were honest you're generally not really going to notice with Apple's AAC unless you've got the hearing of a dog and your stereo cost about Ј80,000. Some of these 'Audiophiles' are just making an argument for the sake of it. But hey, at least I can't scratch or damage my AAC files.
Fair play to Apple I say with not agreeing to that crap Indie "offer" (I use the term loosely). It will pave the way for price-fixing which is what labels want. More money to line their coffers. I can tell the labels where to stick it. Not as if they have much production/distribution costs (Apple kindly chops out the distribution for them). They don't need those old silver discs either and none of that fancy printed inlay cover crap, which most people would really care about anyway.
"I know let's include a pointless booklet at the front of the CD and charge an extra Ј5 for it".
Well that's my tuppence worth.
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