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Universal: Apple using "golden handcuffs"

updated 04:40 pm EST, Tue November 27, 2007

Universal on Music, Apple

Universal Music Group has been slow to acknowledge technological change and has been ensnared by the "golden handcuffs" of Apple's music efforts as a result, says the music label's chief Doug Morris in a newly published interview with Wired. The executive observes that Apple approached Universal for signing on to 2003's iTunes Music Store at a time when the latter was desperate to find a successful online music sale model and was willing to take a risk on the iTunes operator, which promised minimal damage due to its small computer marketshare and the lack of a monopoly on digital music players at the time.

But by insisting on copy protection and then allowing Apple to use a proprietary format, Universal inadvertently became dependent on iTunes for success, Morris says. The music provider cannot pull its tracks from Apple's catalog without losing a large portion of its revenue, particularly in the US.

"There's no one in the record company that's a technologist," he states. "They just didn't know what to do... We were just grateful that someone was selling online. The problem is, [Apple chief Steve Jobs] became a gatekeeper... We would hate to give up that income."

This largely confirms beliefs that many of Universal's recent moves in online music sales have been an attempt to reduce the label's dependence on Apple and re-balance online music's marketshare, giving Universal greater leverage over prices and special deals. The company in recent months has dropped its long-term contracts with Apple in favor of month-by-month services and is allegedly developing an experimental service called Total Music that will build music fees into phone subscriptions and music player purchases, providing content from multiple major labels entirely outside of the iTunes and iPod ecosystems.

Microsoft's agreement to pay a $1 royalty to Universal for every Zune sold is an early example of the business model in action, according to the interview.

Written, edited and compiled by Jeff Smith.

By Electronista Staff
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  1. chotty

    Fresh-Faced Recruit

    Joined: Jan 2003


    Hey, Dougie

    Boo Hoo Hoo. Waaa waaa waaa.... No one wants a subscription model. We want to OWN the music. "No one in the music business is a technologist"? Well, your company was owned by a Canadian Whiskey company who sold it to a French water treatment company... so maybe they don't know Music either! ;-)

  1. tomodachi

    Fresh-Faced Recruit

    Joined: Apr 2002



    Before iTunes, we didn't have a clue as to how we could sell our music online and make a profit. Now that iTunes has shown us how that can be done, we want the control over exactly how much we get to rip off our customers.

  1. Smurfman

    Fresh-Faced Recruit

    Joined: May 2001


    Positive/Negative PR

    Apple better be watching their image.

    I've been reading more and more negative PR like this. I'm glad Apple offers songs for $1 across the board and TV shows for $2 but I think they need to please both hands that feed them. Right now, Apple is feeding their customers primarily (which is a great thing), but they can easily feed music labels and TV/movie studios a little more by offering a certain percentage of iPod royalty fees based on how much content is sold by a studio on iTunes.

    Apple would be reaching out to these studios while pleasing customers more since studios would be inclined to offer more content.

    Apple, PLEASE, PLEASE, PLEASE, don't become arrogant as you were in the 80s/90s!! Also, shed some of your greediness while you're at it. I want you to continue to succeed. Part of that continued success has to do with your image and how you treat your partners.

  1. jameshays

    Fresh-Faced Recruit

    Joined: Mar 2003


    re: smurfman

    What are you? Communist? Share and share a like. I'll give you some of my profits if you just sit there...

    Come on. Apple makes money for selling iPods and computers. They also make money for transferring music. Universal makes money by producing music and allowing others to transfer it. It's already a win/win deal. If Universal wants to create a new service, let them. iTunes is not the golden gate, it's just a path. There are lots of paths that can be taken, it just happens that iTunes was one of the first paths that lead to profits.

  1. legacyb4

    Mac Elite

    Joined: May 2001


    proprietary format

    "Allow Apple to use a proprietary format"... as if they would have a choice to have used an "open" format with Microsoft that had even more restrictions?

    If anything, the consumer would have been tied down more and the record companies would have more flexibility in limiting freedom of use... oh wait, that's what they wanted all along!

  1. coffeetime

    Senior User

    Joined: Nov 2006


    desperately seeking

    MS is desperately seeking partners. They want to lure record labels from iTunes by offering royalty. We just have to wait and see. Zune no sells, no money.

  1. Ken Leonard

    Fresh-Faced Recruit

    Joined: Nov 2007


    re: Zune royalty

    "Microsoft's agreement to pay a $1 royalty to Universal for every Zune sold is an early example of the business model in action, according to the interview."

    Let's see, that will net Universal about $5. Smart move Universal :-)


  1. nhmlco

    Fresh-Faced Recruit

    Joined: Mar 2007



    "...willing to take a risk on the iTunes operator, which promised minimal damage due to its small computer marketshare and the lack of a monopoly on digital music players at the time."

    Translation: It wouldn't matter anyway, so we went ahead and did it. Who knew?

  1. User Name

    Fresh-Faced Recruit

    Joined: Nov 2007


    I want them!

    Yeah, I would love to have those Golden Handcuffs!

    Where can I get 'em?

    Oh... you mean, some record exec is complaining that Steve Jobs personally snapped those cuffs on the exec's wrists? Gold is too soft and malleable to be really effective cuffs...

    Maybe if the exec said something about platinum handcuffs, he would be onto something...

    Meh. Apple still has the right idea on prices and distribution. It is just those movie and record execs that are whining worse than a roomful of children.

    User Name

  1. robttwo

    Fresh-Faced Recruit

    Joined: Nov 2005



    Lets see - in 2003 - the record companies had no idea about technology. Maybe they should have asked a 12 year old.

    I am so sick of these dumbasses whining. s**** you, Universal. And your mothers too.


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