Suicide Watch: Universal Music Demands Customers Use P2P

umg_logo.jpgYesterday Big JG, the soup eater, posted a note about Universals Music’s mad dash to ends its tortured existence as the worlds largest purveyor of little plastics discs. In an act of classic Seppuku, Universal Music is reported to have told Apple that it was not going to renew its contract to sell music through iTunes. The move comes as a bit of a shock given that the Universal is reported to net somewhere in the $200 million dollar range through iTunes sales. Apple’s steadfast refusal to allow the labels to “wet their beaks” from iPod sales is widely believe to be the main reason behind the move by Universal.

There are two huge problems with Universal’s withdrawal from iTunes. First, they are the only ones doing it. Both Sony/BMG and EMI are on board with Apple and Warner Music is bleeding money and employees so fast it wouldnt dare walk away from any source of income. Second, by refusing to sell its music through iTunes, universal will not effect the consumption of its music, iPod sales or iTunes popularity. People will just get the content that isnt on iTunes they way they get 70-80% of the content on their iPod, from CD’s and P2P networks. The big loser therefore can only be Universal Music, which stands to loose a couple hundred million dollars along with a couple million paying customers. In these lean times for the music industry turning away either is the fastest way to quick death I can think of.

Here is a simple law of survival economics that all digital entertainment business MUST LEARN! “A little money is better then NO money.”

One Response to Suicide Watch: Universal Music Demands Customers Use P2P

  1. Phil says:

    I think Universal has only told Apple that they won’t sign a long term contract; it seems like their strategy may be to go with other stores, like the Zune marketplace (*chuckle*) for new exclusives and promos. It will be interesting to see if there are any economic repercussions of their decision over the next few months; it seems pretty clear to me that they’re either trying to bust the ‘one track price fits all’ policy of iTunes or else they’re trying to help push Zunes because they have an economic incentive to help sell more of them.

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