Yesterday 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.”