Universal Playing Chicken with Apple

In a high stakes game of chicken, Universal Music Group, the largest music corporation in the world notifyed Apple it will not renew its yearly contract to sell music on iTunes. Universal will sell music “at will”. There are many interesting quotes from this article.

But if Apple were to decide not to carry Universal’s recordings, the music company would likely sustain a serious blow: sales of digital music through iTunes and other sources accounted for more than 15 percent of Universal’s worldwide revenue in the first quarter, or more than $200 million. (Vivendi does not break out revenue from Apple alone).

Some industry observers have cautioned against taking on Mr. Jobs directly. “When your customers are iPod addicts, who are you striking back against?,” said Ken Hertz, an entertainment lawyer who represents artists like Beyoncé and the Black Eyed Peas.

Seems to me that Universal shouldn’t mess with Apple. Both companies would suffer damange if Universal started pulling songs, but I’m not sure it would be mutual assured distruction. Consumers love Apple right now and most think the music industry sucks. The music industry is desparate to get on better negotiating terms with Apple, but packing up your toys and going home isn’t the right way to go.

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