by Tamera H. BennettJuly 8, 2007
Billboard reports Universal Music Group (UMG) did not renew its year-to-year contract with iTunes for digital downloads of the UMG catalog, but has decided to move forward with an at-will agreement. Based on the Billboard report, UMG can pull their catalog from iTunes at any time. The flip-side of an at-will agreement is that iTunes could also drop the UMG catalog.
What does this change in contract status mean to the consumer? Probably not a whole lot. UMG will not take their catalog out of the digital "bins" so to speak. Record labels know digital downloads are driving records sales rather than purchases of CD's. Consumers will still have the ability to find their favorite UMG artists for legit downloads.
What does this change in the contract status signal to the music industry? UMG is jockeying to renegotiate the current structure of royalty payments for digital downloads. Currently, for each .99 download paid to iTunes, iTunes retains .29 and pays the record label the remaining .70. The record label then pays the artist, producer and music publisher.
If UMG and other labels get a sweeter deal with iTunes, will iTunes up their prices to consumers or simply cut their own profit?