Universal Declines To Extend Contract With Apple's iTunes

Universal Music Group has reportedly declined to renew an annual contract with Apple and iTunes to sell songs and albums through the iTunes service. This is not a situation causing imminent threat of danger to iTunes, as the two will likely reach a short-term "at-will" agreement as they negotiate new terms for a new contract; rather, it will take some of the bargaining power away from Apple and allow Universal to remove songs from iTunes as it chooses.

The move is a response by one of the major labels to the growing clout (read: virtual monopoly) Apple has in online music sales. As consumers move away from physical CDs to buying digitally, the labels may continue in Universal's stead and force significant concessions from Apple in future contracts.

Conversely, Apple's iTunes is a major source of sales for labels whose physical sales continue to suffer. iTunes' storefront is a massive source of exposure, and since iPods are incompatible with other download services, labels who do not sell through iTunes will miss out greatly on sales through downloads. This bargaining chip of Apple's fails, however, if Universal and others move to DRM-free MP3 sales through other sites.

Bottom line: If labels are willing to give up DRM and make songs available through multiple outlets (just like brick-and-mortar record stores, what a novel idea!) they will not need to stick to Apple's way of doing things, and can start to take back the ability to shape their own business.

EMI Approves Private Equity Buyout, Universal Acquires BMG Music Publishing

EMI has approved an offer to be bought out by a private equity firm, Terra Firma Capital Partners, for $4.7 billion. A private equity purchase such as this will remove EMI from the open market, returning it to privately-held status. Investors hear lots about leveraged buyouts, which are part of private equity purchases and have been de rigeur of late. EMI's board will recommend this offer to its shareholders at a later date.

This news follows EMI's reporting a loss of near $600 million for the year, which should make the offer more attractive to shareholders. Expect massive layoffs, artists being dumped, and enhanced efforts to protect the monetization of EMI's wares (Hypebot goes so far as to speculate there might be a slowing of movement away from DRM). Private equity buys business to turn it around and make it more profitable. Whether the purchase is long-term or to resell EMI (perhaps after breaking it up into smaller businesses) in the not-too-distant future is to be seen.

Not only is EMI being scooped up, but Universal Music Group, already the world's largest music company, has been approved by the EU to purchase BMG Music Publishing for $2.09 billion. This deal makes the #3 and #4 of the big 4 publishing groups #1 over EMI. To avoid antitrust hangups, Universal has agreed to sell off the European rights to several song catalogs, including Justin Timberlake, R. Kelly, and The Kaiser Chiefs.

Reference: Yahoo Finance

Viacom Files Suit Against YouTube

MTV parent company Viacom has filed suit in the U.S. District Court in New York against YouTube and its parent, Google, seeking more than $1 billion in damages on claims of widespread copyright infringement relating to the alleged displaying of more than 160,000 unauthorized video clips from Viacom subsidiaries.

The parties had been in negotiations for several months, however, after the talks broke down last month Viacom demanded YouTube to remove more than 100,000 unauthorized clips. YouTube said at the time that it would comply with the request and said it cooperates with all copyright holders to remove programming as soon as they're notified.

A statement issued by Viacom states that YouTube's business model, "which is based on building traffic and selling advertising off of unlicensed content, is clearly illegal and is in obvious conflict with copyright laws." Viacom and other objectors to YouTube's practices hold that YouTube fails to take the reins and police the site for copyright infringement, instead shifting the burden onto the "victims of its infringement."

Universal Music Group had previously threatened suit before reaching a licensing agreement with the company. Others who have signed licensing agreements include CBS and NBC.