Universal Music has announced that it has ended their long term contract with Apple’s ITunes and is now on an “at will” contract which basically means they have gotten out of their lease and are now on a month to month at iTunes. This is now a battle of wills.

After driving Microsoft into a corner with the Zune Marketplace and getting a cut of the Zune sales, they have made it clear they want to drive a better deal from Apple. However the Zune Marketplace is not exactly a threat because in real estate terms it’s like threatening the Bellagio Casino after cutting a deal with the Super 8 Motel on Paradise Rd.

Universal is unhappy because:

• They were originally out maneuvered by Apple with iTunes
• They hate flat pricing, they want tiered pricing and shonky pricing models that maximize profits
• They hate the new iTunes Plus DRM free deal and think that it is pure socialism
• iTunes is now the rogue retailer they (record companies) always feared who unlike Tower they cannot push around
• Artists could get control of their product and go around them, and lets face it Artists are only a small part of the business
• They are always unhappy, lets face it, they may have to drive 2 year old Ferraris !!!!

Apple now has the upper hand but Universal is going to have a go at breaking this down but the problem they have is that Apple does not get it’s profit from the music, it gets it from the iPod.

Which creates a big chicken/egg question. With the Consumer, does the music create the demand for the iPod or does the iPod create demand for the music ?

My bet is that if a customer really wants an artist they will buy the CD and burn it onto the iPod rather than ditching the iPod…..

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