back to article Behind the Apple vs Universal breakup

Earlier this month, Universal Music Group (UMG) - the world's largest record company with acts like U2 and Jay-Z - decided not to renew its contract with Apple's iTunes music store. Universal will continue to supply iTunes its vast catalogue but may cancel that supply at any time. In the company's own words, "Universal Music …


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  1. Anonymous Coward
    Anonymous Coward

    " will probably never get any money from the iPod or iPhone"

    And nor should it.

    And it espically should not get a royality form each computer sold, what have they given to the computer that they should receive a royality for?

    OH sorry i forgot DRM!!!!

    What of the computers that never see an iPod et al connected, or a media track of any description?

    The musics companies are in this current position though their ongoing greed.

  2. Chris Thorpe

    The flaw in that argument

    What constitutes a copying device for digital music - an 'MP3' player? How about if I make a player that can only play OGG? So then we widen the definition to all digital audio players. Does that include a laptop with iTunes? Do all laptops incur the levy? It won't be an easy law to draft.

    And why bother? The effect of the levy on digital audio tape recorders was to kill the market for DAT. If Universal wants to make money from digital formats, why don't they just open a successful online music store?

    Apple has opened a channel. The record labels are free to participate in that channel or to compete. They just need to adjust their business models to allow them to make a profit. All it takes is brains, business sense and creativity...

  3. The Cube

    The problem with this plan

    is that, as usual, only the major labels would get any of the pork from this scheme, just as with the blank media levies. Whenever these other taxes are applied the small, independent labels and artists are the ones cut out of the payments, irrespective of their contribution. This will simply reinforce what is wrong with the music industry, it is a cartel run for the benefit of a small number of senior executives of a small number of companies.

    Allocating revenue in this way will simply ensure that radio continues to be a homogeneous blob of the same utter rubbish from the same record company playlists, Internet radio is being dragged into this hole even as I type. The same endless line of manufactured 'artists' in carefully shaped and promoted 'genres' will march on by, each more factory produced than the last. This is inevitable as the big labels need to be able to recoup their huge expenses and this can only happen when their control of the market extends to telling us what music we are going to like and buy. New and creative music that they do not control is their greatest fear.

    Under this plan Innovation in music itself, methods of publishing and most improtantly for the long term health of music, new business models will continue to be stifled by the big companies who are desperate to hobble any competition to their stranglehold.

    The solution to the falling revenues of the big labels is, frankly, let them go bankrupt. They are persisting in trying to claim margins and profits that are no longer sustainable in the current world, this is doomed to failure and sending in the bully boys to frighten your 'customers' won't make them any more popular than the mafia.

    A capitalist market is supposed to work like Darwinian selection, those who are best adapted to their environment survive and pass on their genes (or genres), those who cannot adapt to the changes die out. The RIAA are more than happy to champion this model when it is to their benefit, why should we not let them die by it too?

  4. Frank Bellavance

    Protection money

    Having a music tax (don't let anyone fool you, this would be a music tax in all but name) is the equivalent of paying protection money to the mob and hoping they do not come and break your legs anyway. The ONLY way this would be even remotely fair to the custumor is if the labels couldn't sue. We all know this will never be the case.

    The old buisness model of taking 90% of the money and not giving any back to the artist doesn't work any more. It is time this raketiring was stoped and people realise what tapes, CDs and records were originally ment as promotion tools for shows. It's time digital music, like radio, became once again a show promotion tool, not a money maker.

  5. Frank Bough

    Surely a Shill for the Pigopolists?

    "I believe Universal is right in seeking a royalty on electronics sales."

    You've got to be kidding.

  6. Andy Pellew

    That's crazy ...

    Are we really going to pay a music flat tax on everything?

    Already the labels have learnt that if they about 80% of the tracks on the average album would never get sold on their own ... are we really going to tell them that it doesn't matter how bad the artist/ album is they'll get something anyway?


  7. sleepy


    "As discussed, iTunes sales are not hugely profitable for the labels."

    Where did you get that idea? 70c per song with zero costs is hugely profitable. They don't have to do anything . . . at . . . all. (production scheduling, manufacturing, warehousing, order processing, shipping/logistics, debt collection, returns handling, printing of marketing materials etc etc.) And they get traceability of illegal copies, which they don't get with CD's. Greed, big egos and small brains will turn the majors into the minors. And good riddance.

  8. Stenar

    Record labels are greedy

    Record labels are greedy and they have a poor business model. I am shocked that The Register is supporting the idea that they should receive royalties from electronics manufacturers.

  9. benn gold

    The Math Doesn't Agree

    2.5 billion songs at $1/song means $2.5 billion over 4 years. The labels get 70%, which is $1.75 billion, and Apple get 30% which is $750 million. If there are 4 or 5 labels sharing the income that means about $100 million/year per label in royalties. Not quite chicken feed. Apple's take is $175 million per year, which is a lot of money for marketing and overhead expenses and should generate some hefty profits. The $1/iPod or iPhone doesn't come close to matching the income from music sales. Unless the numbers in the article were wrong (not an unusual event, unfortunately), it makes no sense for the labels to think that hw royalties are where the real money is.

    Benn Gold

  10. Anonymous Coward
    Anonymous Coward

    Hardware royalties?

    Why should I be forced to give Universal a pound, a dollar, or even a penny to use my computer?

    By the same logic, the software companies should claim royalties on each computer, regardless of whether their software is installed or not - if the computer can potentially use it, then the software companies deserve cash, right?

    If they want a flat rate "music tax", then lets go all the way. Charge £1 extra per month on an internet connection, and legalise P2P downloading. Think the labels will go for that?

  11. Fazal Majid

    In other news

    Buggy whip manufacturers are lobbying Congress to impose a $100 per automobile levy on car manufacturers as they make profits on conveyances without compensation to the buggy whip industry.

  12. jamie


    $0.70 x 2.5 billion is an order of magnitude larger than $1.00 x 100 million.

    Getting a royalty fee on the iPod isn't going to make more than pocket change for the labels.

  13. James

    What losses due to "free music"?

    The record companies haven't conclusively shown there are losses from "free music". Record company wild guesses don't count as each downloaded song is not a lost sale. When you allow for people who wouldn't buy the music anyway and those who buy a high quality version after downloading from P2P, filesharing increases sales. The decline in CD sales went hand in hand with a declining economy, luxury goods are the first cut out of a budget when money gets tight.

    Don't forget that people are getting much smarter about DRM and they don't like it. iPods and PC's don't last forever and more and more people are finding out what DRM really means when their PC or iPod dies or is lost. Sales of EMI's catalogue went *up* when iTunes started selling DRM-free versions. Have there been sensationalist headlines about EMI tracks showing up en masse on P2P? No, and you can bet there would be if it had happened.

    Universal and the others need to get their heads out of their collective arses and start looking at licensing schemes such as that used by broadcast radio. Everyone gets paid and consumers are happy. The only thing not to like is the loss of monopoly for a monopoly holder but that business model for the music business is dying anyway.

  14. Ej

    Not Profitable?

    "iTunes sales are not hugely profitable for the labels"

    How screwed up is your business if making .70 per track isn't proftiable when you have absolutely NO holding, operating, tranactional or marketing costs invloved in the sale?

  15. Mike Richards Silver badge

    'I believe Universal is right in seeking a royalty on electronics sales'

    Why? Did Universal take the risky step of investing in the development of the iPod, Zune and their like? Were Universal's technicians and engineers a vital part of Intel's chip manufacture?

    No? So why should the companies that invested heavily in new technologies have to pass money over to a group of corporations who don't know the meaning of innovation?

    Microsoft fed the greed of the media companies by offering the $1 licence per Zune. The fat cats at the record companies now think they're entitled to it from each and every manufacturer.

    In reality Universal and their friends are sitting on fast vanishing ground as their business plan of the last half century is eaten away by technology. Their practices just aren't sustainable, and if they fancy remaining in Lear Jets they'd better go and check that dictionary entry for 'innovation'.

  16. Martin

    what about my car

    shouldn't they get a fee for every car sold that comes with a music player? and from every musical instrument sold?

    how absurd can they get, and why did MS buy into that deal???

  17. Dillon Pyron

    The artists get how much?

    I'm in Austin, "The Live Music Capital of the World" (it says it as soon as you walk off the plane). I know a lot of musicians with some sort of recording contract. Most of them have to pay back all sorts of expenses to the label before they see a dime. And that's usually all they see.

  18. Aric Friesen

    Your numbers don't quite add up

    You first state: Apple has made a huge amount of money from sales of iPods - far more than the labels have made from iTunes

    Ok, possibly. But remember for every $150 iPod sold, Apple did have to pay someone to manufacture it. It's not all profit.

    Then you say: The iTunes Store has sold over 2.5 billion songs since its inception ... But the labels only make 70c off each track. This revenue pales in comparison to the amount of money Apple generates from sales of [iPods.]

    Ok so the record companies have made $1.75 billion in song revenue. Again, you are correct Apple has brought in more money with it's iPods having sold over 100 million at, say an average price of $150 (that's $15 billion dollars) but again, how much of that money went to design and manufacturing? I believe the teardowns usually indicate a 40% markup, not including engineering or distribution. So let's take some off for that, and that's only like $5 billion. And remember, selling a track on iTunes didn't really cost the record company any money in distribution. Oh, you could argue publicity and production costs for the original creation, but they would've had to pay that to make the CD whether they sold the track on iTunes or not.

    Then you say: If Universal could negotiate £1 [£ or $?] from every unit Apple plans to sell, it'd make $10m.

    Um, $10m is small change compared to the numbers in the billions we have been talking about. Are you sure that's motivation enough?

  19. Kevin Thomas

    Flawed Analysis

    You're math shows that your analysis is completely flawed. You say that "As discussed, iTunes sales have not been hugely profitable for the labels." I'm not sure where you got that. It is almost free money. They have zero distribution costs as this is paid for by Apple. They also have zero media costs once the tracks are digitized (often done when recorded so meaningless in most cases). The reality is that the iTunes store is more profitable for the labels on a per song basis. Is is widely recognized that it is not significantly profitable for Apple however.

    Even more importantly, you say that the iTune Store has sold 2.5 billion songs and that the labels only get 70% of that revenue. That means that they have 'only' received $1.75 billion dollars in revenue from Apple alone. If they were able to convince Apple to give them a dollar per iPod sold (and somehow convinced them to make that retroactive to ALL previous iPod sales) they would have been given an additional $100 million dollars. That is barely more than 5% of how much they have already been paid. If they were to pull their catalog from iTunes they would lose significantly more than they could ever gain by forcing a royalty from Apple.

    Beyond the flawed math, how are iPod sales different from the sales of radios or car stereos or home receivers or just about any other piece of stereo equpment? Do the record companies receive a royalty for those sales? In fact, if those did not exist, would there even be any music sales? Remember, iPods out of the box do not record. So comparing them to digital tape recorders is incorrect. Apple has never endorsed stealing music. In fact, they opened the iTunes to allow legitimate sales after having to convince the labels in the first place.

    As for the idea that the labels could receive a royalty of 4 to 5 dollars per computer sold, that would be absolutely ridiculous. Computer have many uses beyond playing music. Should there also be a software royalty because of all the losses to software piracy? Perhaps typewriter manufacturers should receive a royalty for all lost sales to people who purchase a computer instead. That could go on forever. Pretty soon the computer would have hundreds of dollars in royalties included.

    Technolgy changes and companies must adapt along with it or or die. Look at the movie and television industry. They fought VCRs with a vengence proclaiming that they would kill their business. Instead, when they finally opened their eyes to the possibilities, they found a whole new business which makes them huge amounts of money.

    The record labels must adapt to the new reality. That is the way it is.


  20. Anonymous Coward
    Anonymous Coward

    Worst Register article ever

    I usually agree with El Reg, but not on this one. How did an article supporting fees for music labels on "every electronic device" end up on this site. I was waiting for a bootnote saying this was just some bad joke.

  21. jbelkin

    You've Been Had

    Universal Music is not just greedy but trying to find cash for overpaying to buy Universal Music. Where will you draw the line then? Should car manufacturers pay Tyre/tire manufacturers a royalty also? What about pencil manufacturers to paper maufacturers? Your line of reasoning makes NO SENSE - I can buy an iPod and NEVER put one Universal track on it and use it happily then - will UNiversal rebate me $1? Of course not. GREED.

    Or when an artist takes their library from UNiversal - do I get my dollar back?

    The ipod can be used to load Universal artists in which I HAVE ALREADY paid for royalties by buying their CD or I can use the ipod to load my own performances, watch just movies or listen just to audiobooks or perhaps I only like Mongolian chants - highly unlikely any Mongolian chanters are signed to Universal, what then?

    You would just have us randomly give Universal a dollar each? There are about 10,000 record labels, should Apple give each a dollar just to be safe or only the major 4? Where would you draw the line?

    You really need to take a look around and think through before just writing the viewpoint of a guy you met at a cocktail party who is buying you drinks.

  22. Anonymous Coward
    Anonymous Coward

    Apple doesn't keep 30%

    Dunno where Mr. Gordon gets his 30% from.


    "A download on iTunes costs 79p per track. The Performer gets 7%, the Writer 8%, Credit Card company 9%, Apple 15%, and Record Company 61%. Go figure."

    That's 61% straight to the record company, Mr Gordon, every penny of which goes to their corporate coffers, without the incovenience of having to pay any of those dratted "artists".

    >> "I believe Universal is right in seeking a royalty on electronics sales."

    Go on, tell us -- for doing what, exactly?

  23. Gleb

    I love the comment section...

    Apparently the writer of the original piece has it all wrong. While reading it I was scratching my head in disbelief - is it april first, again?

    Everyone's got their piece in, but I would like to point out that even if the numbers are wrong, and it would make sense to tax hardware - THAT would and could never happen. Noam chomsky says that there are only two super powers left in the world - one of them is public opinion, and thankfully nobody in our beloved [hacker infested] community would stand for hardware tax.

    As far as levy on blank media goes - that too is a great imposition. That's why I'm not using any optical media - and I've never felt the need to, either. Another fun way of looking at it, is that practically nobody (I'm guessing, of course feel free to disagree) actually burns CDA tracks anymore. If people burn, they burn mp3s or oggs or something compressed so tightly that a lot of songs fit on a single optical disk. With the media tax mesured in cents the price per actual infringed copywright is very small, while the price for burning, say, linux is infinitly injust. The records recover their "lost" profits by taxing people that have nothing to do with the infringment in the first place. That's a bit leninist for my taste!

  24. elder norm

    Greed, greed and pure greed

    I think that the music industry is in for a rude awakening. I vote for the artist to self post their music on iTunes directly and get paid directly. For get the greedy and useless business man.

    In todays digital age, bands can record (Garage band from Apple) their own music, make their own CDs and market their own sales. By kissing the bloated middle man good-by, they stand to keep much more of the money that they earn.


  25. Anonymous Coward
    Anonymous Coward

    With apologies to Monty Python ...

    [The Piranha brothers] began to operate what they called 'The Operation'... They would select a victim and then threaten to beat him up if he paid them the so-called 'protection money.' Four months later they started another operation which they called 'The Other Operation'. In this racket they selected another victim and

    threatened not to beat him up if he didn't pay them. One month later they hit upon 'The Other Other Operation'. In this the victim was threatened that if he didn't pay them, they would beat him up. This for the Piranha brothers was the

    turning point.

  26. Morely Dotes

    No more Gordon crap on El Reg, please

    "I believe Universal is right in seeking a royalty on electronics sales."

    How much were you paid to believe that, Mr. Gordon?

    My day job is deeply involved with setup and maintenance of computers for a business. We (the I.T. department) make it next to impossible (nothing is ever completely impossible) to copy music using the company's computers, and the penalties for even attempting to do so include termination of employment.

    There is absolutely no reason whatsoever for our company to pay Universal - nor any other "music" (I use the term loosely, as my personal opinion would be more closely equal to "cacophonous feces") company - one single mill for the computers we have bought.

    Anyone who says we should is clearly either an idiot, or a shill for the record labels.

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  28. GVD

    The Butchers are next!

    Yes, let's levy a tax on computers because they MIGHT be used to listen to music.

    Next, let's levy a tax on knives because they MIGHT be used to butcher meat.

    Where does the "it MIGHT be used for" tax end?

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  31. John Manzione

    The Reporter

    Not a single positive comment posted to this story. Clearly the reporter that posted this article has socialist leanings. Share the wealth! Come on, its only a $1 were talking about here, why not? Rubbish!

    I won't repeat what many have already said, except to say that the record companies refuse to treat its artist's with any respect, horde the money that does come in, and cheat the artist at nearly every turn. Every artist is forced to pay for all the expenses incurred in making an album, and then they are cheated when its time to pay for the records that ARE sold. Now you want computer makers to pay the record companies because a computer can play music? Get real my friend, you just want a redistribution of wealth, plain and simple.

    Apple is a capitalist company (God bless them!) and Jobs will never give the record companies a share, no matter how small, and Apple is correct.

    How about Apple launching their own music label? Want to bet that every artist on the Apple label would be paid a whole lot more than they currently make?

    You got it wrong, but then again socialism is wrong, so you can't help it.

  32. Matthew

    Just plain dumb for Universal

    One thing that I really like about the blank media levy in Canada is that it allows, by virtue of contract law, the ability to say to the whiners (RIAA) "You've been compensated, now shove off (and get bent)". While it doesn't allow you to upload, it does permit downloading of music.

    If Universal wishes to apply something this poorly thought out, then they and their attack dog organization should be forced to shut up about lost sales due to downloading. The fact would be for downloaded tunes, they would have recieved their piece of pie, even if they wind up wearing it.

    As for those worried about it being for all computers, this isn't what the article is talking about, not yet anyways. This is simply talking about a contracted share of Ipod revenue for the use, at the existing rate, of the Universal portfolio. The slippery slope argument, the "what MIGHT be used for" rubble is just that, someone somewhere will draw a line in the sand. Given that Universal really has no clout with computer manufacturers, it's unlikely that they'll be able to apply this to HDs or computers in general. As for a gov't legislated thing, that's unlikely at this point, but is a whole different problem.

    Personally I think Apple will/should dare them to take their ball(s) and go home. Short of 2 or more of the major labels pulling out, and setting up their own successful online distribution network, which would need to be done cooperatively (in order to be competitive with P2P, remnants of iTunes, etc). The Ipod and it's revenues won't be seriously affected, the labels would see a real impact in their revenue streams (61% of 2.5Bn over 4 years). Apple sees an impact of 15%, with say a teardown of 40% costs.

    You're talking each of the big 4 labels takes an average impact of 100M/year

    Apple eats: 56M/year.

    My response as Apple would be to pursue the bands themselves, expand the garage band concept, offering them something rediculous like a 40-60 split. At that point especially the large artists should, as their contracts expire, leave the major labels as it becomes far more lucrative for them to sell through iTunes, and they have the recognition to not need the distribution network of the major labels. With the big guys in tow, the little artists will follow, and Apple will really have hurt the major labels, and becomes a label themselves. The major labels effectively have to focus on breakout talent, or give the artists a fairer shake of the profits, and I don't see how that's bad. Apple really has the big stick here, I dunno why Universal is taking this approach to diplomacy, it's just going to hurt them in the end.

    Back to the "royalty" crap, I think this should allow you to download all you want, I'd love to go further and see uploading too. Either that or a reasonable copyright time.

    But IANAL, so take it with a grain of salt.

  33. Matthew

    Sorry one thing I missed in the "if I were Apple"

    Apple had a gross profit of 5.6Bn last year. 56M is relative pocket change.

    Plus, should the "royalty" cost more than 56M/ year, it makes no sense for apple to continue operating iTunes.

    Consider $1/ipod for Universal, 4 years, 100M ipods, that's 25M/year. BEFORE you factor in the asking prices of the other labels who, seeing this sweetheart deal will seek it.

    Talk about poisoning the well.

  34. heystoopid


    Nuts , to all new additional taxes fees and charges sought by this monolithic industry , as all marketing people will say if you don't make the product up to end user expectations and constantly fall short on every step of the way you lose the market to your competitors !

    The old monolith , of you have to sign up with a major label like UMG to have any international market success to sell your song to the rest of the world is rapidly dying thanks to the new market power of the billion plus users on the Internet!

    The power of the new home PC's which have come a long way in less then 3 decades from the simple rudimentary Apple 2's of old , to the point where any musician with basic computer skills can put a complete recording and sound studio previously worth tens of thousands of dollars , create record edit remix a song or video , in any location ,eliminate or enhance any background noise , upload to any CD duplicating house of choice , get the purchased bulk pack delivered , and then sell them directly at his/her next concert without the aid of any management or record label slicing and dicing all the profits and leaving the crumbs behind!

    The new musicians can even self create a web site , complete with mp3 sample tracks from his new album or direct sell his album CD's , T-shirts e.t.c. to any location in the world , without the Record Company taking the biggest share of the proceeds as is the case in multinational media conglomerates which need the monies to balance all provisions and then a lot more extra to pay the CEO's over inflated salaries and expenses!

    Any CEO , who presided over any any company which has sales that declined in over 5 years by 50% , ain't worth a bent penny and should have his salary slashed to the bone or sacked for incompetence , rather than inflated as is the case today! , for he is looking out for number one and not all shareholder's interest or their capital investment!

    With the power of a few modern electronic computing devices linked and talking to each other , the modern musician in this new 21st century , can eliminate the majority of parasites the major labels supply as minders that infest and deflate his income to pennies rather than dollars whilst appealing to a wider more discerning audience world wide , who by now are tired of listening to the same old universal sound alike and look alike garbage that is the hallmark of all the current big four's majority of new releases since 2000 , of the hear them once and throw them away genre because the majority literally suck so badly , very few if any stand above the noise!

    Me I wonder , what UMG would say about Prince's direct marketing of four million CD's for free in a Sunday paper , which paid him for that privilege , as a promotion for his new up coming UK concert tours , when previously the local arm of his record company struggled to sell a mere forty thousand of his last album!

    To close in the words of Bob Dylan "For the times they are a-changin'. The line it is drawn The curse it is cast The slow one now Will later be fast As the present now Will later be past ..."

  35. Matthew Saroff

    You are wrong

    You say, "the income generated by the levy has been negligible because AHRA does not apply to the new generations of technology, including personal computers and MP3 players."

    There has been negligible income because the levy, and the mandatory copy protection technology, killed the digital tape recorder by making media and hardware too expensive, and reducing sound quality.

  36. ReginaldW

    Consider the source

    I looked for other articles here by Steve Gordon and found one where he said he worked for Sony as a corporate lawyer. I did a Google search on Steve Gordon and finding his website at there is this statement at the bottom.

    "Steve is Senior Vice President of Content, Licensing & Acquisition for MUSIC ON DEMAND, INC. m/OD is a partnership between the cable TV industry and the music business to create a subscription video-on-demand service airing music programming on cable, and selling CDs, DVDs and merchandise to the subscribers of the service."

    So, someone who WANTS royalties would definitely want royalties on hardware sales. After all, if you can get someone to pay you for doing nothing, why not?

    There are those who do and those who suck off those who do. Guess who is who.

  37. Anonymous Coward
    Anonymous Coward

    Yay! Legalised piracy!!!

    Oh, wasn't that what was meant by, "...the labels together may be able to get $4 to $5 or more for each computer and MP3 player, that could add up to an extraordinary amount of money that could compensate for lost sales..."?

    I assumed that if I've already paid the $4 or $5, I can go ahead and get all Universal music from P2P networks? And no one can sue me because I've actually paid for it?

    I hope Universal crash and burn.

  38. Anonymous Coward
    Anonymous Coward


    Worst. Register. Article. Ever!

  39. Eric Van Haesendonck

    They should bundle songs instead of trying to impose a tax

    Instead of trying to have Apple give each major 1 dollar, why don't they ask Steve Jobs to raise the price of the iPod $10 BUT bundle a voucher for 10 iTunes downloads with each ipod? That way the music industry would be assured some sales, the money would go to the labels publishing the music that the customer actually chose to download, and the consumer wouldn't feel taxed.

    That would also force the majors to produce decent music, or the $10 voucher would go to independant labels. Also if the labels get 70c per song that would be $7 by ipod that goes in the music industry, or $700 millions if they had done this on the 100 milions ipods sold. This wouldn't really cost something for consumers because the very large majority ofr ipod users is likelly to buy some new tracks at some point, and else they could always re-sell the woucher to someone that does.

  40. Greg

    Yes, it is right that they seek royalties

    ... In spite of all the crap incompetent punters are uttering here.

    Why is it right? It's the economics, stupid!

    The way to achieve efficiency for the distribution of goods in a society is to have goods be sold at marginal price.

    This is because selling at less than production price incites people to spend the goods without a need proportionate to the cost, and selling higher than that cost makes people shy out from buying, which reduces the amount of pleasure (total) derived from a product. What is important for efficiency is not the transfer of money (whether it's in one pocket or the other, it's there somewhere, you could always tax it back idf needed) but the fact that the price is right.

    In our case here, it implies that the cost should be 0. It costs nothing to duplicate a song, so it should cost nothing. Not because of any ideology, but for practical, efficiency reasons: if I value listening to a crap song at 1c and it costs nothing to the producer, why should I be deprived of the pleasure, and the producer of the money? what if I value it 0.5c? 001c?

    So music in our age should be free.

    That has been very well understood for a long time, you don't pay per hour you listen to radio.

    But then you need to make the business live (not necessarily the major, but the industry as a whole, whatever parts of it are necessary).

    But you can't ask people to pay per song, not even to pay for the right to listen in an unlimited manner, because the price will always be too high for someone who would have been ready to pay half that. So in that case it's pleasure lost for the guy, AND money lost for the industry => inefficient.

    The only optimal solution, as has been known by economists for around 2.5 centuries now, is to make everyone pay for the good of all. You get to pay a price whatever you do, that way you're then free to benefit from the full service. Some end up losers, as they pay more than they value the fact of listening to whatever they want whenever they want, but pricing them out would increase the cost for others, which would in turn deter some of those, which increases the price for those who are left, and so on.

    This is why a levy of some kind is THE right way to go, as anyone with a good economic background and no vested interest in one side or the other, will tell you (THE right way assuming it is at all possible to put it into place, but then that's not an ideological question anymore, as opposed to what I can read above).

    For information, I'm NOT a major lovers, quite the opposite, I consider them parasites which have outlived their usefulness, but still, that's not a reason to say that a levy is not in itself a good thing (though as very well pointed out by the good journalist you're criticizing without good cause, it would be better if raised by an organization that as the artists' well-being at heart).

    Also note that all of you are paying for the wellfare of all, for the public roads they're not using, for the army, for whatever thing you cannot efficiently ask people to pay a contribution of their own choice, because the good of the society as a whole mandates that you don't give people a choice - even if they're in good health or have a personnal insurance and so don't care about Medicaid/NHS/whatever social health service there is in your country.

  41. Matt

    Audio Home Recording Act

    When refering to law can you please state which country it is from? The Audio Home Recording Act is a peice of American legislation but you don't mention this, remember this is primarily a Brit site, but it is read by people from all over the world so please bear this is mind when writing atricles for El Reg!


  42. Paul Stimpson

    $1 per Zune not about the hardware

    IMHO the $1 per Zune is nothing to do with the Zune hardware. It's all about DRM. Microsoft are effectively paying Universal to use MS-DRM. It would look really bad for any company if they had to pay customers to take their products. If I walked into a shop and saw a sign effectively saying "we'll pay you to take this product away" my first response would be "what's wrong with it and what's wrong with you for making it?" In this case the product is DRM. The levy on the Zune is just another way of dressing this up.

    MS are paying for a slice of the media distribution pie in the hope that their investment will make them the default monopoly player. If it pays off it will be very good for them financially and will marginalise open source music players and operating systems as the MS-DRM code is obviously going to be under NDA and is therefore unavailable to them. Stopping users from playing music and movies is a very powerful way to slow desktop adoption of a competitors operating system.

    MS get away with taxing computer hardware. They got paid for a Windows licence even though my office box runs Debian and always has. Yes I COULD try to get my money back for that licence but my time per-hour would be more than the sum involved and even then, if I did, MS still get their money as the OEM deal my vendor signed means they get paid even if Windows doesn't ship (not my problem if they signed a crappy deal, I know.) With this as an example please will somebody explain to me why big music shouldn't try it on too? What have they got to lose?

    I say make a fair royalty distribution mechanism that pays the majors but doesn't cut the small players out then let every ISP offer the option for home users to pay a few dollars a month to legally use P2P. They could issue IP addresses and hostnames in different ranges depending on whether or not the customer has paid the extra (e.g. against That way the music business would be able to see instantly who has and has not paid and would not be able to sue those who paid. This mechanism could also be used to prevent non-P2P users' bandwidth being squeezed by P2P users. The ISPs also get to become blameless and get a reduction in copyright complaints. Everybody wins.

  43. Anonymous Coward
    Anonymous Coward

    Re: John Manzione

    "You got it wrong, but then again socialism is wrong, so you can't help it."

    How in the *world* could you possibly manage to interpret this as socialism?

    Taxing people to prop up a cartel which works against their interests and which is starting to lose it's grip on its monopoly is about as far from socialism as you can get. Please understand that the word 'socialism' has an *actual* meaning outside of the US - as opposed to being a random perjorative to throw at any system you don't like.

    "Get real my friend, you just want a redistribution of wealth, plain and simple."

    That is completely ass-backward. The 'redistribution of wealth' thing is supposed to be about moving it from a small group with extreme wealth (the labels) to the 'oppressed masses' (the artists and us).

    Why ruin your perfectly valid complaints about the actions of the record labels by attaching it to random bashing of a political philosophy of which you have not even the most basic understanding?

  44. Cyberspice

    Yet another gasp from a dying industry

    I am a part owner and on the management of an alternative music venue. ( I do this in my spare time by day I'm a geek). The club pays its music licences to the BPI, and our DJs pay their licences in order to be able to play music off of their laptops.

    But I personally know many of the bands who we play. They give me their latest releases. Most of them are independents. None of them are actually signed to anyone who gets any money from the BPI. So we pay thousands for the privilege of playing music that we don't pay and none of our friends who actually make music get anything in return.

    The big music companies are no better that organised crime syndicates. I feel that any device manufacture should hold out and not pay them a penny. The sooner they die and music as a business ends the better.

  45. Giles Jones Gold badge


    Why should the music companies get money from the hardware?

    It's simple:

    Apple makes the hardware, the record labels make the music.

    Apple gets the money for the hardware.

    Record labels get the money for the music.

    If the music isn't bringing in the dough then you need to look at the cost of the music in terms of how much it takes to produce and reduce that cost.

    Try not spending millions on a promo video as people buy the music first, video second.

    Music is cheap to produce, producers and video directors aren't cheap.

    Economise like all other media companies have to.

  46. Scott Mckenzie

    I'd love to see...

    ...Apple make their own label, or offer an easy method of artists releasing their own tracks on iTunes and making ALL the money themselves, then the music industry would have fun and games on their hands!

    MS have opened a huge can of worms by offering the deal to Universal... i guess they were trying to get some sort of exclusive with Universal but have been screwed over, that factor won't help in any negotiation with Apple.

    IMHO Universal need Apple a lot more than Apple need Universal. As many folks have said, 70% (or possibly more accurately 61%) of something is a lot better than 0% of nothing....

    Oh and I buy CD's anyway.

  47. Mo


    The biggest flaw in the argument of a levy on hardware sales is that I'VE ALREADY PAID FOR THE CDs that I'm sticking on my iPod.

    Why on earth should people be forced to pay twice? Even Steve Ballmer had to back down on his “The most common format of music on an iPod is 'stolen'” quip.

    Maybe I should have to pay a levy on each separate pair of speakers that I buy?

  48. Chad H.

    But Pirated Music IS capitalism Incarnate

    People began to download music BECAUSE the marketplace wasnt supplying what the market wanted - Easily to access digital music without a physical component - IE an MP3.

    What we didnt want is an Overpriced physical "album" full of the artists other crap that wasnt good enough to get airplay, lets face it, on your average album, theres what, 2, 3 songs that get airplay for your average manufactured group.

    The old business model just doesn't work any more. It shouldnt have worked for a long time because its not wanted the consumer wanted, but there wasnt an alternative, now there is.

  49. Connor Garvey

    I think no

    Should I also pay a tax to the oil companies when I buy a car?

    Oh! How about a hand out to Microsoft whenever I buy a PC.

    I'll have to give money to the soft drink companies whenever I buy a cup because i *might* put soda in it one day.

    Do the Register's editors read these stories before they're published?

  50. Anonymous Coward
    Anonymous Coward

    Cough Up

    Can you all please send me $1 each.

    I have some photos on Flickr and you may see them. Even if you don't know what flickr is, or have no intention of visiting, you MAY go there and MAY download the pictures, without my express consent.



  51. Anonymous Coward
    Anonymous Coward

    When you sell half-decent CDs for £1.40, what happens to volumes?

    That'll be the same Universal that took down Prince's amazing Superbowl half time performance off Youtube will it? A record label couldn't ask for a better advertisement, but they'd rather enforce their "rights" than advertise their content ?

    On a related note, what happened to UK Mail on Sunday sales last weekend (did I miss El Reg's coverage)? Hundreds of thousands of people paid (around) two dollars for a newspaper they wouldn't normally buy, to get hold of the new Prince CD. (I've translated to US money because the article author seems to be a Yank).

    Wake up, pigopolists, the answer is decent performers, decent music, decent prices. Enough of the Search for a Simon Cowell Factor clones, thank you.

  52. Greg



    >The biggest flaw in the argument of a levy on hardware sales is that I'VE ALREADY PAID FOR THE CDs that I'm sticking on my iPod.

    That is, assuming you paid for your CD. The tax is justified only as a compensation for the right to get the music without ever buying the CD, by getting it by whatever means you want. In that case the CD you pay or don't pay is just for the physical object, in the same way as you can actually buy a Linux DVD if you like having a DVD an a user guide.

    the levy is just there to ensure that the rights for the music itself are paid for, music which you should of course then be legally allowed to get by any means of your choice, otherwise I agree that the levy is unjustified.

    @Connor Garvey

    >Should I also pay a tax to the oil companies when I buy a car?

    Oh! How about a hand out to Microsoft whenever I buy a PC.

    I'll have to give money to the soft drink companies whenever I buy a cup because i *might* put soda in it one day.

    The comparison are ALWAYS ludicrous as soon as they compare a physical product (oil) to an immaterial one (music). There's no reason to pay the oil companies for their drilling investment when you buy a car, because you'll pay for the drilling investment by buying oil, which I never succeeded in downloading on P2P networks, no matter how hard I tried. there's a reason to pay the music companies for their recording/producing investment (who to pay exactly and how much is another debate) when you buy an iPod, because you can completely avoid ever paying one shilling for the music itself while still enjoying it.

    That's the difference between rival goods (of which there's a limited supply for a given cost, for instance concert seats) and non-rival goods (which we do not need to fight over: once a song is produced, everyone on earth could enjoy it on his iPod without there being a shortage of it.). Non-rival goods should cost 0, and as a direct consequence should be paid for by levies.

    Oil and soft drinks are rival goods, your analogy is inappropriate

    (Microsoft comparison is more apt, the problem there being quantity; a levy is only beneficial if you want an all-you-can-eat product like music, not an OS of which most people only want to be able to run one or at most two at the same time)

  53. Anonymous Coward
    Anonymous Coward

    Response to Greg

    You arguement is crap.

    How about $1 for every photographer as their material may be illegally reproduced

    How about $1 for every Author as their material may be illegally reproduced

    How about $1 for every graphic designer as their material may be illegally reproduced

    How about $1 for every website designer as their material may be illegally reproduced

    How about $1 for every fine artist as their material may be illegally reproduced

    In fact there is proberbly more visual theft than audio. How many people have thought, oh that's a nice pic and downloaded it, regardless of copyright?

  54. Greg


    @Stu Reeves

    Exactly, and I don't see why it makes my argument crap.

    Quite the opposite, I fully agree with a levy for photographers, authors, graphic designers and all.

    Note that, however, you got it completely and fully wrong.

    "illegally reproduced" is absurd to use as a reply to my comments, since by definition, the levy needs to be a counterpart to it being LEGAL to reproduce.

    Also, where did you ever see that it should be authors or graphic designers or whatever who get to raise a levy? Where did youi see me say that U2, Britney Spears and Korn should each raise a levy? You reply in bad faith I'm afraid.

    What I do support (as well as so many theoretical articles if you read economic scientific paper) is a levy for the industry, so that there is a pool of revenue for the music industry to be shared among all artists (and if need be, the ones whom they work with/for).

    I thank you for raising the subject, however badly: yes, indeed, such a levy should also be raised for the authors as a whole (the proceeds having then to be split among them by an organization, just like for the AHRA, how to rightly split the money being another issue down the line). At least the day when all the categories you cited will be concerned with widespread adoption of the marginal-cost tarification, which is not currently the case.

    In the meantime, because there are no individuals actually BUYING nice pics (and professional wouldn't usually do it illegally), there is nothing to compensate, as there is no switch to a different business model for pictures. If some day there is and it's good for the society to allow photographs to live by paying them while allowing everyone access to everything rather than having to see just one or two pictures because you pay for each one, then fine, it'll be time to have a levy for them too.

  55. Spadge Fromley


    "Steve Jobs says it is Apple's goal to sell 10 million iPhones in 2008, the first full year of sales. This means that the goal is to get one per cent of the £1bn strong mobile phone market. If Universal could negotiate £1 from every unit Apple plans to sell, it'd make $10m."

    Chuck in a pear of bananas and you've got yourself a meal!

    This isn't 1985, you know.

  56. Glen Turner

    I use my iPod for Podcasts

    So tell me again why I should pay Universal to listen to science podcasts?

    Anyway, it's bad public policy to levy the player as a proxy for music listening royalties.

    Firstly, it is anti-competitive. Imagine how a new firm (such as Virgin Records once was) would ever appear in the future digital music market.

    Secondly, it's far too complex. There are substantial differences in record company market share depending on where you are -- English speakers don't listen to many Japanese-language recordings, some English-language groups are unaccountably "big in Japan", dragging their record company's market share with them.

    Thirdly, it prevents the evolution of the market. Flickr and YouTube don't make money by levying product. What makes digital music so special that it will always need the particular form of intermediatary known as a "record company"?

    Fourthly, levying the iPod denies artists subsequent revenues. Music preferences change as people age. But the revenue via the hardware purchase will always be frozen to my preferences at the time I purchased the player. Since art follows money, those annoying boy bands so appealing to teenagers will exist forever.

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