September 17th, 2007
admin
And Telefonica, who owns them, just as much. If the rumors are true, they will be surrendering around 40% of revenue (not profit, revenue) from each client using an iPhone, in exchange for an exclusive distribution deal in the UK. What is going to be the likely problem for end users here? Traditionally, when you buy a phone in Europe that is tied to a contract, you have to sign the papers before you can even smell the phone, and thus are bound by the terms. In the US, you can just buy the phone at the store, take it home, and get the contract set up with AT&T through iTunes there while sipping a coffee.
Unlocking your $400 iPhone is now possible, and so you’re no longer bound by an AT&T contract. In Europe, however, you may be able to unlock the phone just the same, but you will have to stay with the contract or pay the cancellation fee. Either way, operators stand to have better deal than AT&T.
Looking at how Universal Music Group has decided not to renew their contract with the iTunes music store (which is by the way the third largest music retailer in the U.S., not just online, but globally!), I predict two things will happen:
- Apple will offer a subscription-based model, where you pay a weekly or monthly fee, and can download as much as you want from their catalog. Right now, iTunes imposes the price they buy their music at, and it has been patently obvious that many labels were not at all happy with the $0.99 a song pricing scheme.
- UMG will see their music pirated like no other label. If people cannot even get their music from a convenient and easy to use source, for a one-could-argue reasonable price, they will find ways to get it from other sources. There are alternatives to piracy, such as MP3Search.ru, which provide songs at $0.19 a piece, DRM-free, and they have a very extensive repertoire (albeit sometimes not as complete as iTunes’).
Will this prediction come true? It depends on how much it would hurt iTunes to lose Universal, and I think it would hurt a lot.