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News   - 04/21/2007

Apple holds upper hand in music negotiations

Recent negotiations call for a quantum leap in the global online music market.

Company's early deal with EMI gives it position of strength as it enters talks with the three other major music labels.

When Apple sits down for contract negotiations with the major record companies over the next month, it will probably seek further concessions from them on selling music without copy-protection software.

The owner of the market-leading iPod digital media player and iTunes online music store has already cut an early deal with EMI Group, the third-largest record company, and enters talks with the other labels from a position of strength, according to music industry executives.

That leaves Vivendi's Universal Music Group; Sony BMG Music Entertainment, which is a joint venture of Sony and Bertelsmann; and Warner Music Group in a tough spot.

"EMI struck a deal that puts all of us at a disadvantage," said a music executive who spoke on condition of anonymity. He said EMI had agreed to let Apple sell its music without antipiracy protection to please shareholders concerned that the record company was behind in the digital music race.

For its part, EMI argues that the anticopying software, known as digital rights management, has been frustrating for consumers.

"We believe removing it will boost digital music overall," an EMI representative said.

Universal, Sony BMG and Warner will aim to steer contract renewal negotiations with Apple to discussions on variable pricing for songs, a subscription service for iTunes, and more bundling of tracks and other features into digital packages, music executives and analysts say.

The separate talks are scheduled to start toward the end of April and go into the summer.

Music companies also want to improve their margins on the wholesale pricing of digital songs. There has even been talk of getting a cut of sales of iPods themselves, or future devices such as the highly anticipated iPhone set for availability in June.

Source: ZDNet    
 
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