Universal's Crave for a Slice of the iPod Pie

Earlier last month, Universal Music Group signed a deal with Microsoft that gives Universal a percentage of the profits of each Zune sold. Now, Universal has set its sights on Apple, hoping to grab a slice of iPod sales.

At a recent Reuters Media Summit, Universal executive Doug Morris revealed the company's desire to strike a deal with Apple that would give iPod royalties to the music company.

"It would be a nice idea. We have a negotiation coming up not too far. I don't see why we wouldn't do that... but maybe not in the same way," Morris explained at the conference in New York City. (Source: arstechnica.com)

Universal's appetite for royalties from digital music players comes from their understanding of digital music downloads. They believe that a significant portion of music on the players is downloaded illegally. Therefore, the company asserts that it deserves a cut from digital music player sales in order to be compensated for lost album sales.

"These [digital music player] devices are just repositories for stolen music, and they all know it. So it's time to get paid for it," Morris said. (Source: appleinsider.com)

The "file-swappig problem" is not a new issue in the industry. Economists have recommended that file-swapping be legalized in the United States; however, this solution has not been greeting with satisfaction by all parties. Apple and Microsoft are well aware that such legalization would be detrimental to the systems' digital music stores (iTunes and Zune Marketplace, respectively). (Source: arstechnica.com)

However, while the issue of file-swapping has been around for quite awhile, Universal's proposed solution is definitely new. But although Universal may be seeing dollar signs with their new idea, they shouldn't be too hasty. Economically, it does not make sense for consumers to be charged a "tax" on their higher-priced media players and still pay for music downloads. Therefore, the implementation of Universal's royalty system may cause a push towards file-swapping legalization. (Source: arstechnica.com)

Universal and Apple are slated to meet in early 2007 at a round table meeting to discuss licensing negotiations. Universal hasn't held back in expressing what it wants to ask for. Whether or not Apple agrees, however, is not going to be so easy to foresee.