Apple To Buy Vivendi's Music Division For $6 Billion [Archive]

strider42

Apr 11, 2003, 01:55 AM

Originally posted by AlejandroGonzo
The LA Times reports Apple is in talks to buy Universal Music from parent company Vivendi, saying Jobs will become the most powerful man in the music industry.

http://www.latimes.com/business/la-fi-apple11apr11,1,6558114.story?coll=la%2Dhome%2Dheadlines

If I remember right, apple has only 4 billion in cash reserves. Not that they'd buy it in cash, but it seems obvious that such a move would but a serious dent in apple's finances. Its a big gamble if they did go that route.

But it sure would be interesting if it happened. Personally I've been waiting for apple to absorb or create subsidiary companies that compliment their main business but isn't about software or computers. So I think something like this could be a good move. I don't know if this example is a good move, but moving outside the core business, without going into things they know nothing about, is going to be essential to apple's bottom line.

Apple][Forever

Apr 11, 2003, 02:15 AM

brought this up in the online music service thread too, didn't remember getting a response-

what about the deal with Apple Records?

chewbaccapits

Apr 11, 2003, 02:24 AM

All I can say is WOW........Wonder if they can pull it off...

maradong

Apr 11, 2003, 03:01 AM

I hope they won t do that! Who knows, if sales on the hardware go down, perhaps they will not be able to come in a bonus with it. I think they will make large losses with this service, as , none of the "music you have to pay for" services on the internet has survived, as there are still things like kaza, limewire and co aviable.

alset

Apr 11, 2003, 03:24 AM

I don't believe it. Actually, I do. I believe it just as much as the idea that Apple had caused ThinkSecret to go offline. I believe it just as much as the iPod updates that were going to happen three months ago and the dual 970s that some people think are coming to the PowerBooks.

C'mon!!!!!

Dan

yzedf

Apr 11, 2003, 07:04 AM

music industry is hurting more than ever before... sounds like a waste of time, $$$, and energy to me.

JPGR_Fan

Apr 11, 2003, 07:07 AM

Random thoughts:

I think it's true that Steve Jobs loves music, and he must think he is a good executive in the creative fields (e.g. Apple itself, but especially Pixar).

However . . .

If Apple owns one of the big music companies, doesn't that make it harder to launch a music service that offers tunes from everyone, which it must to be successful?

And . . .

What would Tipper Gore's role be?

Happy Hamlet

Apr 11, 2003, 07:15 AM

The Register has a story about it. I agree with them that the whole 'digital rights managment' craze might be a huge opportunity for Apple if they play it right. I use both Macs and PCs (and actually like both), but if DRM is coming to the Windows platform (hardware & software) I will probably switch back to Macs only (that's how I started). I think nobody likes the idea that big corporations snoop around on their computer. If Apple plays up the privacy issue with just the right amount of paranoia I think they could do a switch campain that actually works.

iJon

Apr 11, 2003, 07:56 AM

very interesting. i really dont know what to believe, and i really dont care. seems like 6 billion is a hefty amount for a company with 4 billion. guess we will see. doest steve also have lots of personal cash from pixar and apple.

iJon

mac15

Apr 11, 2003, 08:27 AM

this thing is are they buying it for apple, universal is a huge company and could fit into every aspect of what apple is doing right now.

Universal does music and film, Apple could use this to get behind is upcoming music service and even push the industry with mpeg4. As it would play a massive role in it. And with this momentum it could ruin Microsofts relations with WMP9 and there anti DRM stance.

Then again could apple expand this into more than just film? FCP is already a big part of it, an with tools such as DVDSP and Shake, this could mean more and even more macs in the industry.

This would reflect good things for pixar, Apple wouldn't jump into this if it wasn't a good decision.

dricci

Apr 11, 2003, 08:30 AM

If anybody could pull this off, it'd be Apple. I have no doubt in my mind Steve would be able to make Internet music profitable because of his strong belief in consumer rights and hate towards DRM. Either way, we'll probably see this new music service soon. Apple owning the largest label out there would just be icing on the cake :D

LethalWolfe

Apr 11, 2003, 08:32 AM

Originally posted by mac15
this thing is are they buying it for apple, universal is a huge company and could fit into every aspect of what apple is doing right now.

Universal does music and film, Apple could use this to get behind is upcoming music service and even push the industry with mpeg4. As it would play a massive role in it. And with this momentum it could ruin Microsofts relations with WMP9 and there anti DRM stance.

Then again could apple expand this into more than just film? FCP is already a big part of it, an with tools such as DVDSP and Shake, this could mean more and even more macs in the industry.

This would reflect good things for pixar, Apple wouldn't jump into this if it wasn't a good decision.

I think they are just looking to buy Universal Music Group, not Universal Films.

Lethal

ipiloot

Apr 11, 2003, 08:36 AM

1. It's a big risk to invest in ANY market going down despite the money and ideas, one has

2. There's no need to own a recording company to get the music to sell.

3. If it really happens, it shows that Apple has no ideas what to do with the money, they have in the business, they're really in - computers

4. It'd be stupid to put all the eggs in one basket - you risk eating Apple's profit and spending it on some music shop

5. It's stupid to put $6 billion depending on te success of the yet-to-be announced untested (market-wise) web-service.

The only positive thing is that the brand allows the company to du such things quite successfully. Sony did it and they're doing quite ok.

synergy

Apr 11, 2003, 08:36 AM

This could be one of the most interesting buys in the history of business. A computer hardware/software company buying a Music publishing company.

This could help shore up Apple profits through the sales of music and movies if they bought the movie part.
Transitioning from CDs to mp3 sales could help propel them further and beat the honking snot out of the other record companies. Apple has always wanted to be like Sony. They have their MP3 players. What other DLDs will be out to compete with Sony?
Adding music to their portfolio would bring them closer to being similar to the Sony giant.

DriverDan

Apr 11, 2003, 08:37 AM

I thought Apple Computer was sued years ago by Apple Records for copyright infringement, and that it was settled by Apple Computer agreeing never to go into the music biz.

stefman

Apr 11, 2003, 08:38 AM

Come on! Apple wants to be an AOL or Viacom or VivendiUniversal now?

None of those companies are making money and one is pretty much dead.

Not a very wise move I think.

Furthermore, Apple Computer would get slapped with a big lawsuit by Apple Records.....Sosumi!!

DriverDan, didn't see your post

drastik

Apr 11, 2003, 08:42 AM

If it happens, You can bet the bank that a lot more studios will run apple hardware and logic software. On the other hand this might further light a fire under Digidesigns ass. One thing apple must do to stay in the desktop market is get Pro Tools and Avid working a little quicker on their aoftware, not to mention Quark. Sure, we are getting the ports now, but these companies are so bloated ansd sure of themselves that they have no motivation. Apple owning Universal will give apple some more sway over digital media companies.

eddively

Apr 11, 2003, 08:43 AM

Originally posted by DriverDan
I thought Apple Computer was sued years ago by Apple Records for copyright infringement, and that it was settled by Apple Computer agreeing never to go into the music biz.

Yes, you are right. However, I am just guessing that it was a time frame that they could not enter them music group..or maybe under the Record Label "Apple". But UMG already exists, I don't think that kind of takeover would break the contract, but I could be wrong. Plus, I really don't think that Apple would know all the time that if they bought out UMG, that they would be breaking a contract.

edited for my stupidity

The Shadow

Apr 11, 2003, 08:44 AM

Thing that worries me is that Uncle Steve has never sold any thing cheap in his life, he's always cranked up the profit margin. Doesn't seem a good fit with online music sales to me.

And if you believe anything you read in the biographies around on Jobs, nobody thinks he is a savvy executive, least of all the Pixar people.

I guess there is a second thing that worries me...this is big AND it's risky...no good business man would go near it. It's big enough to ruin a company the size of Apple if it goes wrong.

I hope it's not true.

timbloom

Apr 11, 2003, 08:44 AM

FelixDerKater

Apr 11, 2003, 08:47 AM

Frobozz

Apr 11, 2003, 08:55 AM

Originally posted by ipiloot

4. It'd be stupid to put all the eggs in one basket - you risk eating Apple's profit and spending it on some music shop

This isn't a music shop. It's Universal Records. The largest of all "music shops." :-)

I don't necessarily think it's wise to do it, but it's not like Apple is throwing away $6B on an investment to only receive $0. Universal makes a LOT of money NOW.... which means immediate ROI. They'll expand the revenue by offering online distribution.

If Jobs can pull it off, it would be a major cash cow for Apple. I'm still hesitant to believe this, as many major papers have reported false rumors in the past-- such as Sony buying Apple. Or Disney. The list goes on.

Sol

Apr 11, 2003, 08:59 AM

Why would Apple become a content provider? Their business is been computers, gadgets and software to use with computers. Music, movies, video games, etc are content and the formats they come on are compatible with our Macs. Downloading singles from the Net might be a good option but I suspect most people would still prefer to shop for their CDs. Same goes for movies and games.

I have my doubts about the validity of this story. Perhaps we can take it as an indicator that Apple will almost definitely provide a distribution service for iTunes users when the new iPods arrive (or soon after).

Frobozz

Apr 11, 2003, 09:00 AM

Originally posted by DriverDan
I thought Apple Computer was sued years ago by Apple Records for copyright infringement, and that it was settled by Apple Computer agreeing never to go into the music biz.

So far as I'm aware, this is true. However, it may be that this settlement had a limitation that would enable Apple to enter the music business after a certain amount of time. I'm also not sure about the financial situation of Apple records these days.

bousozoku

Apr 11, 2003, 09:06 AM

Originally posted by FelixDerKater
Maybe we'll eventually see music vending machines instead of large record shops. I heard a while back that in Japan you could co to such machines with a MiniDisc and purchase a single song and it would be recorded onto the MD. Anyone know if that is true? Maybe they said you bought the MD pre-recorded from the machine. I forget.

There were machines like that in Japan for software as long ago as 1985, so it's very likely that you can buy music that way.

I hope that an agreement can be reached. I'm thinking that, with Apple's relationship with musicians, technicians, and producers, that they ought to be able to get everyone a better cut while lowering prices and still make a good profit. This would pull more of those people to the renewed company and build on its strength. More than having an iPod, those people want to be recognised and shown it by their cut of the profits.

Foocha

Apr 11, 2003, 09:07 AM

This is amazing news - I wonder what Wall St would make of it?

It would be nice to see this big American company back in America hands - I only hope the pill is not too big for Apple to swallow.

lmalave

Apr 11, 2003, 09:08 AM

Originally posted by Sol
Why would Apple become a content provider? Their business is been computers, gadgets and software to use with computers. Music, movies, video games, etc are content and the formats they come on are compatible with our Macs. Downloading singles from the Net might be a good option but I suspect most people would still prefer to shop for their CDs. Same goes for movies and games.

I have my doubts about the validity of this story. Perhaps we can take it as an indicator that Apple will almost definitely provide a distribution service for iTunes users when the new iPods arrive (or soon after).

Well, the story's hit MSBNC, not exactly known as a rumor-mongering site...

http://msnbc.com/news/898804.asp?0cv=CB20

anthonymoody

Apr 11, 2003, 09:22 AM

Well, Apple is down almost 5% right now when almost everything else on the screen is green, so it's clear what the early verdict by the street is.

The thing that gets me is this: Apple doesn't need to own a label (let alone the largest umbrella in the world) to provide music for its service. The labels are under increased scrutiny and pressure from congress to offer their content fairly and equally...not only to the ones they back like pressplay but to non industry players as well. So, at the end of the day, Apple should be able to sign licensing agreements with all 5 majors. They don't need to own one to do this.

What's most bizarre is that while Apple's cash position is about $4.4 billion, the market cap is only just north of $5 billion. That says 2 things:
1) the market values apple's business as almost worthless (i.e. the enterprise value is about $700 million)
2) to buy UMG for $5-6 billion results in massive dilution to the existing finance base of apple

So, unless UMG is at least as profitable as Apple (which I don't buy given the fact that the music industry has been shrinking in terms of both unit sales and revenues), it doesn't seem to make sense financially either.

Now, strategically, MAYBE there's a possibility that by getting into the business Apple can capture a large part of the value chain in the music business that UMG currently does not capture. As someone speculated earlier, maybe by materially changing the distribution game Apple thinks it can make more money from UMG with UMG under its control than UMG can on its own.

TM

bilingual

Apr 11, 2003, 09:23 AM

Apple is down 87 cents as of 10:23 AM EST. The Wallstreet is not too keen on this arrangement.

NicoMan

Apr 11, 2003, 09:23 AM

Originally posted by ipiloot
1. It's a big risk to invest in ANY market going down despite the money and ideas, one has

2. There's no need to own a recording company to get the music to sell.

3. If it really happens, it shows that Apple has no ideas what to do with the money, they have in the business, they're really in - computers

4. It'd be stupid to put all the eggs in one basket - you risk eating Apple's profit and spending it on some music shop

5. It's stupid to put $6 billion depending on te success of the yet-to-be announced untested (market-wise) web-service.

The only positive thing is that the brand allows the company to du such things quite successfully. Sony did it and they're doing quite ok.

1. You are right here but it's the market value that's going down, not the company, and it's not like buying a single share, you are buying a whole business + rights to manage it.
2. So far it seems that without the backing of the majors, online music ventures are sure to fail. And we know how agressive the majors are with regards to the DRM issue. So if you want a rather "liberal" music service you cannot count on their backing... unless you own one of the majors...
3. They probably just don't want all their eggs in the same basket. besides IF this happens it will probably a cash + stock package as opposed to a cash-only deal. They will still have cash left for the computer business.
4. On the contrary, besides what Apple profits?? And the music business is a cash cow, with much bigger profits than Apple's.
5. Who says it is just for an online music service? The music business (despite the majors' cries to the contrary) makes A LOT of money, even though they are making a little less now.

NicoMan

anthonymoody

Apr 11, 2003, 09:25 AM

Actually Nicoman to my understanding UMG, and most of the other majors, have pretty much been hemorraging the last 2 years.

TM

tempo128bpm

Apr 11, 2003, 09:28 AM

I don't know why none of the articles mention this, but if Apple wants to get into the on-line music service business, Universal Music Group is the PERFECT record company to buy, because UMG already owns:

MP3.com
emusic.com
rollingstone.com
mp4.com

MP3.com and eMusic are both mature online music services with huge catalogs of music (and not just crappy unsigned bands that nobody has heard of). If Apple buys UMG, they'll be able to leverage the experience, the developers, the library of music, the existing code, the revenue stream, etc. etc. etc.

JesseJames

Apr 11, 2003, 09:32 AM

Going off on a tangent here.
I think the record companies have brought this upon themselves. I mean, how many times have you shelled out 14 or 18 bucks for a CD and found that there are only 2 or 3 songs that you like on the whole freaking album? The prevailing thought in my mind was: WHAT A RIP!!! If only I could pay for the songs I wanted! Those bastards tease us with releasing limited singles too!
I have no compunction about using Limewire. If the record companies would wake up and realize that their customers are fed up with their antics then they can make a cogent business plan to give us what we want. Then they wouldn't have such a problem like they have on their hands now.
Hey record companies! GET BENT!:p

NicoMan

Apr 11, 2003, 09:35 AM

Originally posted by stefman
Come on! Apple wants to be an AOL or Viacom or VivendiUniversal now?

None of those companies are making money and one is pretty much dead.

Not a very wise move I think.

Furthermore, Apple Computer would get slapped with a big lawsuit by Apple Records.....Sosumi!!

DriverDan, didn't see your post
I'll tell you what: Apple situation has absolutely nothing to do with AOL. For one AOL was never a good business. It just happens that they were so ridiculously overvalued during the bubble years that it allowed them to buy plenty of things through shares deals. It's the guys at Time Warner who swapped their shares with AOL guys who are crying now, because their company used to be a decent business, as opposed to AOL. And the bundle of money that AOL Time Warner have lost are due to write-offs because they bought loads of internet-related companies at ridiculous prices...

That's my opinion... (anyway what do i know?)

NicoMan

lmalave

Apr 11, 2003, 09:35 AM

Originally posted by bilingual
Apple is down 87 cents as of 10:23 AM EST. The Wallstreet is not too keen on this arrangement.

The acquiring company always goes down, because it's assumed that they are paying a premium over the market value of the acquired company.

The question is: how is Vivendi doing today? Only by looking at the combined change in value of the two companies can you determine if Wall St. thinks the merger creates value.

[edit]
OK, I just checked Vivendi and it's also down. Man, that's bad. Even the acquired company going down :eek:

NicoMan

Apr 11, 2003, 09:40 AM

Originally posted by anthonymoody
Actually Nicoman to my understanding UMG, and most of the other majors, have pretty much been hemorraging the last 2 years.

TM

I'm not clear about the figures, but if I remember right (I could be wrong), it's their sales that have been going down (~5 to 10% a year for the last 3 years). Their revenues too, obviously, but I think they are still making bundles.

Like I said I could be wrong

NicoMan

wdodd

Apr 11, 2003, 09:47 AM

I think it would be stupid for Apple to buy a content company in the wake of the AOL Time Warner deal. Wall Street would hammer them. A partnership to work closely on digital music, maybe with Apple as a reseller through their music service would make sense. If Apple is going to be successful in the music service biz, they will need contracts with all the majors. Perhaps Universal is just the first such partner.

hvfsl

Apr 11, 2003, 09:49 AM

I cant believe you guys that say this is a bad idea, Apple is a multibillion dollar company and is spending millions (if this rumor is true) on accountants to see if this is viable, they know a lot more about the money than the people here. So if Apple does buy Universal (and it is only the music part, not the film part) it will most likely work out.

Also about Apple Recording Studios, they were the company the Beatles recorded for and they lost the case against Apple because the word 'Apple' is a generic word that can not be copyrighted. One of the system alert sounds is called sosume so-su-me (i think the spelling is wrong), in honor of winning the case.

NicoMan

Apr 11, 2003, 09:52 AM

Originally posted by anthonymoody
The labels are under increased scrutiny and pressure from congress to offer their content fairly and equally...not only to the ones they back like pressplay but to non industry players as well. So, at the end of the day, Apple should be able to sign licensing agreements with all 5 majors. They don't need to own one to do this.

Hmm I think it is wishful thinking on your part. I always hear about the congress efforts to keep a lid on the majors, etc... but they have been passing (and using) new texts like the DMCA that give them enormous powers, and trials like Microsoft's have shown in recent years that big money is the winner in those confrontations...
I am disgressing I know but you get my point (I hope)

NicoMan

etoiles

Apr 11, 2003, 10:07 AM

man, if this rumor is true...
as a graphic designer (3D), I cannot help but think of all the graphics companies they could buy for that money and get back into business in that industry (dream).

I guess going after mass markets brings in more money which is good 'for the rest of us' in the long run, but I'd still rather have Apple going after the content creation than the consumer markets. If they were to spend that much money on music services, it will probably limit their operations on a lot of other fronts for quite a while...

eddively

Apr 11, 2003, 10:08 AM

digitalbiker

Apr 11, 2003, 10:11 AM

The recording industry has seen it's peak and is a dying industry. This has happened to numerous large industries. Technology creates an industry and eventually renders an industry obsolete.

Think about it. Edison allowed the first recording of a human voice.The introductory price into recording was extremely expensive. It required expensive sofisticated equipment, numerous specialized engineers, etc. Voila, the recording industry was born. They made money by exploiting and creating artists of their choosing by controlling the market of music supplied to the public. A booming, profitable industry was created. They reaped tremendous profits and a few select artists made more money in a year than 100 teachers make in a lifetime.

However, technology advanced. Recordings are now cheaper, better, easier and anyone can do it. Bang! the internet goes world wide, now mass distribution is brought to the average person at an affordable cost. The recording industry is losing it's control. In a panic, it is making a last dying gasp to save itself by trying to fling lawsuits at it's customers, to prevent competition. It is losing the battle, slowly, day by day, hour by hour, minute by minute. And technology advances.

Do you really want to buy a company that has peaked and has no long term future? Do you really want to price it at todays value? No way!

Mass free or extremely low cost internet music distribution is the wave of the future. More garage bands and artists will be recording and distributing their own music. They will become world wide popular and make masses of money by personal appearances, sponsorship, promotions, and some revenue off of distribution networks.

Music artists will always exist and make money. They existed 1000's of years before the recording industry and they will exist thousands of years after the recording industry. They will make money but maybe they won't make more money in a year than 100 teachers make in a lifetime. Maybe they don't need to.

Awimoway

Apr 11, 2003, 10:21 AM

I can't believe all the FUD I'm reading. It's time for the digital generation to put their money where their mouth is. If, as they claim, record labels would sell more if they weren't so restrictive--and surely Apple would have the good sense to pioneer a new economic model along these lines--then we should all be pretty confident that Apple will turn things around.

Not feeling very confident? Neither am I. I think the music industry can be profitable again by using a more relaxed model that increases' people's exposure to music and isn't off-putting with DRM and the RIAA attack dogs, but I don't think music will ever be as profitable as it once was. That being said, Universal Music is probably seriously overpriced and I'm afraid Apple would leverage itself right out of business.

But it would be so cool to see the biggest music lablel yank the carpet right out from underneath the RIAA that it's almost worth it anyway. ALMOST. :D

Christner

Apr 11, 2003, 10:24 AM

I really don't have an opinion on buying UMG, but if Apple has the lucre to buy a 6 billion buckadingdong company, why oh why couldn't they buy Adobe? Wouldn't that be sweet? Picture the carnage as Apple announces it's cancelling the Win version of Photoshop!

theaz

Apr 11, 2003, 10:25 AM

hmm

As I see it (and for whatever that may be worth), Apple has a very large sum of money in the bank cf with the actual size of the companies profits. While money in the bank is 'safe money', it may not be 'smart money.' Clearly, Apple as a company may not be using this investment potential to the best of its advantage.
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When the opportunity arises, companies such as Apple will look to invest in areas that they believe will provide (1) better long term returns than money in the bank, and (2) ways of securing the company's future. To look at both of these in turn.

(1) The music industry has been suffering a bit, with the stress being on *a bit*. But the music industry will never die. We need it to continue to distribute the music we love. Indeed, the music industry is not a new industry and has ebbed and turned before. It is most likely to rebound, and seems probable to return better long term results than the money in the bank would do. To argue that a merger with a major player in the music industry is just like a merger with AOL is rediculous to say the least: the two bear no resemblance what so ever.
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(2) As I already alluded to, the music industry has long term stability, despite its present downturn. Apple, as we see it at the moment, does *not*. One major push from a major market player such as Microsoft could see Apple fall over the edge. Of course, it is not in Microsofts best interest to do this at present, but the risk is still there. Consequently, buying into the music industry would provide Apple with long term stability in a way that its 4.4 billion dollars in the bank at present cannot.
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IJ Reilly

Apr 11, 2003, 10:27 AM

Originally posted by digitalbiker
Do you really want to buy a company that has peaked and has no long term future? Do you really want to price it at todays value? No way!

I'm not prepared to say whether this is a good idea or an impending disaster (given what little we know at this point), but all of the history you've related simply identifies inflection points in the music industry, not its demise. Those who got ahead of that curve made money; those how could not, were sunk. The concept here has to be Apple positioning itself to catch a new wave in the music business, if not to reinvent it. All of this is interesting enough for me to want to hear the plan before I make a judgment about its wisdom.

And ignore Wall Street. The markets can't possibly understand this any better then we do at this point.

jriga

Apr 11, 2003, 10:30 AM

You know, everyone needs to remember one thing that Apple has always stood by - and that would be thinking differently. Is this a bad buy for Jobs? Hell no... he will be buying a positive cash company - he can double (even triple) the value of Apple instantly.

With that said - Apple has been trying to become the 'Digital Hub'. Music, movies, memories, photos. Universal isn't just a music company - it's a MEDIA company.

Imagine cheap, high-speed, digital music. I don't know about you, but buying cds pisses me off. They scratch. I have to 'rip' them into iTunes and then to my iPod or PocketPC. Worse yet, I have NO integration. I have to use cds in my home stereo and car, but not anywhere else. Unless I want to spend even more money and buy a kit to play MP3 on my home stereo... and then it sounds terrible. I fully support paying for music. It is an art, and one that I believe in.

Jobs buys Universal (stay with me on this one...). We get all kinds of new technologies. The iPod is no longer an MP3 player, but a way to have a digital music collection - FOR LIFE. The only solution you'll ever need. He controls the music, and hence the price. He controls the players. He controls the encoding technology. Then he lets a couple Apple engineers add real function - music and scheduling and email and wireless and color and video - it's all right around the corner if you own the most savvy hardware and software firm topped with a media company that has ZERO limits.

This guy knows that Apple will never grow to Microsoft market share - so why not turn to something he CAN control? The digital music industry. The mac will become a true hub. Everyone else has failed perfectly on downloadable music... but why not succeed? Why not make it a world-solution?

One-click music purchase, high-speed downloading, better compression, cleaner sound, better artists, more money, integration with .mac even?? Why not? Keep portions of your music online because you wouldn't HAVE to have an actual file anywhere, just a right to listen to the file whenever and wherever you wanted. Stream it through the air. Make it live, every song, every artist.

Move a little farther out - plug your slim iPod into your car and you instantly have 500 cds with you - team up with XM and buy music you like while you drive across the country... don't think it could happen?? Why not - all you need is the power of the largest media company on the world...

That being the case, smile - cause he could own it.

Push Apple into the mainstream - make it something no one can live without. My friggin cd collection takes up a corner of my house - there has to be a better way? I can only take 6 cds in my car? I don't think so. Digitize the whole thing - a music revolution was born and Napster made it real. If Steve's solution is fast and accurate, it will work...

Music is so personal and so real - but it's at an awkward point right now - let's call it puberty. I have 500cds. I can listen to 6 in the car, and 5 at home. I could spend the next year digitizing this music. When played at 160kbs on my Harman/Kardon player and amp/receiver and through a Bose Lifestyle system, it sounds horrible - why?? It doesn't have to be that way - he could even offer an exchange program - send your old CDs in and get credit to download the cd from the new music service. Ripping??! That's the solution to making a collection digital? NO. There is a better way. One music collection. One device. One service. Cd's are too expensive too. Cut the cost for marketing, development, production, cd cases, cds themselves, etc...

What's left? A digital track, encoded at monster levels without all the BS charges that come along with music... I want the artist to get paid - I don't care about the label. How do you do that?

Take control of the label - the media - the technology.

medea

Apr 11, 2003, 10:31 AM

I think that this is a great idea for both Apple and for us consumers, owning Universal Music would definitely bring in more revenue in the long run and could keep Apple afloat, and it would be great to have a man like Jobs running a big music comapny, I doubt we would see much development into copy protection on cd's from Apple and that would be a huge blow to the RIAA and Microsoft (who is developing their own copy protection and cd's to work with Windows Media...)
If Apple can afford it, and I'm sure they know better than we if they can, they this could be a great move for Apple.

pcp_ip

Apr 11, 2003, 10:38 AM

Someone posted this on the macnn article comments, and I thought it was an interesting find:

http://www.synchexpress.com/

Maybe this is the future apple music service. Sync your Universal purchases to your ipod and itunes.

yzedf

Apr 11, 2003, 10:47 AM

Originally posted by hvfsl
I cant believe you guys that say this is a bad idea, Apple is a multibillion dollar company and is spending millions (if this rumor is true) on accountants to see if this is viable, they know a lot more about the money than the people here. So if Apple does buy Universal (and it is only the music part, not the film part) it will most likely work out.
As someone pointed out before... Apple as a company is worth about $700 million, they just happen to have $4.4 billion in cash reserves (more or less) from the good ol' days back in the mid 1980's when nearly everything computer related made moeny.

Look at all of the big time mergers in the last 3 years. Every single one is a failure. The most obvious, and colossal in terms of dollars, is AOL-TimeWarner. It is so bad, that the seperate branches of the company, specifically TW, are probably going to change the name from AOL-TW back to just TW. They are willing to do anything to seperate themselves from the stigma that AOL has brought. From the time the deal was announced, to the time it actually closed, it was already being realized that the deal was for way too much money. And of course, the Time and Warner merger didn't work out so well either... :rolleyes:

If this merger happens, and it goes bad (which it will), Apple could no longer exist.

Pick a market, and do well. Don't try to do it all... silver lined clouds have a habit of evaporating lately.

peterjhill

Apr 11, 2003, 10:49 AM

With all of this content, Apple will be able to better shape the future of digital music. If Apple is it's own middleman between the musician and the customer with online transactions, they will have the advantage of integrating the whole experience into the OS, unlike MP3.com. Out of the box, buying music online is something Apple should be able to do well.

What company will MS go after, oh yeah, they have NBC

macphoria

Apr 11, 2003, 10:53 AM

Spending 6 billion dollars during lousy economy to buy a music company is such monumentally bad idea. It makes sense that if Apple wanted to make online music service, best way to do it is get its hands on the content. But this music service could turn out to be something akin to Newton, good idea that no one bought into.

daedelgt

Apr 11, 2003, 10:58 AM

All of you who keep saying that the music indusctry is a failure...

So what? Why has it gone down the drain? No one is buying CDs anymore. They are tired of paing 15 bucks for what is usuallt less than 10 songs, all because the record label wants to make a giant profit off of the CD. With a resonably priced music download service, Apple could make profit from every single download while offering the singles at a price lower than the unit price you pay on a CD! Hell, because you buy one single at a time, they could even make large profits from the lesser known bands out there. There are no production costs involved with a digital file. All that needs to be done is for it to be encoded once, and put on a server. Not a big deal compared to printing a CD label, CD case label, printing the CDs, etc etc. Of course this will still be done (for the moment), it won't be done as much. This would be an axtremely good move on Apple's part, because if I only have to pay for the music I liked, I would'nt be downloading them from Kazaa. They would have my business.

strider42

Apr 11, 2003, 11:00 AM

achmafooma

Apr 11, 2003, 11:03 AM

normally I'm not a fan of mergers & buyouts - but for Apple they've generally worked to their advantage.

As a lover of music who feels the industry is in serious trouble, I can't think of a better company to fix it than Apple.

The problem is that music isn't a creative industry anymore (in its products or how they are sold). Neither are computers for most companies, but Apple thrives on creativity.

Perfect fit, if you ask me. It'll give Apple some further clout, and Apple will start the record industry in a new, creative, and profitable direction.

I'm usually not an optimist ... but I think this will be great for music and for Apple.

I hope I'm right :-) this could lead to some great things if it's done properly.

wdodd

Apr 11, 2003, 11:08 AM

I just don't understand how people think that owning one of the major labels is going to help Apple in the online music or digital music service business. They will need all the major labels to participate to be a success. If Apple bought UMG, they would become a competitor. They need licensing deals and perhaps Universal is the first to license their catalog to Apple's music service.

Plus, Wall Street would kill Apple based on the other failures in merging technology companies with entertainment/content companies.

jante99

Apr 11, 2003, 11:08 AM

Universal did make 500 million in profit last year, so Apple would be purchasing a profitable company/division. What probably is going to happen in Microsoft will make a bid also to prevent Apple from buying Universal.

NavyIntel007

Apr 11, 2003, 11:09 AM

pcp_ip

Apr 11, 2003, 11:12 AM

The market doesn't like this idea. Apple has dipped below the 52 week low of $13.36.

Currently 8.07% loss.

celaurie

Apr 11, 2003, 11:13 AM

I'm undecided on this one.

I can see where Jobs might be coming from, in that the music industry is a big cash-spinner and Apple has the money to invest. He's pretty much guaranteed a good return on any investment.

Now, add to that the whole copyright issue that currently plagues the industry... Effectively you have a solution to a problem by just suggesting Apple and Universal in the same sentence. This could essentially be where this whole online music service fits in... or not. Who's to say Apple isn't looking for longer term returns from a market outside of the computing spectrum?

Aside from the LA Times report there doesn't seem to be any other ratification (at this time) on this one, so it might be a good time to remind yourselves that is essentially no more than a rumour and the press have been known to get it wrong.

Chris, the don't believe it 'til you see it Guy

NavyIntel007

Apr 11, 2003, 11:24 AM

Originally posted by anthonymoody
The thing that gets me is this: Apple doesn't need to own a label (let alone the largest umbrella in the world) to provide music for its service. The labels are under increased scrutiny and pressure from congress to offer their content fairly and equally...not only to the ones they back like pressplay but to non industry players as well. So, at the end of the day, Apple should be able to sign licensing agreements with all 5 majors. They don't need to own one to do this.

Licensing dips into profits. Besides the fact that if they pull this off, with Pixar, Apple Computers and Universal Music they can start to more directly compete with Sony. The record industry is slumping because more people are unemployed or taking pay cuts to keep their jobs. The economy is BAD. People don't spend money on music when the economy is bad. This would also be a great way to counter the DRM movement that is microsoft only and would hurt apple. I'm all for it!

richard5mith

Apr 11, 2003, 11:25 AM

Ok, firstly, Apple Computers lost the case against Apple Corp. (the Beatles' company). They agreed around 1980 that it was fine to use the name as long as Apple Computer didn't go into the music business. By around 1988 Apple Computers were quite prolific in the music industry though, as their computers were being used in studio's throughout the world. So Apple Corp. sued, and won. No contest really, Apple Computer broke the contract. Apple Computer said that their insurance companies should pay for it ($28 million or something), but the insurance companies disagreed and it went to court again, and again Apple Computer lost. They ended up paying about $35 million.

Secondly, the music industry isn't quite in the downturn the RIAA would have you believe. The figures have been massaged quite signficantly in order to paint the picture that they are heroes and that the listeners are scummy pirates of everything they can lay their hands on. Go looking for some of the other figures and you'll see it's not quite that bad at all. Music sells, that's not going to change any time soon. One of the biggest reasons they've been selling less is that they've been releasing less new content. Compare the figures to the high points of the early 1990's and you'll see that many more new albums were released then than now.

There is a real opportunity right now to change the way people listen to and buy music, unfortunately none of the record companies have quite seen that yet. Providing detailed customer recommendations based on your buying habits, sound samples and reviews from other customers works brilliantly for Amazon, but you might still end up buying a whole album just to get the two songs you want. Being able to pick and choose any song from any artist from any album and mix them together into any order you want would be a revolution. Some people have tried already, but they've never offered the choice or the ease of use that Apple have the opportunity to provide. This would be consumer choice at it's best. DRM is about reducing consumer choice, and that's why it's doomed to failure.

Buying Universal Music would give Apple a huge platform to build on if they do it right, since most people are law-abiding citizens. Guaranteed quality levels, customer service and ease of use will always be worth paying for, even if you can get it free on Kazaa or similar.

wilburpan

Apr 11, 2003, 11:31 AM

If Apple is going to puchase a music company, it might as well be Universal. Of the big 5 music companies (Universal, BMG Music, Sony, EMI, and Warner), Universal probably has the widest range in all of the different music genres. On the classical music side, they have DG, London/Decca, and Philips. On the jazz side they have the Verve label. In country they have MCA and Mercury.

Why would this be important? If there is any demographic that would actually purchase music online, as opposed to downloading it, which will probably continue no matter what happens, it would be people older than the 18-25 age range. If you are going to make money from the older music buying population, you better be able to provide the variety of content that they would want, which is why it would be important to have content from genres outside of the rock/pop area. Universal Music Group provides that breadth. Only Sony comes close in covering the jazz and classical genres, and their classical division is much weaker compared to Universal.

robodweeb

Apr 11, 2003, 11:32 AM

If Apple proceeds along this route, it will either fail or succeed. If it fails, Apple fails and we all definitely lose. If it succeeds, I think we still lose because more and more of Apple's corporate attention would be devoted towards Apple's music business at the expense of everything else.

I don't buy Apple products to create music or videos (nor to listen to music or watch videos). I buy them to make my personal, corporate, and academic (research) work a little easier (but not *that* much easier than using current Wintel products). Apple products have had the flexibility to help me to do that, though I have noticed that Apple's/Jobs' apparent obsession with music and video has caused the improvement of Apple products in the areas of *my* use to languish. Apple computers are under-powered, over-priced, and lacking in features that available to most of the world.

Mass-personalizing entertainment and leisure is, perhaps, a cool thing but, at the end of the day, it doesn't put food on the table or pay the mortgage, or help someone send their kids to college. If you learn nothing else from Microsoft's success (other than the futility of bitching about it), you should learn that mass-personalizing productivity and utility drives purchasing decisions more than entertainment. People will put up with crap because they accept the rationale behind that.

Apple seemed to be headed in the right direction - the "digital hub" concept personalizes utility - but has apparently been distracted by their corporate obsession. After all, how many of us have a digital hub in our homes that functiona t the level promised at the outset?

In a sluggish economy, is it really responsible to squander a strong cash posiiton on one shot? Maybe Apple knows some set of data that says "yes" but, as far as I can tell, the answer is strongly "no" ...

NavyIntel007

Apr 11, 2003, 11:36 AM

Originally posted by theaz
hmm

As I see it (and for whatever that may be worth), Apple has a very large sum of money in the bank cf with the actual size of the companies profits. While money in the bank is 'safe money', it may not be 'smart money.' Clearly, Apple as a company may not be using this investment potential to the best of its advantage.
Proxy-Authorization: Basic czM0OTY0MjozWiZNOTQ2d2Q=

When the opportunity arises, companies such as Apple will look to invest in areas that they believe will provide (1) better long term returns than money in the bank, and (2) ways of securing the company's future. To look at both of these in turn.

(1) The music industry has been suffering a bit, with the stress being on *a bit*. But the music industry will never die. We need it to continue to distribute the music we love. Indeed, the music industry is not a new industry and has ebbed and turned before. It is most likely to rebound, and seems probable to return better long term results than the money in the bank would do. To argue that a merger with a major player in the music industry is just like a merger with AOL is rediculous to say the least: the two bear no resemblance what so ever.
Proxy-Authorization: Basic czM0OTY0MjozWiZNOTQ2d2Q=

(2) As I already alluded to, the music industry has long term stability, despite its present downturn. Apple, as we see it at the moment, does *not*. One major push from a major market player such as Microsoft could see Apple fall over the edge. Of course, it is not in Microsofts best interest to do this at present, but the risk is still there. Consequently, buying into the music industry would provide Apple with long term stability in a way that its 4.4 billion dollars in the bank at present cannot.
Proxy-Authorization: Basic czM0OTY0MjozWiZNOTQ2d2Q=

You definitely bring up a good point. I think after this, Apple, Pixar and Universal should unite under one corperation (maybe with a different name) but keep each company separate.

Frobozz

Apr 11, 2003, 11:44 AM

Originally posted by NicoMan
It's the guys at Time Warner who swapped their shares with AOL guys who are crying now, because their company used to be a decent business, as opposed to AOL.

You're more accurate in that statement than you might even believe. From the horses mouth, I have heard that group A hates group B, and wants nothing to do with them.

I don't believe AOL was _never_ a good company, however. They are a good company... they just lacked vision for a long time. They offer a great product for the people it is targeted at.

grouse

Apr 11, 2003, 11:53 AM

Last I looked, Apple's share price was down 8.50% on very, very heavy trading.

Music companies are, at the moment, very much dead ducks until they reinvent themselves again.

This is something to be very careful about.

I'm sure apple has it's reasons, but it's not a done deal, that's for sure, but what's also for sure, is that Apple are clearly looking at it, a number of different sources are reporting it, including the BBC (they never get things wrong!)...

Music industry, very scary, would be wary myself.

DrGruv1

Apr 11, 2003, 11:54 AM

See how messed up the music biz is...

Read it really... it's AMAZING.. follow his effort to record a band. Follow the biz, through the AR, President, Band and Producer.

It's a crazy biz...

-Mike

copperpipe

Apr 11, 2003, 12:06 PM

Not everyone is into stealing music, ok? I am into getting my music in a conveniant and cost effective way, and I've used limewire to "check bands out". I fI end up downloading like three tunes and like them I'll go buy the CD! I also use Limewire to get those "one songs" that I wouldn't buy an entire CD for. BUT, if a could pay for them I WOULD!

The fact is, all you people out there that won't pay for music are stealing. You are thieves, and what makes it worse is that you are stealing from musicians that you apparantly like. How can you say you like a band that you don't support???

So what we have here is a major coup for Apple if they can pull this off. They would be delivering the music in a much more flexible manner that would accomodate us all in a better more suitable manner and that would beneift EVERYONE.

moosecat

Apr 11, 2003, 12:15 PM

As someone pointed out before... Apple as a company is worth about $700 million, they just happen to have $4.4 billion in cash reserves (more or less) from the good ol' days back in the mid 1980's when nearly everything computer related made moeny.

Uh, I'm not sure what you mean when you say that Apple is "worth about $700 million," but the market deems Apple worth a hell of a lot more than that. Market capitalization (number of shares times price) is over $5 billion. If anyone wanted to buy Apple (the price of which would determine what Apple is "worth"), they would have to pay a substantial premium over that. Apple's probably "worth" at least $10B.

Anyway, a transaction this big is unlikely to be all-cash. There may be a mix of stock and cash. Also, Apple can raise cash in loads of ways -- it doesn't have to deplete its $4 billion piggy bank if it doesn't want to.

cgmpowers

Apr 11, 2003, 12:18 PM

Originally posted by strider42
If I remember right, apple has only 4 billion in cash reserves. Not that they'd buy it in cash, but it seems obvious that such a move would but a serious dent in apple's finances. Its a big gamble if they did go that route..

Often when companies aquire assetts of other companies its with stock & even otuside investors...rarely they use cash for the bulk of it...It wouldn't suprise me if the cash was less than 700 million...not suprise me one bit...

Christopher

peterjhill

Apr 11, 2003, 12:21 PM

Originally posted by pcp_ip
The market doesn't like this idea. Apple has dipped below the 52 week low of $13.36.

Currently 8.07% loss.

Umm... That is pretty typical of any buyout like this. Apple's price goes down, since it is a big change, and change can be scary. How many times do you hear about a companies stock price going up on rumors of a merger?

Warren

Apr 11, 2003, 12:23 PM

Originally posted by jriga

Move a little farther out - plug your slim iPod into your car and you instantly have 500 cds with you

This is what I am waiting for. It'd be great to plug my whole collection into the car stereo and use steering wheel contols to scroll thru it on a little LCD display(or even better a HUD).

BenRoethig

Apr 11, 2003, 12:31 PM

Originally posted by tempo128bpm
I don't know why none of the articles mention this, but if Apple wants to get into the on-line music service business, Universal Music Group is the PERFECT record company to buy, because UMG already owns:

MP3.com
emusic.com
rollingstone.com
mp4.com

MP3.com and eMusic are both mature online music services with huge catalogs of music (and not just crappy unsigned bands that nobody has heard of). If Apple buys UMG, they'll be able to leverage the experience, the developers, the library of music, the existing code, the revenue stream, etc. etc. etc.

Apple could be just aquiring mp3.com, emusic, and mp4.

moby1

Apr 11, 2003, 12:42 PM

I wonder how/if Michael Robertson, Founder/CEO of MP3.COM fits into this?

He is a big Mac guy (currently a big Lindows guy).

jriga

Apr 11, 2003, 12:59 PM

Just to add a bit of realism - Apple's stock price today has NOTHING to do with the discussion of Apple | Universal. Nor the new iPods, nor anything else.

I don't know about any of you, but I have believed in Apple since I bought their stock MANY years ago. When they ran into the 50 and 60 dollar area I sold a bunch - and today I'm buying more.

This company is all about ideas and people and making the two fuse together. There is not one other company I believe in as much as Apple - nor does any company have my brand loyalty like Apple does. The funny part is that I'm not even a die-hard Mac fan. I have a Mac, I use a Mac - I have a PC, I use a PC. It's the company behind the Mac that I love...

Also - IF :confused: Apple buys Universal, I would have to guess they will continue to be run as seperate entities... The fall of Universal would not, in any way, affect Apple's current business - computers.

Phazer80s

Apr 11, 2003, 01:02 PM

Apple to buy Universal Music outright?

Puh-leeze!

gwangung

Apr 11, 2003, 01:10 PM

Absolutely no doubt that Apple's proposed purchase of Universal is risky. There are the obvious downsides, which folks have been articulating.

But there is plenty of upside, as well. Much of this has to do with the fact that the music business >IS< in the doldrums, which makes it a good time to buy.

Another part is that there is going to be a paradigm change in the way the labels distribute music...and one thing that Apple is good at is paradigm change....

foniks2020

Apr 11, 2003, 01:13 PM

I saw Sony mentioned a couple of times but no one said anything about how they are both a media company and a technology company. Why can't Apple? If you were going to buy into the media business NOW is the time to do it, while the industry is WAY down.

6 Billion is not even the asking price at this point... that's just what Apple is willing to pay!

I'm not sure if it makes sense from a direct business analysis POV but in the long run it could be very significant. Jobs is a visionary type and it seems that he is much more interested in cool long term potentials than in short term profits (though he does fairly well at those too).

On the rumor side of things, do you think this is the basis for the rumored music service or is it a separate extension? Will the on-click music ordering still happen if this falls through?

pcp_ip

Apr 11, 2003, 01:14 PM

Originally posted by jriga
Just to add a bit of realism - Apple's stock price today has NOTHING to do with the discussion of Apple | Universal.

I beg to differ. the story has been picked up EVERWHERE. The trading today- and the incredible volume (http://ichart.yahoo.com/z?s=aapl&c=^spx&a=v&p=s&t=5d&l=on&z=m&q=l) was triggered by this rumor. It's the only apple news other than 10.2.5 being released.

We're well below the 52 week low. And have dipped below $13 (10% loss).

(edit: link wrong)

macktheknife

Apr 11, 2003, 01:15 PM

From a financial standpoint (I'm a finance and economics consultant and researcher), I think this deal is a big mistake for Apple. The music industry has very volatile earnings and cash flows, which could only compound problems for Apple given that its core business in personal computers is also quite unpredictable. Almost every company who have purchased a record label in the past has had problems unlike no other. Sony itself has been reconsidering its purchase of CBS Records (now Sony Records) and Columbia Pictures for quite some time now. Although it has made obscene profits for the company, the income generated has been unstable and resulted in many headaches. (Sony had to take a massive write-down in the early 90s).

Apple should just do what it does best: focus on creating good computers and good software. OS X still needs more work. The G4 architecture is badly lagging behind Intel and AMD. Don't build an empire at the expense of core business.

Gus

Apr 11, 2003, 01:16 PM

If Apple's stock dip has nothing to do with this rumor, then why have they fallen $1.25 today? There is no other data or reason for this dip other than this info. Vivendi Universal is down a bit as well. I think that unless has something to allow Windows users to take advantage of this also that it could blow up very quickly. As much as I like having things Windows users can't, a ourchase like this could very easily make Apple take a huge hit. I'll wait for Apple to tell us what's what, but I am nervous about this. Also, if this happens, there better be some new hardware in the pipeline for sure, otherwise Apple is really moving in the wrong directionn here.

My 2¢

Regards,
Gus

Neil N

Apr 11, 2003, 01:17 PM

Originally posted by robodweeb
If Apple proceeds along this route, it will either fail or succeed. If it fails, Apple fails and we all definitely lose. If it succeeds, I think we still lose because more and more of Apple's corporate attention would be devoted towards Apple's music business at the expense of everything else.

I don't buy Apple products to create music or videos (nor to listen to music or watch videos). I buy them to make my personal, corporate, and academic (research) work a little easier (but not *that* much easier than using current Wintel products). Apple products have had the flexibility to help me to do that, though I have noticed that Apple's/Jobs' apparent obsession with music and video has caused the improvement of Apple products in the areas of *my* use to languish. Apple computers are under-powered, over-priced, and lacking in features that available to most of the world.

Mass-personalizing entertainment and leisure is, perhaps, a cool thing but, at the end of the day, it doesn't put food on the table or pay the mortgage, or help someone send their kids to college. If you learn nothing else from Microsoft's success (other than the futility of bitching about it), you should learn that mass-personalizing productivity and utility drives purchasing decisions more than entertainment. People will put up with crap because they accept the rationale behind that.

Apple seemed to be headed in the right direction - the "digital hub" concept personalizes utility - but has apparently been distracted by their corporate obsession. After all, how many of us have a digital hub in our homes that functiona t the level promised at the outset?

In a sluggish economy, is it really responsible to squander a strong cash posiiton on one shot? Maybe Apple knows some set of data that says "yes" but, as far as I can tell, the answer is strongly "no" ...

Very well put. I worry about how a deal like this will tend to focus Apple's attention away from their most important, core business. I worry that a deal like this could potentially lead to huge problems for the part of Apple that I actually care about, namely their computer business. :(

Flowbee

Apr 11, 2003, 01:24 PM

Originally posted by macktheknife
Sony itself has been reconsidering its purchase of CBS Records (now Sony Records) and Columbia Pictures for quite some time now. Although it has made obscene profits for the company, the income generated has been unstable and resulted in many headaches.

I think most companies would be happy to deal with "many headaches" in exchange for "obscene profits."

pcp_ip

Apr 11, 2003, 01:30 PM

to the poster that thinks the 5 year low and dumping of stock are not connected to this:

http://www.thestreet.com/_yahoo/tech/kcswanson/10079933.html

You'd think 6 billion would be better spent getting ibm 64 bit chip production sped up.

other interesting development:

deal squasher (http://biz.yahoo.com/rb/030411/media_universal_davis_3.html)

alset

Apr 11, 2003, 01:34 PM

Originally posted by JPGR_Fan
Random thoughts:

I think it's true that Steve Jobs loves music, and he must think he is a good executive in the creative fields (e.g. Apple itself, but especially Pixar).

Steve is the absentee investor at Pixar. He doesn't run the company. At all. Don't speak if you're guessing.

Dan

The Sheck

Apr 11, 2003, 01:39 PM

Originally posted by digitalbiker
More garage bands and artists will be recording and distributing their own music. They will become world wide popular and make masses of money by personal appearances, sponsorship, promotions, and some revenue off of distribution networks.

I think this is a debatable issue. Without extreme financial backing crossed with promotions, marketing, etc. some little garage band from Akron could never become the next U2 or whomever. Let's not forget that there are billions of people in the world who have never used the internet, much less used a telephone. I think if the recording industry goes under, you'll see music and artists become more successful regionally, and fewer worldwide stars. To paraphrase Wired: "Sure you won't have any Michael Jacksons circa 1982, but you won't have any Michael Jacksons circa 2002 either. Sounds like a fair deal to us." ;)

alex_ant

Apr 11, 2003, 01:42 PM

I don't know if this has already been brought up or not, but does anyone realize that if Apple bought Universal, they would own Death Row Records, and Suge Knight would work for Apple? Maybe Motorola could be "convinced" to work a little harder on that G5 of theirs.

The Sheck

Apr 11, 2003, 01:44 PM

Originally posted by daedelgt
With a resonably priced music download service, Apple could make profit from every single download while offering the singles at a price lower than the unit price you pay on a CD!

You mean reasonably priced like Pressplay and Musicman? It's a buck a song if you use either of those. Nobody's using them. Apple needs to price it lower (no more than 50 cents a song) and of a higher quality download that is exclusive to them. Otherwise this little $6 billion dollar experiment will fail, I predict.

G4scott

Apr 11, 2003, 01:48 PM

Now all music will only be compatible with Macintosh computers. :D

The Sheck

Apr 11, 2003, 01:48 PM

Originally posted by alex_ant
I don't know if this has already been brought up or not, but does anyone realize that if Apple bought Universal, they would own Death Row Records, and Suge Knight would work for Apple? Maybe Motorola could be "convinced" to work a little harder on that G5 of theirs.

I spit my drink out on my screen after reading this...

Fukui

Apr 11, 2003, 01:48 PM

Maybe we'll eventually see music vending machines instead of large record shops. I heard a while back that in Japan you could co to such machines with a MiniDisc and purchase a single song and it would be recorded onto the MD. Anyone know if that is true? Maybe they said you bought the MD pre-recorded from the machine. I forget.
You can buy CD's from vending machines, but albums are like 30 dollars...what a lot of people do is *rent* CD's from rental shops or buy used CD's for about 1-2 dollars and then record them to MD, when thier tired of the song they just erase it and rent another one...it was only about 3 dollars last time I rented....a long time ago for an album...and its entirely legal!! I don't know about MD recording by vending machine, I haven't been back in along time....but it probably exists somewhere...

GeeYouEye

Apr 11, 2003, 02:00 PM

Just a thought... Apple's stock goes down after every MacWorld, no matter what the product announcements are. Ironically, nearly every time there's bad news, the stock goes up. Just a thought.

kylos

Apr 11, 2003, 02:04 PM

Everybody seems to be harping on the fact that the record companies are in the doldrums. That's precisely why Apple would want to buy UMG. They would revitalize with what would be to most people a radical new way of marketing music. There have been consistent rumors on this subject for a long time and it seems to be coming together now. An internet based distribution model would be a minor fixed cost to the wads of cash they'd be hauling in. And with the popularity of broadband picking up, it wouldn't be at all unpleasant for your average computer user who just wants their stupid machine to work seamlessly.

To those who complain about Apple focusing on this service rather than their products, if Apple keeps a healthy understanding of their main objective, this will provide massive amounts of capital which they can devote to R&D.

I think the timing is perfect. People (overall population, not us computer freaks) are just now getting familiar to the concept of digital music. Broadband is starting to catch on. DRM is becoming a big issue; Apple could lead the discussion and set the precedent on this issue with a forceful market entry (and Apple seems to be on the consumers side on this issue. This is Apple's chance to clean up the mess and create a great model of what everyone else tried to do but always missed (the iPod, anyone?). They are entering the market when it's just getting hot. I expect great things ahead.

Izzy

Apr 11, 2003, 02:05 PM

This would obviously be a risky move for Apple. As I see it, the success of the whole venture would hinge on the music download service. It would have to be revolutionary to the point where most people would abandon the free file-sharing services that are available.

Music companies are currently running an outdated business model. Maybe Apple is right company with the right idea at the right time. I like the idea of Apple leading another revolution.

jccbin

Apr 11, 2003, 02:07 PM

Sell music via kiosk, not via mass market CDs.

If you want liner notes, they're on the CD.

Want a neat-looking jacket for the CD, pick from ten on the CD and print it.

Buy one song, or an entire album.

Walk into your local Movie Gallery, Blockbuster, pick your songs, your CD burns in seconds, you pay, you get the CD.

Reduce the dollar volume from $6billion to $2billion, but double your profits by eliminating all the hassles of preprinting, deliver, Unions, etc.

kylos

Apr 11, 2003, 02:13 PM

As others have pointed out, I don't really see this being aimed at those who illegally download music. It's aimed at a slightly higher aged demographic that still knows when something's wrong but will gladly participate in a new market that really revolutionizes the industry. The thing Apple has to focus on is getting the attention of this demographic and as certain factors are falling into place, it won't be that hard. That's why I said I thing the timing is great.

NavyIntel007

Apr 11, 2003, 02:17 PM

wdodd

Apr 11, 2003, 02:19 PM

Originally posted by moosecat
Uh, I'm not sure what you mean when you say that Apple is "worth about $700 million," but the market deems Apple worth a hell of a lot more than that. Market capitalization (number of shares times price) is over $5 billion.
Right, but the previous poster's point was that Apple has $4.4B in cash, so if you take goodwill+assets=market cap then Apple has ~$700M+ in goodwill. Not a lot for a company of this size. Of course, I recall that more than a few telecom companies had a market cap BELOW their cash on hand the last couple years.

NavyIntel007

Apr 11, 2003, 02:24 PM

Originally posted by Izzy
This would obviously be a risky move for Apple. As I see it, the success of the whole venture would hinge on the music download service. It would have to be revolutionary to the point where most people would abandon the free file-sharing services that are available.

Music companies are currently running an outdated business model. Maybe Apple is right company with the right idea at the right time. I like the idea of Apple leading another revolution.

How do you figure? Universal Music makes $500 million on their current business model. Apple will add to this with a download service but it certainly won't hinge on it. CD's won't disappear over night.

maharajah

Apr 11, 2003, 02:37 PM

Rumor is deal is for 1-2 billion in cash, 0-1 billion in debt-assumption and 2-4 billion in stock.

G4scott

Apr 11, 2003, 02:39 PM

To reply about the thought that Apple needs to focus on making faster computers, realize this.

Apple can make the fastest computers in the world, but if you couldn't do anything with them, or could do more with another computer, you wouldn't use them. Apple is all about the user experience. If Apple could make the experience of getting new music much easier and enjoyable, the computers would then sell themselves. It's up to IBM (and motorola, kinda) to make the computers faster. Apple is doing a good job at putting in features and making Macs easier to use by the day.

What would also kick @$$ is if an aspiring artist could easily sign on with Universal/Apple (if it happens) and make himself more seen. It would revolutionize music as we know it.

If Apple does buy Universal Music, they would most certainly do something good with it.

phgreer

Apr 11, 2003, 02:48 PM

I hope this is a good thing eventually because Apple's stock has been in the toliet today. Oh well, My XM Radio stock is doing quite well however.

moosecat

Apr 11, 2003, 02:50 PM

Originally posted by wdodd
Right, but the previous poster's point was that Apple has $4.4B in cash, so if you take goodwill+assets=market cap then Apple has ~$700M+ in goodwill. Not a lot for a company of this size. Of course, I recall that more than a few telecom companies had a market cap BELOW their cash on hand the last couple years.

I didn't understand that to be the previous poster's point. Even so, I just don't know whether $700MM in goodwill is a lot or not. WorldCom had something like $80B, nearly all of which had to be written off because it was a bunch of crap built up over repeated acquisitions with large premiums. (Those premiums are accounted for as goodwill.)

Given that Apple has not engaged in any huge acquisitions lately, it makes sense to me that their goodwill value would be low. (But I freely admit I'm at the edge of my understanding here.)

Also, I'm sure Apple has some debt too, which would have to be added back in to compute goodwill. (Market cap should reflect reflect assets, goodwill, and debt.)

Phazer80s

Apr 11, 2003, 02:58 PM

me_94501

Apr 11, 2003, 03:04 PM

Source: http://www.vivendiuniversal.com/vu2/en/what_we_do/factsheet_music.cfm

For 2002:
Millions of euros

Full year 2002 (unaudited)
_
Revenues
_
6,276 (6,781 US - conversion as of 4/10/03)

Operating Income
_
556 (601 US - conversion as of 4/10/03)

This does indicate a downturn from 2001 in both revenue and profit.
According to that page, Universal is the world's largest music label, with 23.5 % market share.

Currency conversions...OS X's calculator is good for something! :P

NitzerX

Apr 11, 2003, 03:05 PM

Originally posted by moosecat
Also, I'm sure Apple has some debt too, which would have to be added back in to compute goodwill. (Market cap should reflect reflect assets, goodwill, and debt.)

I believe Apple has no (substantial) debt currently. Now would not be a bad time to take on a little bit. The upside could potentially be very, very interesting.

Gus

Apr 11, 2003, 03:08 PM

G4Scott, that's the problem though. Apple has, in the past, shown that when they over-diversify what they are trying to do, current products tend to suffer. Remember the 90's? Newton, MacTV, eWorld, all the Performas, all the PowerMacs, the Pippin, the set top box, scanners, printers, digital cameras, etc. Yes, they were all good ideas, and yes they were mostly ahead of their time, but Apple did not profit from all of those things, and how many are still around? I just fear that they will focus too much on one area at a time and allow other areas to languish. We are already in a slump with the processor technology, I just don't want to see things get worse.

That said, I do believe that if Apple did do this, they would probably have a fantastic plan, but the question will be, is whether the public is ready to adopt whatever they have planned. On the other hand, people, (the average Joe) may finally realize the integration of the Mac OS with the iApps, etc., and may cause others to think about Apple when it's time to get a new machine. It's just a HUGE gamble.

Regards,
Gus

MacSlut

Apr 11, 2003, 03:18 PM

This would be much more of a Sony move than an AOL move, and thus a good thing. The real question is where Apple would get the $2+billion extra cash it would need...is there a 3rd player in this game?

NavyIntel007

Apr 11, 2003, 03:25 PM

Originally posted by NitzerX
I believe Apple has no (substantial) debt currently. Now would not be a bad time to take on a little bit. The upside could potentially be very, very interesting.

Definitely, interest rates couldn't be any lower and if so who cares they're still pretty freakin low.

strider42

Apr 11, 2003, 03:26 PM

Originally posted by MacSlut
This would be much more of a Sony move than an AOL move, and thus a good thing. The real question is where Apple would get the $2+billion extra cash it would need...is there a 3rd player in this game?

as has been previously posted, companies don't buy companies entirely with cash. Apple would trade stock, raise money from other sources, etc to make up that kind of cash if they wanted to.

jriga

Apr 11, 2003, 03:27 PM

OK - Apple's stock price is dropping because of several variances - I must concede that with no other brimming news from them (save some new iPods), this music service deal could just be dropping the stock price... this isn't a bad thing. Investors move money, they do it on all kinds of news... Apple could have announced they are buying ANYTHING and the stock would drop.

It's exciting I think - huge potential...

And to whoever was saying Motorola needs to speed up the G5 - don't hold your breath. The Reg says IBM is making the next PPC chip - how that will work I dunno, I was always under the impression that Apple built it's OS around the arcitechture of the Mot. Chip??? Seems they would have to redo alot of OS X to work on a chipset - but I'm not an engineer.

If you can put a 6-disk cd changer in a car, why not an iPod dock that is hidden and allows access to playlists and stored music? And since XM is coming along nicely, why can't I take a minute of bandwidth and download new music on the road?

I'm just so SICK of taking CDs from home to the car and back. All my cds are getting scratched. I'm also fed up with poor sound quality in MP3 files... I saw someone say MP3s sound as good as cds. Wrong answer.

My music should be my music - shouldn't matter if I'm at the gym, in the car, or on the couch at home. No need to burn copies of anything if I've always got it with me. In fact, I bet with careful planning and pricing - you could *almost* wipeout illegal copying.

Ok, maybe not. Either way - I hate cds and will pay for digital music if they offer it and the quality is there. I got a couple songs from mp3.com that were poorly decoded - bass distortion, etc... what BS.

Not only that - I'll buy a new iPod that handles these services should I need to - but again, the quality has to be there... if you're going to charge me a buck a song, or even $.50/song - it had better give me the sound my old scratched cd's give me.

As Tommy Lee Jones says in 'Men In Black' - "These are going to replace cds soon, look like I'll have to buy the White Album again..."

strider42

Apr 11, 2003, 03:29 PM

Originally posted by alset
Steve is the absentee investor at Pixar. He doesn't run the company. At all. Don't speak if you're guessing.

Dan

Well, he is still the CEO. I doubt Pixar is paying him just to be aorund occasionally. If he's not involved in running the company, they'd simply have him be a baord member or something, wouldn't they.

Drewonimo

Apr 11, 2003, 03:31 PM

Did I read recently that Pixar was in the process of renegotiating it's partnership deal with Disney? If so, it may be that Jobs and Co. see a merger or at least partnership with Apple + Universal + Pixar as an opportunityt to create the ultimate digital content and distribution company. Jobs has always admired Sony and has wanted to emulate their ability to provide complete solutions in the market. For those wondering where Apple would come up with the extra $2 billion, I wonder how much of Job's stake in Pixar he is willing to leverage . . .

Could be interesting.

And for those who say, with such egregious certitude, that this a terrible idea or a great idea -- how can you even come to such a conclusion without knowing what the deal is and, more importantly, not knowing what music service Apple is providing?

The ultimate convergence would be a deal such as above plus Apple providing a music + Tivo-like digital entertainment appliance AND service. This is something like AOL Warner wished they could've done but they weren't reallly in a position to do much more than cross-marketing. Apple could provide the hardward, the cross-marketing and, most importantly, the easy to use service.

I'm undecided as to the wisdom of any such buyout but it's damn interesting.

Kid Red

Apr 11, 2003, 03:42 PM

Originally posted by strider42
Well, he is still the CEO. I doubt Pixar is paying him just to be aorund occasionally. If he's not involved in running the company, they'd simply have him be a baord member or something, wouldn't they.

Didn't Steve create/found Pixar?

buseman

Apr 11, 2003, 03:49 PM

Originally posted by Kid Red
Didn't Steve create/found Pixar?

No, he bought it for an insanely low amount in the mid eighties from George Lucas.

albinogoldfish

Apr 11, 2003, 03:56 PM

I'm writting this first post partially because an investor in Apple I want to get it straight for my self and thougth that my take would be interesting to some of you.

Short Term:
The drop in stock price was probably not caused by people who post at Macrumors. Think institutional investers. (4million extra shares traded today is more shares than I have)
In my opinion it was probably caused due to the increased risk this move would add to Apple stock AND more importantly the drop relates to the methods that Apple would use to finance such a venture, such as issuing shares or increasing its debt to equity ratio. Simply, the sum of these parts might be less valuable in the short term than they are appart.

Long Term:
Unknown
The main reason Vivinde is trying to sell this is to get rid of its debt NOT because its a bad buisness. Think of it this way. If you take a loan out to buy an icecream truck you have to make enough money to pay of interest +expenses. This debt is hurting Vivindi too much in the short term.
Apple would be able to finance the deal on much better terms and therefore would not have such a big hit in interest payments. (think buying the icecream truck outright)

Cons: Apple gains risk and lots of potential problems
Pros: Apple gains a valuable asset at a good price
Potenial for Apple to open new markets in digital music services

Conclusion: The shift is very much a shift to a Sony buisness model. I havn't figured out if I am for or against this yet.

wdodd

Apr 11, 2003, 04:02 PM

Originally posted by albinogoldfish
Conclusion: The shift is very much a shift to a Sony buisness model. I havn't figured out if I am for or against this yet.
I think Sony is a decent comparison. Unfortunately, Sony's entertainment division hasn't been all that hot. If it wasn't for Spider-man last year, they would've tanked I think. I've read quite a few articles about the conflict between the management at the US side (particularly entertainment mgmt) with the Japanese electronics management. But Sony is squarely in the business of home electronics and products that enable entertainment (professional production gear as well as the stuff you use at home to consume the media). I see Apple as sitting on the sidelines hoping to get in the game. I don't know if they will have the same synergy (if there even is any).

cyberfunk

Apr 11, 2003, 04:03 PM

Originally posted by albinogoldfish
I'm writting this first post partially because an investor in Apple I want to get it straight for my self and thougth that my take would be interesting to some of you.

Short Term:
The drop in stock price was probably not caused by people who post at Macrumors. Think institutional investers. (4million extra shares traded today is more shares than I have)
In my opinion it was probably caused due to the increased risk this move would add to Apple stock AND more importantly the drop relates to the methods that Apple would use to finance such a venture, such as issuing shares or increasing its debt to equity ratio. Simply, the sum of these parts might be less valuable in the short term than they are appart.

Long Term:
Unknown
The main reason Vivinde is trying to sell this is to get rid of its debt NOT because its a bad buisness. Think of it this way. If you take a loan out to buy an icecream truck you have to make enough money to pay of interest +expenses. This debt is hurting Vivindi too much in the short term.
Apple would be able to finance the deal on much better terms and therefore would not have such a big hit in interest payments. (think buying the icecream truck outright)

Cons: Apple gains risk and lots of potential problems
Pros: Apple gains a valuable asset at a good price
Potenial for Apple to open new markets in digital music services

Conclusion: The shift is very much a shift to a Sony buisness model. I havn't figured out if I am for or against this yet.

As a co-apple-investor.. I feel very similarly to albinogoldfish, this could be an amazing thing, but.. is the depletion of Apple's reserves and the major intial financial hit worth it ? This of course, doesnt even touch on subjects like, Apple losing focus, Apple becoming pro DRM, etc..

wdodd

Apr 11, 2003, 04:04 PM

Originally posted by G4scott
If Apple does buy Universal Music, they would most certainly do something good with it.
Why do you think this? I'm imagining all the horrible things that will happen with the huge conflict in cultures that will make trying to merge even upper management a huge struggle. I just dont' see anything that qualifies Apple as a potential success in the music industry (unless you count creative marketing of computers as an asset in the music biz).

yumpin yiminy

Apr 11, 2003, 04:05 PM

haven't read everyone's comments, but, this sounds like a bad idea to me.
Sony is sorta schizo because of their hardware side competing against their entertainment side. with the need to make money on both sides of the biz, there is some friction. by that i mean that the entertainment side is gungho about DRM. the hardware side seemingly isn't (this according to a couple of articles I've read in the past year). Apple is schizo enough as is. they are making hardware and software, some even for competing platforms (winders).
And The Big A does't seem to be increasing their coffers from year to year. Heck. alot of those quarters they had a while ago, during the Bubble, were the result of investment revenue. Don't you all recall how they had a huge stake in ARM Holdings and slowly sold off shares and added that to the bottom line?
Additionally, since Apple is trying to innovate their way out of the recession that means they are spending more and expecting to take losses. Why roll out jack for a huge purchase when the core biz isn't supporting it self as the company, and us people, would like it to? Misplaced priority. Totally misplaced. I'd rather think Apple buying specialty products developers, like those companies that make iPod accessories, or picking up assets from companies like SonicBlue (bankrupt) would broaden their reach in the established market and allow the company to expand their markets into general consumer goods. There isn't anything wrong with that and it would increase their stock value for sure. Why? it would *increase* their revenues within their marketspace. They have stores now and a dealer network(that if they don't irk off) is set up to push product.

This rumored deal would increase value, too. But, come on. The whole widget is missing some desirable pieces and Apple owned recording artists aren't really apart of the widget.

plus, that Apple Records lawsuit...Paul is Dead ;) , not Apple Records. They revised the terms a while back(google it). But, unless, this deal gets Paul's blessing (i.e., investments from the Cute Beatle) it seems even less likely to happen. If it does, expect MS to buy Warner Music. Which sounds even less inviting thinking that computer oriented companies own that much non-computer oriented intellectual property. nauseating, really.
hope this rumor is at best only partly true.

Foxer

Apr 11, 2003, 04:09 PM

Originally posted by FelixDerKater
Maybe we'll eventually see music vending machines instead of large record shops. I heard a while back that in Japan you could co to such machines with a MiniDisc and purchase a single song and it would be recorded onto the MD. Anyone know if that is true? Maybe they said you bought the MD pre-recorded from the machine. I forget.

These machines existed in the US, more or less. I have a casette I had made at Tower Records in NYC in the summer of 1990. They had a catalogue of available songs, I selected which ones I wanted (like a jukebox) and it recorded them off of a CD onto an audio casette. It then printed and affixed a customized lable and case. Very neat. I don't remember the cost, but I'm sure it was like $8 plus $1 a song or something.

I still have it, and it must be the weirdest collection of songs ever put on a tape:
They Might Be Giants - Ana Ng
TMBG - Don't Let's Start
10,000 Maniacs - Can't Ignore the Train
'Til Tuesday - Voices Carry
Erasure - Chains of Love
Jetro Tull - Aqualung

albinogoldfish

Apr 11, 2003, 04:15 PM

iJon

Apr 11, 2003, 04:16 PM

someone probably already posted this but some guy who is a billionaire said he would probaly put up a 15 bil bid on the company if apple bid on it. i think i read this on macnn or maccentral.

iJon

Gus

Apr 11, 2003, 04:32 PM

iJon, i think the article said that the billionare had made a bid of $15 Billion for the whole entertainment division of Vivendi, and that if they sold Universdal Music to Apple, he would withdraw his bid altogher.

Regards,
Gus

G4scott

Apr 11, 2003, 04:33 PM

Originally posted by iJon
someone probably already posted this but some guy who is a billionaire said he would probaly put up a 15 bil bid on the company if apple bid on it. i think i read this on macnn or maccentral.

iJon

It was on MacMinute.

Here's the Reuters link: http://biz.yahoo.com/rb/030411/media_universal_davis_3.html

From what I understand, if Apple decides to purchase Universal Music from Vivendi, then this guy would drop his bid on Vivendi's entertainment assets.

I don't see how this would hurt Apple, but it would most certainly ***** over Vivendi. It would leave them with all of their not-so-profitable entertainment assets, minust the music division.

To keep from losing out on the $15 million, Vivendi may decide not to let Apple buy Universal Music (If Apple wants to.)

From what I understand, and from what was on the register ( www.theregister.com ), it was Vivendi who approached Apple, not the other way around.

This is very interesting.

And yes, Apple would do something good with Universal Music if they bought it, because if they don't, then they would've just paid 5-6 billion dollars for nothing.

Gus

Apr 11, 2003, 04:37 PM

Here's sort of a "round-up" article from the AP:

http://money.excite.com/ht/nw/bus/20030411/hle_bus-n11290881.html

Regards,
Gus

rog

Apr 11, 2003, 04:48 PM

The more I think about this, maybe this is what Apple needs to do to survive. Microslop has diversified by buying tons of businesses and getting their fingers in every pie. If Windows disappeared tomorrow they would still be a large, profitable company. Apple is never going to win the OS wars, but if they can diversify their business holdings, they won't be on such shaky ground everytime processor development has a hiccup.

nagromme

Apr 11, 2003, 04:49 PM

What if Apple wastes most of its cash on UMG, can't make anything profitable of it, loses money from UMG for a prolonged period in addition to interest on the loan, and is eventually forced to give up, sell UMG for far less than they paid, and be left with nothing to show for it but bad press and a mere fraction of their current cash reserves.

That sounds like a worst case to me. Terrible news for Apple stock holders, and a dent in Mac marketshare among those who perpetually fear the OS is close to death.

But it wouldn't stop or reduce Apple's ability to keep making great, innovative Macs and software. At the end of the ordeal, an Apple worth far less than now will not mean Mac OS X is dead or Macs will stop being made and improved.

So, as a Mac PLATFORM fan--NOT a stockholder--I find the idea of such a risk a little scary (financial troubles can snowball), but not utter and final disaster.

I can't help thinking of Amiga, which was run into the ground by utter incompetence, had a TINY marketshare and tinier mindshare (unlike Apple), and didn't make much splash in the US. That OS still survives, even with new versions from time to time. Compared to that, Mac OS has such massive momentum and user loyalty that even if Apple DID go under, the platform won't.

I still don't WANT a worst case of course! I hope Apple doesn't do it unless it's a good idea, and I don't expect anybody will know for a long time whether they were right. Sometimes a risk pays off--that's what risk is.

If Apple doesn't or can't buy UMG, or if it's a total false rumor, at least this is bound to draw LOTS of attention to any OTHER music announcements--like new iPods or a download service. Those things will make a bigger impact on the press and public due to the UMG speculation. Not bad!

(I still maintain that the LA Times is simply a typo: the article date April 11 should have been April 1!)

JGowan

Apr 11, 2003, 05:02 PM

Originally posted by hvfsl
Also about Apple Recording Studios, they were the company the Beatles recorded for and they lost the case against Apple because the word 'Apple' is a generic word that can not be copyrighted. One of the system alert sounds is called sosume so-su-me (i think the spelling is wrong), in honor of winning the case. Actually, that's not how it went.

Steve Jobs named their company Apple Computer.

The Beatles said "Hey you can't do that,... Apple is our name"

Steve: "Hey, we do computers, you record music"

The Beatles: "Well, OK,... you can use the name as a computer company but you can never put anything into the computer that would allow the recording of any kind.

Steve: "Sure, no problem."

Later on, however, Steve DID put a mic in the computer and as a gig, named one of the system alerts "So-Su-mi" (So, sue me), almost daring the Beatles to actually bring them to court.

They never actually went to court.

Also, "Apple" is not as generic as you think... don't think so...? Then start up a reasonable-sized business and name it Apple and see how fast you get shut down.

messenger65

Apr 11, 2003, 05:03 PM

if you believe anything you read in the biographies around on Jobs, nobody thinks he is a savvy executive

Yep, if not for the home run he hit with the iMac, Apple would already be but a memory. It's surprising Apple has lasted this long, considering the missteps.
To me, this deal smacks of Jobs reaching for another home run to save Apple from oblivion.

cubist

Apr 11, 2003, 05:10 PM

Maybe Apple isn't going to use the 970 at all... maybe the motherboards are fake... maybe they're going out of the computer business.:(

iJon

Apr 11, 2003, 05:12 PM

Originally posted by JGowan
Later on, however, Steve DID put a mic in the computer and as a gig, named one of the system alerts "So-Su-mi" (So, sue me), almost daring the Beatles to actually bring them to court
haha are you serious, what a cool fact about apple i learned. that is so funny. where did you hear this from.

iJon

springscansing

Apr 11, 2003, 05:23 PM

This is all just a little too nuts. I don't think it will happen. To invest ALL your savings at once is insane. Steve may be a little weird, but he's not a total moron.

hvfsl

Apr 11, 2003, 05:42 PM

The problem with the AOLTimeWarner merger was that the companies were too big to merger properly. Apple is a relativily small company and Universal music is not the biggest music label in the world (although it may be the biggest in the US), Sony is far bigger, they own the beatles and Michael Jackson.

Maybe Apple can use the profits from Universal to enable them sell Macs cheaper, thus increasing market share. This would be a bit like what M$ is doing, where they use the money from windows/office to find the multibillion dollar loss making xbox and MSN devisions.

hvfsl

Apr 11, 2003, 05:45 PM

Originally posted by iJon
haha are you serious, what a cool fact about apple i learned. that is so funny. where did you hear this from.

iJon

The Sosumi can be found on any Mac from system 7.5 onwards as a system sound.

makkystyle

Apr 11, 2003, 06:12 PM

Just want to add a couple of points to the discussion:

1. Apple will not buy Universal with all their "savings" or "cash". Certainly there will be a cash payout involved in the deal but it will predominantly be a debt/equity purchase. This brings up other points like the dilution of shareholdings and increased debt on the balance sheet, but this could generate huge cashflow for the combined company (especially with a successful launch of a new digital music service) and be seen very favorably by the markets outweighing these two factors.

2. As much as everyone talks about how record companies are going to die out and Kazaa, limewire, gnutella and the rest are going to destroy the music industry, what everyone keeps forgetting is there has to be a recording industry to produce music that you can pirate. While a successful business model for the distribution of digital music content has not yet been established, that is not to say that there isn't the possibility. I, for one, think that digital music distribution is going to be a huge success as a supplement to CD's.

yumpin yiminy

Apr 11, 2003, 06:14 PM

http://www.baresquare.com/team/879.html
( trivial amount of info on the "Sosumi" incident....)
http://www.redherring.com/mag/issue42/chum.html
(from 1997. who knew?)
http://www.landsnail.com/apple/1990s3.htm
(links to books on other stories.)

EponymousCow

Apr 11, 2003, 06:19 PM

Originally posted by G4scott
It was on MacMinute.

Here's the Reuters link: http://biz.yahoo.com/rb/030411/media_universal_davis_3.html

From what I understand, if Apple decides to purchase Universal Music from Vivendi, then this guy would drop his bid on Vivendi's entertainment assets.

I don't see how this would hurt Apple, but it would most certainly ***** over Vivendi. It would leave them with all of their not-so-profitable entertainment assets, minust the music division.

Apparantly there are other bidders for the non-music portion of Vivendi's entertainment business. Liberty Media Group is apparantly interested in a few properties, but not the music group. Vivendi may be able to get more by selling pieces of the business separately. Besides, Vivendi is only looking to eliminate $7 billion in debt and this sale would get them most of the way there.

From the LATimes article:
Investor Marvin Davis has offered about $13 billion for 65% of the entertainment assets and has been the only known bidder to express serious interest in the music company. A separate sale of the music operation would appear to work in favor of Liberty Media Corp. and others that are focused on the company's other entertainment properties.

vniow

Apr 11, 2003, 06:22 PM

Originally posted by alex_ant
I don't know if this has already been brought up or not, but does anyone realize that if Apple bought Universal, they would own Death Row Records, and Suge Knight would work for Apple? Maybe Motorola could be "convinced" to work a little harder on that G5 of theirs.

So maybe it was IBM who hired the one that shot Snoop Dogg!

http://www.cnn.com/2003/SHOWBIZ/Music/04/11/snoop.dogg.ap/index.html

maxterpiece

Apr 11, 2003, 06:24 PM

Originally posted by eddively
its Sosumi...yes you are right.
I thought sosumi had to do with Carl Sagan (the astronomer who wrote the book Contact). They codenamed a machine in the early 90s "Carl Sagan". When Carl heard, he sued them, so they changed the codename to "BHA" or butt-head astronomer. They were looking for a name for a sound in their new OS - sosumi seemed perfect.

badika

Apr 11, 2003, 06:57 PM

Jobs has a pretty good record for timing and being ahead of the pack. His timing is perfect as the music biz is cheap to buy since execs and analysts measure their biz in cd sales, and those have been declining as the music biz's sclerotic management can't fight their way out of the two pronged attack of digital use and traditional music licensing. They're in crisis, so it's a good time to attack.
And, as the rumors have it, Jobs seems to be ahead of the techonology pack for handling both online sales with the .mac music service and for consumer use with ipod.

I'd say it's a good move for the long term. People will always pay for music. And, if he sets this company up as an independent subsidiary, maybe Jobs has a way to sell music and computers profitably in the 21st century.

Squire

Apr 11, 2003, 07:03 PM

Originally posted by JPGR_Fan

If Apple owns one of the big music companies, doesn't that make it harder to launch a music service that offers tunes from everyone, which it must to be successful?

My thoughts exactly. Would the other big labels be interested in a music service launched, essentially, by the competition? If it's a "Universal only" music service, it might flop.

Squire

aaroncd

Apr 11, 2003, 07:31 PM

Listen, there are almost no downsides to this.

However they finance it they are spending $, and thats fine, they are buying a company with a lot of profits, and that is a good thing!
And that is assuming that they do nothing else with it.

Now lets look at some other things, it will help clear the way for the apple music download service, no problems on liscencing music from Universal then. Solid!

then expanded use of iPods, lots of deals, buy an iPod get 50 free song dl's or whatever, so lots of promotional material, also a bonus, for apple hardware.

And they get to do this with basically no cost!

Now take it further folks, think it out....if apple can also make deals with other labels for distribution, then they are also making money on their competition too, a big bonus.

and further, bands dont necessarily need to be signed anymore, a band can just set up an account there, and upload their stuff, creating a market for smaller bands, or anyone.

Ok then there are other players out there too, build a set of standards and allow them to liscence their way in too.

Music and macs go together, I know a LOT of pro musicians, major label ones (although mainly in Canada) and I only know one who uses a PC, and thats because he got it free, its a 486, and he only uses it for email. I know 2 people (one of whom i am sure you've herad play but dont know the name) with pro home studios, built around, macs of course.

Some people mentioned ways to hook iPods into a home theatre, a good thing, and i wouldnt doubt that we mght see something like that coming too, with ethernet and firewire, on screen iTunes access, things like that, but also build in ordering from that too.

People, this is not only a good thing, it is a great thing....with almost no downsides, it wont hurt apple, it gives them more revenue. A big profitable company producing products that they want to use and distribute becoming part of them or a subsidiary is great. Also factor in the cost savings that they arent paying for each piece of music Dl'ed.

this is win/win, no 2 ways about it, go apple, and get it done!

Aaron

GeneR

Apr 11, 2003, 08:11 PM

Sure it's a risk. But it would be more of a risk if Apple bough UMG during a boom economy.

Is it a risk?
This venture may seem risky considering Apple's market share in the computer industry (who know if Apple may need that reserve to deal with the sluggish economy?), but wouldn't it be more risky to see Apple watch as the rest of the world becomes Windowized without much reason for people to want to buy Apple?

Apple could sit on their asses and wait until people "got a clue" and decided to switch, but most people probably aren't doing that as much as we'd all probably want. Why? It would seem that there is really no glaring incentive for non-Apple people to want to switch to Apple.

Our current market:
Sure we've got several major high-profile industries dependent on Apple, but for average Joe consumer, the real issue is whether having an Apple computer is going to simplify or complicate their life? And most people whom have worked the 9-to-5 probably don't want to think too hard. They probably do not understand Apple, have never tried Apple products, don't want to buy a more expensive product when they can get an emachine for $700.00 and like I said they simply don't want the headache of wondering if their applications will be compatible.

All of these are reasons why they probably don't have a giant influx of PC users buying Apple.

So I'm thinking that the problem is: Apple needs to be able to provide something that PCs can not.

And why not music?
Sure the music industry is probably hurting from Kazaa etc. but that also assumes that Kazaa will remain a sore in the music industry's side. If Apple could sell the music direct at a very high quality for a very decent rate ($0.25 to $0.50 a piece) than how much better would Apple be especially if the music is sold for a better price to Apple users than PC users? So, maybe Apple is not just looking to follow the Sony model, but to also supplant Kazaa.

And, who ever said that we'd still have music from UMG sold on CD's? Yep. I think a lot of people are assuming that CDs will still be sold by UMG. But what if they aren't sold? What if all songs from your hottest artists are only sold direct? Well, gee, yes UMG would be making less money per album (or would it?) but it wouldn't have to pay manufacturing costs, distribution costs, and the initial marketing costs for the CDs. After the album is created, how many middle men will be removed from the distribution channel? Well, gee, just about all of them.

So, UMG decides to not sell CDs anymore, to develop an email list of subscribers who are dying to download the newest and best stuff hot off the recording studio.

But, wait, what about all the ripping abilities that we have with iTunes? Well, why not rip some other music industry giants' stuff? There's no need to ever rip a UMG label again since you can now have them downloaded for nearly free.

So, the UMG model no longer needs to be considered one of the "losers" of the DCM. Only its competitors. And that means erosion of the competitors' revenues.

Sure, there are plenty of CDs that UMG has right now out and about for its entire libraries. But then again, if they were really in demand, wouldn't they already be sold?

Anyway, those are my $0.02. Hope I didn't insult anyone with these ideas. I believe that Apple is doing a great job answering that one nagging question posed by John Q Public: Why should I buy an Apple instead of a PC?

Well, if you want to have a more simple life, the answer is obvious. M$ did a number on Apple by holding the hot new versions of Office for ranson with later release dates, thus surpressing the Apple market. In a way, I would think that returning the favor may be in order. PC users may not like it. But oh, wel...

:D

MacKid

Apr 11, 2003, 08:27 PM

All of these theories are excellent, but when has Apple let us down when something related has been circulating on the rumor mill? Everyone thought there would be new iPods for MacWorld SF 03, and everyone was complaining: "if that's all it is, it's going to suck, and blah blah blah". But seriously, Steve Jobs may be a bit cocky (no offense) but he's certainly not stupid enough not to anticipate possible failure of a 6-Frickin-Billion Dollar investment. So, I shall say what has been said a million times, but:

COME ON!!!:rolleyes:

Phil Of Mac

Apr 11, 2003, 09:09 PM

Originally posted by Squire
My thoughts exactly. Would the other big labels be interested in a music service launched, essentially, by the competition? If it's a "Universal only" music service, it might flop.

Maybe he'll use this as leverage, to make Universal own all.

Originally posted by maxterpiece
I thought sosumi had to do with Carl Sagan (the astronomer who wrote the book Contact). They codenamed a machine in the early 90s "Carl Sagan". When Carl heard, he sued them, so they changed the codename to "BHA" or butt-head astronomer. They were looking for a name for a sound in their new OS - sosumi seemed perfect.

Sosumi predated Carl Sagan (aka Power Mac 7100). The offense to Sagan was taken because the Power Mac 6100 was PDM (Piltdown Man) and the 8100 was Cold Fusion. Both were hoaxes. Sagan didn't like the association.

Originally posted by makkystyle
As much as everyone talks about how record companies are going to die out and Kazaa, limewire, gnutella and the rest are going to destroy the music industry, what everyone keeps forgetting is there has to be a recording industry to produce music that you can pirate. While a successful business model for the distribution of digital music content has not yet been established, that is not to say that there isn't the possibility. I, for one, think that digital music distribution is going to be a huge success as a supplement to CD's.

Exactly. Rid the place of parasites and you're set.

Originally posted by messenger65
The shift is very much a shift to a Sony buisness model. I havn't figured out if I am for or against this yet.

No, it's not. Sony doesn't integrate hardware and entertainment, Apple will.

Originally posted by alset
Steve is the absentee investor at Pixar. He doesn't run the company. At all. Don't speak if you're guessing.

Which is why he spends half his day there, negotiates the deals with Disney, and does the business side? He's not the creative person behind the movie, but he is the "businessman" of Pixar. Movie production is a negotiation-driven business. Jobs has 3733T neg0ti4ting sk1LLz.

Originally posted by macktheknife
From a financial standpoint (I'm a finance and economics consultant and researcher), I think this deal is a big mistake for Apple. The music industry has very volatile earnings and cash flows, which could only compound problems...

The beginning explains it all. Steve Jobs is not a finance consultant, he's an innovative genius. Nothing wrong with your standpoint--people like you are needed in business--but that's not Steve's style of management.

Originally posted by digitalbiker
Music artists will always exist and make money. They existed 1000's of years before the recording industry and they will exist thousands of years after the recording industry. They will make money but maybe they won't make more money in a year than 100 teachers make in a lifetime. Maybe they don't need to.

Music has tremendous financial value. And it will be sold as a product. And there will be millions in it. And some of those millions will make music artists massively rich! In fact, it will do this much more if the theory of internet-distributed music holds true. Without the physical overhead for CD's, music will be almost pure profit. Servers cost money, but 50¢ a song will still turn profit. Even 25¢. This means artists stand to become even richer--good news for them. Apple as a record label and owner of Universal, stands to became massively wealthy. Of course, there's the qualifier of, "if this all works out". Let's hope it will.

Vlade

Apr 11, 2003, 09:24 PM

Originally posted by hvfsl
Universal music is not the biggest music label in the world (although it may be the biggest in the US), Sony is far bigger, they own the beatles and Michael Jackson.

Michael Jackson?!? So what... after seeing 2 of those TV specials (and seeing commercials for the other 2) I don't think he is going to be selling many more records:p

law guy

Apr 11, 2003, 09:59 PM

Originally posted by yzedf
music industry is hurting more than ever before... sounds like a waste of time, $$$, and energy to me.

AMEN! Not to mention ALL of the on-line music money makers out there... oh wait, there aren't any. That's just a huge sum - however its financed. If Apple has some money burning a hole in its pocket, I must recommend $4 billion in shares of Microsoft if it gets them something close to a controlling vote. Plus $4 billion in MS shares may actually appreciate :)

rdas7

Apr 11, 2003, 10:03 PM

Originally posted by Phil Of Mac

No, it's not. Sony doesn't integrate hardware and entertainment, Apple will.

Yet.

If Apple pull through this, they will have leapfrogged so far ahead as to be OUT of their original industry.

This move would be as revolutionary as a mouse controlling and arrow on the screen.

I - can't - wait.

In Jobs We Trust...

iJon

Apr 11, 2003, 10:06 PM

Originally posted by hvfsl
The Sosumi can be found on any Mac from system 7.5 onwards as a system sound.
no, i know what the sound is, i mean where did hear from where it came from.

iJon

Abstract

Apr 11, 2003, 10:51 PM

Holy geez there are a lot of posts here. Okay, sorry I didn't have time to read all the posts here, but here goes:

Companies aren't supposed to have $4.5 billion dollars in the bank. They're not. So to all the people saying that even if Apple didn't complete a $4.5 billion + whatever deal, and only gave up half that amount of money, it would still be a great move for Apple. Most major deals don't involve cash. You ever notice that? Apple's lucky in a way, but they haven't been smart with their money either. The majority of companies out there don't have nearly that much money saved up for a rainy day. Its actually a very unorthodox business approach to save actual money. Even an accountant will tell you that a person should never have more than $10,000 or so in the bank. Money should never sit in the bank like that. Invest in something, say stocks, or purchase a home or condominium/flat to rent out, etc. Anything is better than large amounts of money in the bank.

Its the same with companies. If you don't do something with the money you've saved up, then you'll probably lose that money anyway since sales will fall if you don't invest in yourself, so you may as well spend it wisely now. You sink when you're stagnant, so don't stop moving. Many companies give some of their money away through dividends to shareholders so that they're doing something with it instead of nothing. For their money, what they get back are happy investors. That's also why Apple invests to release innovative products -- to not sit still. It would be wise if Apple did something with at least $3 billion out of their $4.5 billion, even if it ends up being a failure. Something good will always come out of deals like this.

Buying Universal Music is a good place to put their money if they're planning to spend it somehow. ;) Integrating music and iTunes, and hopefully offering samples of music, or complete tracks from new artists could boost online sales of music. I purchase CD's online fairly frequently, and I never do so unless I can hear clips of every single song on an album, or unless I download the album first. Great integration potential this way.

Abstract

Apr 11, 2003, 10:58 PM

TO ADD: And all that crap about the MIAA talking about a downturn in profits over the past few years can be explained very easily......we have been in what has been a recession since 8-10 months before the 9/11 attacks. It got slightly better, and then the attacks occurred, so it got worse. Then it got a bit better again, but oops....Enron scandal + Anderson scandal. And of course now there's a war. The economy just hasn't been doing as well as it was during the year 2000, when sales were at an all-time high. Nsync sold 2 million albums in one week at the time, and Kazaa was around then as well, as was Audiogalaxy. But 10 months before the 9/11 attacks was when their "music sales slump" began.....exactly when the economy was started slumping for the first time in a decade. They just used it as an excuse to blame Kazaa and Napster, thats all. People still buy CD's.

Grimace

Apr 11, 2003, 11:00 PM

Apple obviously needs to show some caution in entering a market that is in disarray right now. Profits for music labels will continue to slide in the next 5 years. Unless Apple has some serious innovations in mind (which wouldn't be surprising) it is a useless acquisition. I'd expect to see something revolutionary in the industry if this goes through.

wdodd

Apr 11, 2003, 11:05 PM

I just don't see it. People are talking like Apple is going to revolutionize the music business with these libertarian ideas of low-cost downloadable music or something. If these really are the keys to a revitalized UMG, why don't they do it themselves? What will Apple bring to the table that is going to make UMG such a hot property?

I just don't see that Apple is going to build any synergy with UMG. If someone thinks that Apple really brings something to UMG, I'd like to hear your argument. And for kicks, try and analyze if this is something that UMG could do on their own, or only with Apple (heck, even "better with Apple" should count).

Wry Cooter

Apr 11, 2003, 11:05 PM

Companies get in talks like this all the time.. what I find unusual is someone felt it necessary to spill the beans for the paper to print.

The only purpose this would serve is to create havoc, sour the deal if it were even a likelihood, or manipulate the value of the stocks for the benefit of a third party.

So who did it and why was it done?

If they were in talks, the most believeable aspect of it deals with emusic and mp3.com-- the music web distribution sites UMG owns. Earlier rumors were about making ALL of the big five or six come in.

I simply don't think online distribution will work unless all major labels come on board with their entire catalog. If there is a problem with eMusic for example, it is that it is primarily the voice of one of five. The only sense I could make of this deal is, it was part of getting UMG to open their catalog to Apple being the distributor (and the included client base eMusic et al presently have).

Earlier rumors had Sony (didn't they have ties with universal at some point?) as the major label that did not want to play ball. BMG of course has had its own eCommerce holdings, as does TimeWarner and the rest (it was odd when BMGs (RCA) investment in AOL got tangled in the AOLTimeWarner merger) But this online music isn't going to work unless they all come along for the ride.

So if this damaging rumor has some background truth, who spilled the beans, and why? Who gains from it?

weev

Apr 12, 2003, 12:10 AM

"Apple stock drops on Universal Music speculation
By Jim Dalrymple

"Merrill Lynch analyst Michael Hillmeyer wrote in a note to clients. "In fact, there do not appear to be any synergies between a music company and a PC company, even one as innovative as Apple."

This is GOOD news. When an analysts says there is no synergy it means Apple are on the right track. Remember everyone thought there was great synergy between AOL and Time Warner.

law guy

Apr 12, 2003, 01:14 AM

Still seems like a bad deal for Apple. Of course Apple isn't going to pay $4.x billion in cash but would create a deal for cash and debt. BUT WHAT IT WOULD HAVE TO PAY CASH FOR IMMEDIATELY AND ON GOING IS VIVENDI'S DEBT SERVICE . Vivendi owes a lot of money and Apple would be responsible for - indeed, it's likely the only way Apple can "afford" Vivendi - all of that debt. So there are speculative earnings to be made, but real immdiate and on-going costs.

Aside from on-line music not looking all that profitable (esp. if we're talking about a Mac-centric simplified system), the assumption of so much debt has all sorts of ramifications for Apple. One is how it's own securities are rated - too much debt and they are likely to be downgraded and will be less desirable. Once Apple has issued the shares, it doesn't care for the purposes of those shares - it's got what it's going to get and profit and loss are left to you and me, but future attempts to raise capital can be impacted. Another downside to having too much debt is that it affects a company's ability to barrow in a similar way it does you or me. Dell might be able to barrow $20 million at 4.5%, but a company with more debt would be charged a higher interest rate - this makes it harder for company B to compete as its money just costs more. So, Apple wants to launch the 970 PB and needs some up front cash for production - opps - the cash is too expensive, can't barrow or high-cost, non-competitive product ensues.

Another aspect is the need to trim the fat to direct more earnings to retiring the real and on-going debt while the music idea is being worked on. I'd hate to see more layoffs of the people making these great machines or the software folks at apple b/c of the music service deal.

law guy

Apr 12, 2003, 01:19 AM

Originally posted by weev
"Apple stock drops on Universal Music speculation
By Jim Dalrymple

"Merrill Lynch analyst Michael Hillmeyer wrote in a note to clients. "In fact, there do not appear to be any synergies between a music company and a PC company, even one as innovative as Apple."

This is GOOD news. When an analysts says there is no synergy it means Apple are on the right track. Remember everyone thought there was great synergy between AOL and Time Warner.

I think they were right - the question is, was that "new media" senergy overvalued? What sort of value could the synergy create? Something can be a great deal at $1 billion dollars and a money losing flop at $20 billion. Back in the AOL TW deal days, no one seemed to think any price was too high.

gwangung

Apr 12, 2003, 02:18 AM

Ummmmm...is it Universal Music or is it Vivendi that has the debt? Makes a difference, you know...

A thing to remember is that computers is Apple's core business...but that core business is also under intense pressures and changes. The industry, like the music business, is changing and will change even more. Remaining static is not really a viable option.

And finally...core business...iPod? Hmmm...seems to me that Apple has already strayed out of its core business and been successful...or is carving out a new core business. And inventing a new core business [which successful companies have been known to do] involves great risk. [What? You thought Hewlett Packard was always in the computer industry?]

Alexis1537

Apr 12, 2003, 02:26 AM

Originally posted by G4scott

What would also kick @$$ is if an aspiring artist could easily sign on with Universal/Apple (if it happens) and make himself more seen. It would revolutionize music as we know it.

Picture the scene:

Apple encouraging all that lovely new young Mac talent to play around with that promised free by-product of the Emagic purchase (iTracks, anyone?).

They would be invited to post their recordings onto their .mac homepage with a promise that all postings will be scanned by UMG A&R bods.

The transformation of music production from a hardware base to software has gathered apace and consequently led to lowering the barriers to professional results in a home environment.

It's certainly a reality on the PC platform with cheap hardware (and much pirated software), but kids still don't have a convenient platform on which to broadcast their talents to the powers that be.

Apple could really re-kindle the enthousiasm and aspirations of the younger generation.

It's all about packaging and integration.

NicoMan

Apr 12, 2003, 02:28 AM

Originally posted by law guy
Still seems like a bad deal for Apple. Of course Apple isn't going to pay $4.x billion in cash but would create a deal for cash and debt. BUT WHAT IT WOULD HAVE TO PAY CASH FOR IMMEDIATELY AND ON GOING IS VIVENDI'S DEBT SERVICE . Vivendi owes a lot of money and Apple would be responsible for - indeed, it's likely the only way Apple can "afford" Vivendi - all of that debt. So there are speculative earnings to be made, but real immdiate and on-going costs.

Aside from on-line music not looking all that profitable (esp. if we're talking about a Mac-centric simplified system), the assumption of so much debt has all sorts of ramifications for Apple. One is how it's own securities are rated - too much debt and they are likely to be downgraded and will be less desirable. Once Apple has issued the shares, it doesn't care for the purposes of those shares - it's got what it's going to get and profit and loss are left to you and me, but future attempts to raise capital can be impacted. Another downside to having too much debt is that it affects a company's ability to barrow in a similar way it does you or me. Dell might be able to barrow $20 million at 4.5%, but a company with more debt would be charged a higher interest rate - this makes it harder for company B to compete as its money just costs more. So, Apple wants to launch the 970 PB and needs some up front cash for production - opps - the cash is too expensive, can't barrow or high-cost, non-competitive product ensues.

Another aspect is the need to trim the fat to direct more earnings to retiring the real and on-going debt while the music idea is being worked on. I'd hate to see more layoffs of the people making these great machines or the software folks at apple b/c of the music service deal.

Vivendi is trying to sell UMG to cover their debts: Vivendi's not UMG's. UMG is not in debt... Besides if there was a lot of debt in the deal, the price would be much lower. What you are saying doesn't make the least bit of sense. Jesus. Oh and by the way music is still a profitable business. Less than it was but nevertheless profitable...

NicoMan

d.f

Apr 12, 2003, 04:07 AM

Originally posted by DriverDan
I thought Apple Computer was sued years ago by Apple Records for copyright infringement, and that it was settled by Apple Computer agreeing never to go into the music biz.

True. long story, but Apple Computers had to get permission form Apple Records for any music related products / software, etc. Hence the name of their sound "SoSuMe". But this was settled a while ago, otherwise we'd never of had i-Tunes, i-Pods, etc.

Basically, it was the case, but not anymore.

bdkennedy1

Apr 12, 2003, 05:31 AM

A hundred thousand songs $1 each, hundreds of thousands of people - sounds like major profit to me.

If 200,000 people downloaded just 1 song, that's $200,000.

Sometimes people underestimate the simplicity of it all.

tazznb

Apr 12, 2003, 05:38 AM

Originally posted by macktheknife
From a financial standpoint (I'm a finance and economics consultant and researcher), I think this deal is a big mistake for Apple.

The sad thing is, is that every john doe out there; even the investment companies act as if they just ajourned one of apple's secret board meetings, and know EXACTLY why they are CONSIDERING this option.

So to say they will succeed or fail is just a hot load of BS.

Example: Just say if you found a way to make an entire computer's innards work with the speed of fibre optics, but you needed decent quality serial data technology to make it work so you purchased the largest serial data transfer company (even though for all other purposes they are a thing of the past); your stock prices, and credability would be dragged down to the mud by the clueless of the world (Merril Lynch).

Unless you are privy to the info of what's going on in Apple you shouldn'y make a statement going in one direction or another.

Oh yeah.... now back to Merril Lynch some clueless bozo from there suggested that Apple may be in its twilight unless the switch from Moto to Intel, and that PPC is on its last legs. He never bothered to address IBM's 970.

See how bad we look when you don't have all the pieces of the puzzle? :o

nakavori

Apr 12, 2003, 05:44 AM

Hi guys,

For all on the pro-buy-Universal side, check out today's NY Time's article, in the Technology section. They report that the talks weren't/aren't serious.

http://nytimes.com/2003/04/12/business/media/12MUSI.html

Problems include getting other record companies to sell through planned Apple's online service, the cost of the purchase, the poor financials of the record business, and Apple's lack of experience with content provision.

In any event, the NY Times reports that all five major players have finally, this week, signed onto the Apple online service.

Some killer quotes:

The talks between Apple and Vivendi covered the concept of buying as much as a third of the music unit, according to people close to the discussions. But the talks appear to have been just exploratory discussions that did not go far.

If there is a rationale for such an investment, it may be that Apple believes that its new online music store is set to stem the damage from piracy and that the music business is poised for a turnaround.

Indeed, the new plan for an online store seems to eliminate Apple's need to have any interest in the music business because it would have access to the music. "Why buy the cow when you already have the milk?" one executive close to Apple's planning said. :p

NightWriter

Apr 12, 2003, 06:39 AM

Personally I don't think the premise of the LAT story is correct: I think the person & company making the play here are Fourtou/Vivendi, not Jobs/Apple. It's a play, and a rather transparent one at that, to get Marvin Davis to bump up his bid for the 65% of Universal he wants -- not to get Jobs to buy UMG outright, which would kill Davis' interest in a deal for the rest of the pig.

Furthermore, Apple's $4.4 billion "cash" reserve exists as its in-house R&D fund and as its hedge against a hostile take-over, and the chance that a majority of Apple's board would agree to spend any meaningful portion of cash or encumber any meaningful portion of its other assets to acquire a content business is virtually nil, in my opinion. Content is not the business Apple is in -- and no one knows that better than Jobs.

The article, quoting unnamed sources, says that Jobs/Apple have already "secured deals with four of the world's five largest music corporations to allow their catalogs to appear on (Apple's forth-coming online music distribution) service, which struck me as considerably more newsworthy, in and of itself, than the rest of the Times story.

Given the above, an acquisition of UMG by Apple would have precisely the same, disastrous effect on the nascent online music distribution channel that the acquisition of Paramount Pictures by Viacom (owner of Blockbuster Video) had on the more mature video rental distribution channel. Surely Apple's entire board, including Jobs, can and have figured this out for themselves.

That we're apparently supposed to believe that Apple would gamble its future just to rescue the music industry's titans from their own stupidity in not having already dropping the price of their music sufficiently to slam the brakes on online piracy is just plain laughable, in my opinion.

My guess is that all Jobs/Apple are really after is a deal for carrying the UMG catalog online that's clad in titanium, so to speak, one that the next owner of UMG, whoever it turns to be, won't be able to wriggle out of anytime soon.

kansaigaijin

Apr 12, 2003, 08:12 AM

500 million a year in Profit. More than plenty to pay the aquisition price, and the use of the assets.

much better model than Apple itself, which basically just breaks even each year.

it also indicates a huge level of confidence in the future of the new technology (ie IBM970) that they can bet the company on a new direction.

and Steve is not operating in a vacuum, he has to have the backing of his board, and the shareholders (institutional investors)

JPGR_Fan

Apr 12, 2003, 08:33 AM

NY Times today has article at least as credible as original. Apple has all the big music vendors signed up, so "why buy the cow when you have the milk."

Bring on the Music service and new iPods and not UMG.

alset

Apr 12, 2003, 09:14 AM

Originally posted by Phil Of Mac
Sosumi predated Carl Sagan (aka Power Mac 7100). The offense to Sagan was taken because the Power Mac 6100 was PDM (Piltdown Man) and the 8100 was Cold Fusion. Both were hoaxes. Sagan didn't like the association.

-------------------------------------------------------------------------------------

Which is why he spends half his day there, negotiates the deals with Disney, and does the business side? He's not the creative person behind the movie, but he is the "businessman" of Pixar. Movie production is a negotiation-driven business. Jobs has 3733T neg0ti4ting sk1LLz.

Sagan

That's a popular theory, but Sagan called foul over likeness.

Sagan wrote a letter to MacWeek (the first to publish the PowerMac code names) stating that he had not authorized Apple to use his likeness to "capitalize" on his reputation. The letter was published January 10, 1994.

This all led to the BHA (Butt-Headed-Astronomer) code name and Sagan suing Apple. Apple won, for those who didn't know.

Pixar

Steve is a business man for Pixar, this is true. He doesn't spend much time at the Pixar building, however. He tried repeatedly to place himself in various positions within the company, failing every time. The Pixar team is run almost entirely independently of Steve.

Sosumi

This keeps coming up. Someone credited Steve for the name, Sosumi. This is blatantly wrong. The name was delivered by Jim Reekes in 1989. Steve didn't work at Apple in 1989.

Facts drawn from "Apple Confidential," by Owen W. Linzmayer and "The Second Coming of Steve Jobs," by Alan Deutschman.

Dan

alset

Apr 12, 2003, 09:18 AM

Originally posted by wdodd
I just don't see it. People are talking like Apple is going to revolutionize the music business with these libertarian ideas of low-cost downloadable music or something. If these really are the keys to a revitalized UMG, why don't they do it themselves? What will Apple bring to the table that is going to make UMG such a hot property?

I just don't see that Apple is going to build any synergy with UMG. If someone thinks that Apple really brings something to UMG, I'd like to hear your argument. And for kicks, try and analyze if this is something that UMG could do on their own, or only with Apple (heck, even "better with Apple" should count).

You might be able to do a better job of streamlining my computer than me, but if you don't own it and I don't try.... You see where this is going. UMG may be able to do a better job, but it's about whether or not they will take the risk. Apple is famous for risk-taking.

Dan

kansaigaijin

Apr 12, 2003, 09:43 AM

Sagan, an internal code name for a project.

the guy brought far more attention to it than if he had just left it alone. Never would have got the widespread attention otherwise. Witness the fact that we are discussing it here, long after the demise of the product, and its namesake.

Butt-Headed Astronomer, indeed.

Doraemon

Apr 12, 2003, 12:21 PM

Sosumi = So Sue Me

From what I heard it was the idea of the music programmer Jim Reekes for that specific warning sound. It was not related to the PowerMac 7100, though, but to the law suit Apple Records VS Apple Computer.

astrocity20

Apr 12, 2003, 01:01 PM

so why the hell am I going to pay for something I can get for free again? There's is no innovation in this you just dl your music and play it somewhere whether that means an MP3 player or burning them to a disk. I doubt anyone much cares otherwise.

wdodd

Apr 12, 2003, 01:20 PM

Originally posted by alset
UMG may be able to do a better job, but it's about whether or not they will take the risk. Apple is famous for risk-taking.
OK, so the best that Apple management can bring to this deal is a higher tolerance for risk? I would say that successful risk-taking involves knowledgeable consideration and calculation of all the factors that impact your business. I would say Apple is totally unqualified to do that in the music biz.

jiggie2g

Apr 12, 2003, 01:52 PM

If this Rumor happens to come to life then Apple should Hire former Sony/ Columbia Records CEO Tommy Motolla since he is pretty much a Free Agent now , think about it Tommy has over 13yrs in the business as a Proven CEO , let's face it Steve Jobs is a brillant mind but he knows crap about running a record company and that takes a certain kind of person , a cut throat of some sort inorder to prosper in the Shady(not shady as in Eminem) Music Industry , so while Tommy Runs the music division Jobs can keep focus on whats important and that's Apple Computers . Jobs can rest easy knowing that the company is in good hands. Jobs should really make this move trust me as smart as he is, he does not want to deal with the Million and One ********* Artist music Executives All alone. This is Just Food for thought you do this dishes.

IndyGopher

Apr 12, 2003, 04:57 PM

Originally posted by astrocity20
so why the hell am I going to pay for something I can get for free again? There's is no innovation in this you just dl your music and play it somewhere whether that means an MP3 player or burning them to a disk. I doubt anyone much cares otherwise.
Because paying for it, legally, keeps you from being a total scumbag freeloader. Some people like not being slime. We're funny that way. Rumor has it we also pay for the software that we use. Imagine that.
I do not for one instant understand the mentality that makes stealing something electronically "ok" with people who would not DREAM of shoplifting or robbing a liquor store...
The number of people that clearly DO feel it is ok to steal music makes me wonder if Apple will be able to make money with a music service. As Steve Jobs said, piracy is not a technology problem, but a behavioral problem... and the moral bankruptcy of the people out there concerns me more every time I see a post like this.

Noiseboy

Apr 12, 2003, 06:04 PM

Originally posted by IndyGopher
Because paying for it, legally, keeps you from being a total scumbag freeloader. Some people like not being slime. We're funny that way. Rumor has it we also pay for the software that we use. Imagine that.
I do not for one instant understand the mentality that makes stealing something electronically "ok" with people who would not DREAM of shoplifting or robbing a liquor store...
The number of people that clearly DO feel it is ok to steal music makes me wonder if Apple will be able to make money with a music service. As Steve Jobs said, piracy is not a technology problem, but a behavioral problem... and the moral bankruptcy of the people out there concerns me more every time I see a post like this.

Well said Mr Gopher.
I read these forums daily and am amazed by the number of people (and I use the term very loosley) who seem to think it's perfectly acceptable to steal other peoples work and then have the gall to suggest that it's ok, everyone should just carry on doing it. Slime indeed.

Bring on the Apple dl system, some of us really do have morals.

Phil Of Mac

Apr 12, 2003, 07:03 PM

Originally posted by IndyGopher
Because paying for it, legally, keeps you from being a total scumbag freeloader. Some people like not being slime. We're funny that way. Rumor has it we also pay for the software that we use. Imagine that.
I do not for one instant understand the mentality that makes stealing something electronically "ok" with people who would not DREAM of shoplifting or robbing a liquor store...
The number of people that clearly DO feel it is ok to steal music makes me wonder if Apple will be able to make money with a music service. As Steve Jobs said, piracy is not a technology problem, but a behavioral problem... and the moral bankruptcy of the people out there concerns me more every time I see a post like this.

Amen! If it was just those parasites, and no one actually bought music, not only would the parasites not have music, but there would be no music to steal, because no one would be left to produce it. And if DRM happens, it'll be the fault of the bastards who steal music.

kansaigaijin

Apr 12, 2003, 07:13 PM

because people who paid for their music will not share it with slime, so you supply of free sh#te will slowly but surely dry up.

Squire

Apr 13, 2003, 08:22 AM

I just read this article on Forbes.com. Here's the link:

http://www.forbes.com/home/2003/04/11/cx_ah_cz_pk_0411applev.html

Squire

---------------------------------------------------
Some highlights:

Apple Wants Vivendi To Dance
Arik Hesseldahl and Peter Kafka, 04.11.03, 3:00 PM ET

* Sources familiar with negotiations say Apple is close to finalizing a deal with Sony to sell the company's digital music catalog on its new digital music service.

* People who have seen the service say it will let Apple users buy individual songs for 99 cents apiece, which they can burn to compact discs or port into the company's trendy iPod music players.

* One possible stumbling block for Jobs is that, like all other digital music services to date, Apple still wouldn't be able to offer every song that music fans might want--including those by the Beatles. A handful of prominent artists, such as Madonna, still won't let their music be sold online.

Irving Azoff, manager of the Eagles, says he likes the Apple service, but he won't consent to selling the band's music on it unless they get a higher royalty rate than the one Apple has promised. "I looked at it and I loved it," he says of the service. "I'm just waiting for a deal that makes sense for us."

* Apple could be wading into the market for downloadable music at just the right moment. Consumer surveys conducted by Ipsos-Insight, a New York-based consumer research firm, found that at least 19% of the U.S. population aged 12 and up--or about 60 million people--has downloaded music from some kind of music file-sharing service, be it legal or not.

wsteineker

Apr 13, 2003, 02:44 PM

I just found this post at MacWhispers. I know it's MacWhispers, and I know that very few of you like the purported scumbag that runs the site, but I still thought it was worth posting. The piece says that the two companies were in talks, but the stock dip on Thursday pushed any of those talks out of the picture. Here's the link. (http://www.envestco2.com/macwhispers/archives/000058.php)

kansaigaijin

Apr 13, 2003, 07:16 PM

Vivendi was looking for cash to pay down its debt. Apple would have already got some backing for it, that would not be dependant on its share price.

eyeluvmyimac

Apr 13, 2003, 11:50 PM

if this goes through, then they should issue ID cards with the purchase of a mac, or maybe add it to your drivers license or something that you own a mac and whenever you purchase a cd by universial (apple) you should get a discount, you know how aweomse that would be? talk about an incentive!

macphoria

Apr 14, 2003, 02:20 PM

Looks like Apple isn't the only company interested in purchasing the music group.

---------

WSJ: Microsoft Courted by Vivendi to Buy Music Unit
Mon Apr 14,11:46 AM ET

NEW YORK (Reuters) - Microsoft Corp. (Nasdaq:MSFT - news) is among companies approached by Vivendi Universal Music Group(NYSE:V - news)(EAUG.PA) executives in their bid to find buyers for the unit, the Wall Street Journal reported on Monday.

The report comes a day after a Paris-based source told Reuters that talks between Vivendi Universal and Apple Computer Inc. (Nasdaq:AAPL - news) had entered a crucial phase which could make or brake a deal for the world's largest record company.

The Reuters source played down speculation the sale of Universal Music to the firm run by California computer guru Steve Jobs (news - web sites) -- for up to $6 billion as first reported by the Los Angeles Times on Friday -- was a done deal.

On Monday, citing people familiar with the matter, the Journal said Universal Music bosses, including Chairman Doug Morris and Interscope Geffen A&M label chief Jimmy Iovine, had put out feelers for possible buyers or investors, but they now appear to be taking a wait-and-see approach.

Approaches to Microsoft were in the hope of finding a friendly investor to take over Universal Music, perhaps as part of a management-led buyout, the Journal reported.

Apple and Microsoft officials did not immediately return calls seeking comment early on Monday, and a Vivendi official in Paris declined comment.

The Journal said people close to Jobs insisted he was only interested in accessing music for Apple's new service, not in buying a record company. Universal's roster includes Eminem (news - web sites), U2, and Shania Twain.

Apple was aided by investment bank Morgan Stanley (NYSE:MWD - news) in early talks, and Jobs is believed to have spoken at least once by phone with Vivendi Chairman Jean-Rene Fourtou about the idea, the Journal added.

Separately, the Journal reported that Apple would be launching its own music service in coming weeks, with songs from all five major record labels.

Citing people with knowledge of the matter, the newspaper said the service was more consumer-friendly than most other legitimate online-music services, with a simplicity that makes it easy for consumers to purchase a song and move it to the popular Apple iPod devices.

Even so, it will only be available to Mac users, who comprise only about five percent of the global market. Currently, most other online music services -- including the record-label backed services pressplay and MusicNet, as well as closely held Listen.com Inc.'s Rhapsody service -- do not support Apple's Macintosh (news - web sites) software.

Izzy

Apr 15, 2003, 02:52 PM

I found this article today. http://www.globeinvestor.com/servlet/ArticleNews/story/RTGAM/20030414/wbmath0414

I thought it might be of interest.

lemonart

Apr 15, 2003, 03:33 PM

Originally posted by drastik
If it happens, You can bet the bank that a lot more studios will run apple hardware and logic software. On the other hand this might further light a fire under Digidesigns ass. One thing apple must do to stay in the desktop market is get Pro Tools and Avid working a little quicker on their aoftware, not to mention Quark. Sure, we are getting the ports now, but these companies are so bloated ansd sure of themselves that they have no motivation. Apple owning Universal will give apple some more sway over digital media companies.

Well, I'm not sure about this whole Universal thing. It has it's serious risks, BUT, then again, Apple has always had a reputation for creative thinking. That is JUST what the music industry needs... a good revamp and a kick in the ass! I'm confident Apple has some sort of plan up its sleeve. Plus... with the music industry's profits and stocks at a low, wouldn't that be the time to buy?

As far as Logic taking over in studios... this I disagree with. You will definitely see an raise in use in the home project studio, which may prompt Digidesign to start focusing more on its "prosumer" LE systems (001, 002). But even in a lot of good home studios running cubase or Logic, there is a protools program running even if it's just for editing and vocal tracking. Protools just has too much of a stake in world class and other large facilities. It is still the best editing platform (despite its lack of midi integration), and still the most technically accurate, user friendly, and compatible system. Not to mention the appeal of its shear expense! Hey, the labels are handing out large sums of THEIR OWN money to artists to record... They would rather see most of it spend on the recording of their product then spent on fancy cars. Remember, the label has to approve the studio, and the purchases of an artist with advance money.

As far as speeding up Protools on macs... well, with the release of version 6 which now runs on OS X, we will definitely see that. Not to mention way more reliability.

Anyhow, just my two cents. I apologize if this post got mildly off-topic :).

G