Is This Man Evil? Will He Add An iPod Tax?

It’s one thing for a government to charge you a tax for buying a car or fuel. That’s a necessity to run a government.

It’s something else again when an oil company charges the automaker for the privilege of using fuel in their cars and trucks.

That’s what has happened with music giant Universal and Microsoft.

It may happen to Apple so let’s call it what it really is—the music industry’s iPod tax.

Consider this whole scenario as a series of exercises in oneupsmanship, negotiation, and greed.

Microsoft is playing catch up in the portable media player market against Apple’s iPod. They need music for the Zune.

Universal Music Group has music. Lots of it. Now they have Microsoft in a tight grip; it’s the perfect squeeze.

UMG gets money for every Zune media player that Microsoft sells. In exchange for that tax, Microsoft gets the privilege of selling UMG music.

Apple already sells UMG music on the iTunes Store but, according to UMG chief Doug Morris, next year is a new deal, new contract.

What do they want from Apple? A tax on every iPod sold.

Yes, they’re calling it a royalty fee, but make no mistake it’s a tax.

Let’s call it like it is. The music industry wants to tax Apple’s iPod for the rights for you and me to store and play music on said iPod.

This is somewhat akin to the oil industry telling General Motors, “Hey, we need to get a cut on every car you sell. After all, you’re using our fuel.”

Yes, I know. There’s that whole “increase shareholder value” thing that dominant businesses regurgitate whenever the Greed Meters go off.

I don’t care. A tax is a tax. A hex is a hex. Apple could absorb, say, a $1 per iPod tax, but that would cost them $50-million or $60-million a year.

Meanwhile, the recording industry collects the money, keeps most of it, spreads a little to the recording artists, and smiles all the way to the bank, right?

Maybe. Microsoft is not Apple. Universal Music is not necessarily in the taxbird’s seat. Why?

This is all about posturing and positioning and crowing and negotiations, you know. Apple’s seat is pretty good, too.

For example, Apple could tell Universal to take a hike with their iPod tax. Universal could pull their music from the iTunes Music Store.

Nobody wins in that scenario, especially customers. It would be a declaration of war. If so, so would Apple’s declaration of war against Universal.

What’s to prevent Apple from becoming a new middle man in the recording industry?

Does that have a good tit-for-tat ring to it, or what? Is that a cool negotiating position?

Apple’s bargaining position for new contracts is not the same as Microsoft’s position when trying to roll out the Zune and Zune Marketplace.

Assume that Microsoft has to pay Universal a dollar for every Zune sold. What’s that amount to for 2006? A few hundred dollars? Maybe a grand? Even less next year.

I’m all for increasing shareholder value, particularly in companies whose stock I own (AAPL). I’m all in favor of hard bargaining. I’m also in favor of win-win, and not in favor of greed-greed.

Universal is posturing a purely greedy position in an attempt to take advantage of and control a newly emerging digital distribution system of which, for now, they have less control.

Sing it loud and sing it clear—no iPod tax for Universal Music Group.