• Business Week, Tuesday, October 16, 2007 11 AM

Its relationship with Apple in tatters, Universal Music Group has decided to pool together other big music companies independent record labels to create an iTunes competitor. UMG already has Sony BMG and Warner Music Group on board, which together would represent 75% of the music market. UMG's plan is to supply iPod competitors like Microsoft's Zune with the fodder it needs to compete with Apple. The service would be called Total Music. No comment yet from UMG.

The move is partly about UMG's souring relationship with Apple, but also about boosting a business in decline. CD sales are falling, while rising digital sales aren't picking up the slack. Apple, meanwhile, dominates the digital music market through its iPod music players and the iTunes service.

There's plenty that's wrong with UMG's alleged effort. Music companies have tried before and failed to compete in the digital music market. Music lovers, if they're going to pay for music, want to be able to do it all in one place. So Apple retaining certain relationships while losing others to UMG's partnership would simply be bad for paid music. iPod owners won't trade in their music players for Zunes--they're more likely to turn to pirated music. UMG's plan would no doubt involve digital rights management software, another backward step.

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