Apple reported eyeing Universal Music

Earlier this month, various news wires reported that Apple is considering offering $6 billion for Vivendi Universal's Universal Music Group division. The speculation of such a deal drove down Apple's share price by 8.1% to $13.20 on the day the story was reported and left analysts wondering what would be in it for the computer company.

Last week, as Apple announced its quarterly earnings report, company CEO Steve Jobs denied the speculation and issued a statement saying: "Apple has never made any offer to invest in or acquire a major music company." He also said comments attributed to a Vivendi director, who was quoted in a Bloomberg news story earlier that day as saying that Apple was planning to acquire the company, were "untrue."

Apple is struggling to hold on to its 3% of the PC market and acquiring a record company that almost declared bankruptcy in 2002 seems like an unwise strategy. In this proposed deal, Apple would seem to be attempting to leverage some of the success it has had with its iPod MP3 player. If it acquires the rights to the music owned by Vivendi, it could in theory launch a digital music service to complement its digital music technology.

This fits the theory of content convergence. Sony, after all, produces computer hardware and owns a record label and a movie studio. But such a system run by Apple would still be in competition with the free P2P networks that Vivendi has blamed for its sliding profits.

But you have to wonder that if Apple owned both the platform and the content for digital music, would it choose to sue alleged file traders as other members of the recording industry have done. If it selected the path of potential litigation, Apple would not only risk alienating music fans, it could also push away its technology users who like to think of Apple as a progressive company that strives to "Think Different."

These are some of the questions that Apple board members will have to ask themselves prior to purchasing a company that is already running at a loss. If Apple wants to think of itself as a media company, it should consider whether the owners of all those Apple laptops really want Apple to control the digital media they are accused of downloading and swapping with others.

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Ann Harrison

IDG News Service
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