Microsoft to pay Universal for every Zune sold

Microsoft is trying to change the portable music player market. With Xbox and xBox 360, they have lost 4 billion dollars. Now they plan on not only losing money with each unit sold of Zune, but they want to make it industry standard to pay a royalty to record labels for each unit sold. Weird... but you know this strategy is decidely to try and make apple pay money for the ipods. thus raising their costs. and our price to buy the players.

Microsoft is devious!!! and decidedly evil. wish they would just let apple be.

They may want to justify this as labels have been paid money by Sirius and XM for some players which can save content for later play. ie their ipod like models. but this was hardly a call for industry wide payments. the only reason why they are doing this is to try and sabotage apple's most successful product line for growth. (aside from laptops, but they sell more of these cause ipods are driving attention)
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Universal Music Group has opened yet another revenue stream, and this one’s a biggie, as Microsoft agrees to pay UMG an undisclosed fee for every Zune player sold. The two companies made the joint announcement this morning. This fee is in addition to the standard payments Microsoft will make to UMG for the sale of its music. The software giant plans to offer a similar arrangement to other major music labels and music publishers.

For perspective, imagine a world in which Apple had paid the majors for every one of the tens of millions of iPods it sold in the last five years. Whoa.

“It’s a major change for the industry,” David Geffen told N.Y. Times reporter Jeff Leeds, who broke the story. “Each of these devices is used to store unpaid-for material. This way, on top of the material people do pay for, the record companies are getting paid on the devices storing the copied music.”

Leeds further noted that UMG had plenty of leverage in the negotiations that resulted in this groundbreaking pact: Microsoft couldn’t launch the device and service without content from the #1 major.

"This agreement with Microsoft around Zune is a significant milestone for our company and our artists," said Morris in a statement. “This move demonstrates there can be a win-win situation where consumers have a great experience while labels and artists are also fairly compensated. We applaud Microsoft for its innovative and consumer-friendly Zune store and device."

Microsoft Corporate VP of Entertainment & Devices Bryan Lee chimed in: "This is an industry in transition, and we at Zune feel that artists should be paid fairly. The agreement we are announcing today is one of many innovations we plan on introducing to the entertainment industry with our partners and highlights our commitment to growing the digital music space. We believe that the music consumer will appreciate knowing that when they buy a Zune device, they are helping their favorite artists get paid."

The Zune device and online store, which launch next Tuesday (11/14), will include content from all of the Big Four as well as most of the indies.

Even if it's $10 per Zune, it translates to nothing if the unit does not sell. If Zune fails as we all expect it to, the labels have no more leverage against Apple than they had six months ago.

The writing is on the wall for the major record companies. Artists are selling their music directly from their MySpace sites. They aren't going to be making billions via this route, and if anything they are alienating their customers further with their pronouncements about "not paid for" content.

This 'undisclosed' fee is something that Apple apparently drew the line at... but if the labels can get a revenue stream from elsewhere, that doesn't bode well at all.

Personally, I find it outrageous. Especially because my iPod is full of content, every single song paid for. It's like paper manufacturers wanting a cut from ink suppliers...

This I read today @ macdailynews.com - this can be very disturbing...


Microsoft to pay Universal for every Zune sold

Thursday, November 09, 2006 - 12:24 AM EST



"Microsoft Corp. has agreed to pay Universal Music Group a fee for each new Zune digital music player it sells when the iPod rival launches next week, the companies said on Thursday," Yinka Adegoke reports for Reuters.

"The groundbreaking deal could redefine the digital music business pioneered by Apple Computer Inc.," Adegoke reports. "Microsoft is trying to break into an industry closely aligned with archival Apple, which is credited with nearly single-handedly building the legal Web music world with its iPod players and iTunes music store."

Adegoke reports, "But Apple does not give a cut of sales of iPods to music companies. It only pays labels for songs sold on its iTunes music store."

"'We felt that any business that's built on the bedrock of music we should share in,' said Doug Morris, chief executive of Universal, owned by French media giant Vivendi," Adegoke reports. "He did not disclose the amount of the fee for the Zune, which launches next Tuesday."

"The iPod has a nearly 80 percent share of digital media player sales, and its iTunes music downloads site is also the dominant online music store," Adegoke reports.

Adegoke reports, "Like other record companies, Universal has a revenue-share deal with iTunes but no share of iPod sales. 'We have a current contract with him and at the end of that I'm sure we'll negotiate,' said Morris, whose company accounts for nearly one in three CDs sold in the United States. Morris said the deal could set a precedent in negotiations with other device manufacturers, including mobile phone makers, who are increasingly seeing music as important to the future of their businesses."

Even if it's $10 per Zune, it translates to nothing if the unit does not sell. If Zune fails as we all expect it to, the labels have no more leverage against Apple than they had six months ago.

The writing is on the wall for the major record companies. Artists are selling their music directly from their MySpace sites. They aren't going to be making billions via this route, and if anything they are alienating their customers further with their pronouncements about "not paid for" content.

Its getting easier and easier to make and distribute music. Soon artists will create there own tracks (on a Mac of course) then create their own website to distribute it. Cutting out the middle man and maximising profits for the artist. Whoever comes up with a consumer DRM system will be a big winner as it will allow these new artists to protect their work while still maximising profits.

“It’s a major change for the industry,” David Geffen told N.Y. Times reporter Jeff Leeds, who broke the story. “Each of these devices is used to store unpaid-for material. This way, on top of the material people do pay for, the record companies are getting paid on the devices storing the copied music.”

Yes, because I always listen to my CDs at the same time as listening to my MP3s of them. :rolleyes:

They want it both ways, whether they are talking about copying tracks from a CD or pirated downloads.

They say that we are effectively buying a 'license' to play the music on a CD, that we own the physical CD, not the rights to the music. But if that is true, the 'licence' is not a physical thing, and so should be transferable to a copy on an MP3 player. If it's not true then we own the CD including the music and we can do what we like with it anyway. It's just about getting people to pay for the same thing twice.

If he's talking about pirated music, then how do you get the money from people who steal the Zune as well as the music they put on it? It also penalises every person who has never pirated a music track in their lives and encourages the idea that it's perfectly fine to pirate music, after all if that's why they're getting the money what incentive is there to spend an 'undisclosed'[!] portion of the Zune's price on music rather than pirating it instead?

As for Microsoft, why don't they cut the complicated tactics and just give the music companies a big fat pile of cash to dump iTunes!? It wouldn't be too different.

Microsoft has nothing to lose, they could be giving up insane concessions to music companies to force Apple hand in renegotiations in the future with the music industry. If all the companies demand a cut of every iPod sold then that translates into higher cost for consumers...

This is a competitor to the iPod that must be defeated, Hopefully going down Zune......


This is scary - an odd form of Orwellian economics....

Microsoft must be totally desperate to get in with the music companies.

"Microsoft Corp. has agreed to pay Universal Music Group a fee for each new Zune digital music player it sells"

Let's hope they don't need to pay them a lot then. ;)

Microsoft must be totally desperate to get in with the music companies.

Not going to make one jot of difference unless they also get in with the consumers. Unless Zune takes off, this is just another "iPod killer" rumour that'll come to nothing.

This doesn't matter. No one's going to buy a Zune anyway. The only companies that will lose out will be Creative and the like who currently offer alternatives to iPods. The small minority that choose to not buy an iPod anyway would consider the Zune. Everyone else will buy an iPod. Because its cool. Microsoft is not cool.