Microsoft to pay Universal for every Zune sold | iLounge News

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Microsoft to pay Universal for every Zune sold

In a move that could have a future impact on Apple, Microsoft has agreed to pay Universal Music Group a fee for each Zune media player it sells. “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. “We were very early in working with Steve on the launch of the iPod and he’s been a very good partner and done a lot for the industry,” Morris said in response to questions about Universal’s relationship with Apple. “We have a current contract with him and at the end of that I’m sure we’ll negotiate.” Apple currently only has revenue-share deals with record companies for music sold on the iTunes Store, and does not offer a portion of iPod sales to any company.

Update: The New York Times reports that Universal is expected to receive more than $1 for each $250 Zune sold, and that the deal “comes after weeks of tense talks and averts a standoff that might have crippled Microsoft’s attempt to compete against the iPod.” According to the Times report, Universal apparently threatened to not sell its music through the online Zune media store unless Microsoft paid a royalty for each Zune sold.

“Microsoft ultimately had plenty of incentive to make a deal with Universal,” reports the newspaper. “Microsoft is laying a huge wager on the Zune. If it had not struck a deal, it would have been left in the position of trying to mount a credible challenge to the iPod without Universal, which accounts for a third of new albums sold in the United States. Microsoft also stands to benefit by cultivating a fan-friendly image with the notion that artists—not just corporations—will share in the Zune’s sales.”

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Comments

1

Microsoft, you SUCKERS!

Posted by Multimoog on November 9, 2006 at 10:48 AM (CST)

2

I see what they are trying to acheive, but how will this affect sales when their key demographic (who in general spurn record industries), learn that in purchasing the player an RIAA company get’s a cut?

Posted by Stuart on November 9, 2006 at 11:08 AM (CST)

3

I guess that brown colored Zune is synonymous with brown-nosing Microsoft? How to win…er…rather buy and influence friends (or fiends in this instance).

Posted by FahrenheiPod 451 on November 9, 2006 at 11:12 AM (CST)

4

I don’t know if MS has thought about the implications of this.  Are they now going to pay the labels for every copy of Windows Media Player downloaded because that could be used to play their content?  Is MS going to give them a cut of each copy of Vista because a PC is a multi-media device?

This is literally like Ford making a car and then paying Exxon for every car they sell just so Exxon keeps making gas for it.  Normally MS is really tight about this sort of thing, I don’t know how this slipped through.  If anything they tend to be better on business issues and negotiation than Apple, and they have more clout even without the iPod, so it’s beyond me what happened here.

Posted by Jeffery Simpson on November 9, 2006 at 12:02 PM (CST)

5

I have to wonder what MS is buying with this deal.  Will Universal’s terms during the renegotiation with Apple be incompatible with the current iTunes pricing model for example…

Posted by Paul Novak on November 9, 2006 at 12:37 PM (CST)

6

Am I the only one who thinks Microsoft did this on purpose BECAUSE of what it will do to the negotiations with Apple next year?

Microsoft has money to burn and they don’t stand to lose much money this way because they won’t be seeling many of these players initially. So of course, why not make it harder for Apple, and if Apple stumbles, Microsoft will be there to wedge in the crack this creates in the MP3 player market.

Sounds like a smart move for Microsoft because if that does happen and they do become the dominant player, they will be too big for the studios to bargain with and they can stop paying this fee at that point.

Apple SHOULD be worried about this.

Posted by SirROM on November 9, 2006 at 12:59 PM (CST)

7

This sets a dangerous precedent. First Universal, then others to follow. What gives them the right to want a cut of the hardware they had NOTHING to do with making or investing in? The greedy just get greedier and there seems to be no end in sight. Steve Jobs MUST take a stand against this. It smells of Racketeering at it’s lowest!

Posted by Tenchi211 in California on November 9, 2006 at 1:10 PM (CST)

8

So Microsoft sells a music player that can play music from any record label and though there is no guarantee the user will play any Universal music not previously purchased, they still give Universal money for each player sold? This is obviously being done to hurt Apple by getting Universal to withhold their songs from iTunes unless Apple gives them a similar deal and then hoping every label starts screaming for a cut of the iPod (not just by the song on iTunes). The correct response from Apple should be “No way, f-u, go take your tiny little Zune payoff and have a good time.”

Posted by morebinky on November 9, 2006 at 1:17 PM (CST)

9

This is like Sony giving away a % of each CD player sold.  Crazy. 

MS may be trying to affect Apple’s deals with the record companies, but I doubt it will work.  Apple has much move leverage than MS in this market.

Posted by Gary on November 9, 2006 at 1:51 PM (CST)

10

What a bunch of hooey!

“Microsoft also stands to benefit by cultivating a fan-friendly image with the notion that artists—not just corporations—will share in the Zune’s sales.”

I seriously doubt Universal will be sharing the pie with the artists!

Posted by Ohio Trekker on November 9, 2006 at 2:16 PM (CST)

11

I bet this deal provides some type of immunity for Microsoft when it comes to possibly being sued by the label.  If the label is taking part in the profit participation they will have a harder time of proving any type of copyright infringement by Microsoft or the Zune. 

Labels and other copyright holders are going strong after companies that create technology that allows people to infringe on copyrights.  I’m sure Microsoft would love an exemption from these types of cases. 

It’s a dollar per player insurance plan.  It will be five dollars per player when the other labels get on board. 

I think it’s a smart move.

Posted by Talking Madness in Los Angeles on November 9, 2006 at 2:40 PM (CST)

12

It’s probably not a good thing for the whole DAP industry, but I do think it’s kind of funny that Universal is sticking it to M$.  Ha ha!

Posted by WhereTheSunDontShine on November 9, 2006 at 2:42 PM (CST)

13

Microsoft just set a dangerous precedent with this.  Pretty soon the RIAA will charge automotive companies a fee for putting radios in cars.

Rest assured Universal will try to pull this same thing with apple.  If jobs is smart he won’t play ball.  While it would effectively kill the itunes store if Universal pulled their content.  The ipod has become so universal that I would wager they would still sell; and since Stevie makes his money from ipod sales not itunes sales he could care less.

Contrary to Universal and MS’s hopes I don’t think people would then go buy a Zune if Universal pulled thier content.  More than likely a lot more people would go back to pirating music to put on their ipods.

Posted by Art Vandelay on November 9, 2006 at 2:52 PM (CST)

14

If it had not struck a deal, it would have been left in the position of trying to mount a credible challenge to the iPod without Universal…

Sounds like being stuck between a rock and a hard place. Open up a new media ecosystem, then do battle without one of the major media suppliers, or pony up the extortion money that Universal demanded.

I don’t see that Redmond had much of a choice, given how powerful the iTMS culture is already.

Posted by flatline response on November 9, 2006 at 3:06 PM (CST)

15

Over $1 per Zune?

Universal stands to make 5 or 6 thousand bucks on this sweet deal.

Posted by ort on November 9, 2006 at 3:08 PM (CST)

16

“Universal stands to make 5 or 6 thousand bucks on this sweet deal.”

I think you really mean 5 or 6 bucks on this deal ;)

Posted by MatrixSJD on November 9, 2006 at 3:17 PM (CST)

17

Can I get a dollar back on my Zune if I promise not to buy any music from Universal?

Posted by otaku on November 9, 2006 at 3:25 PM (CST)

18

Makes perfect sense for Universal.  I’m sure if they had thought this whole iPod thing would amount to anything, they would have held out for the same kind of deal, but at the time, it was an experiment that they weren’t very sure of.  Don’t forget that for 20 years we all payed the RIAA a few cents for every blank tape (Cassette and VHS) that we bought.  That’s why we were all able to record our favorite tv shows and our friend’s cassettes and the RIAA never blinked.  But now we’re talking about digital copies that won’t degrade over time and we won’t have to rebuy, so a few pennies isn’t good enough.

Posted by jeff on November 9, 2006 at 3:30 PM (CST)

19

I part-run an indie label from New Zealand. Microsoft, I’d like to to send me a dollar for every Zune sold to, thanks.

Lil’ Chief Records
P.O. Box 68-290
Newton
Auckland
NZ

As we’re only a small player, perhaps just a few cents per unit sold. Thanks - I look forward to the cashflow.

Posted by Lawrence Mikkelsen in New Zealand on November 9, 2006 at 3:34 PM (CST)

20

All I know is that I will never buy a player that pays a percentage to the record companies… I’ll just buy from some other company that doesn’t have the RIAAs greedy hands in them.

This just paves the way for the RIAA to have even more say about our digital music. I like my music… and my music player free… not bound by the RIAA.

Posted by Glorybox3737 on November 9, 2006 at 7:03 PM (CST)

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