This concept of paying a consortium a royalty on items is not in and of itself a new idea, it's just that in the past a law needed to be passed in order for them to receive a royalty - it wasn't just offered.

This is actually a clever ploy to force Apple to eat into their own profits, or at the very least make Apple look less "appealing" as a partner to the music industry. I think this is a very clever move.

This is, I think, a dangerous precedent for Microsoft to set. What claim to record labels have to the sales of hardware? They didn't design, manufacture, or market the hardware. If you want to argue that pirated music is being played on the devices, fine -- then create a blanket license fee that covers everyone. The route Microsoft and Universal have chosen leaves them with separate, arbitrarily negotiated contracts for some of the majors -- and zilch for everyone else. Why shouldn't sales of music continue to be tied to, you know, sales of music? This is bad for the industry (music and electronics alike), and really bad for artists and consumers. It just happens to be great for Universal.

More ranting here, but if someone can explain that I'm missing something, be my guest.

I wouldn't say Microsoft ruined the party so much as they had a brain fart in their own negotiating. Throwing tribute money at a company just to keep them onboard? Isn't Microsoft supposed to be at the receiving end of those kind of deals?

I doubt Universal pushed real hard on this. Don't take this too out of context.

If Universal made a demand and then denied access to their music for it not being met then I would throw up a flare.

Microsoft is simply doing what they always do, throwing money at something to try and dominate. They're willing to invest and honestly I think it's smart. Does it set a potentially dangerous precedent... yes, but right now MS is the begger at the door, not Universal. This isn't the first time MS has been in a situation like this and there will be a point (if their product is succesful enough) where Universal and other studios will be knocking on MS's door not the other way around.

This isn't bad for the consumer at all so nothing to worry about in my opinion, if anything this sort of process is great for future Zune owners and could turn out to be great for the industry if it creates a friendlier environment for digital distribution of music.

Does this mean MS might pay Sony in a similar arangment? Sounds crazy.

For me, this is a HUGE reason to NOT buy a Zune as this only has an impact if, and when, the Zune gains enough marketshare to put pressure on Apple. If Zune does not gain significant marketshare, this deal with the major record companies won't matter.

Er, Microsoft IS still the Evil Empire, right?

This is absolutely brilliant!!

Now if Microsoft will just start paying the consumers to use the Zune then we can finally take down new Evil Apple Empire!

Actually, this is an obvious move. When you have the deep pockets MS does you can afford to take a hit at your profits if it means your competition (which doesn't have as deep a pockets), will take a hit as well. Moreover if Apple plays hard and doesn't want to pay, they might loose content to Microsoft.

When two forces of Evil fight, it can only mean good times for the good guys (us)!!

This is priceless... so now Universal will once again make money that will in no way go to the artist like in the YouTube deal. but of course they will complain all day and night about how music is being stolen.

Big business is the Real music pirates. -corporate america- it's how you rob people legally.

Now that's priceless

Peter, I think you are really missing the point of why Microsoft would do this.

They need Universal Music behind them. They need a music catalog that'll compete with the iTunes store. They're taking a gamble with the Zune, and by offering a percentage of sales rather than an up-front signing bonus, is that the risk is shared. Universal now has a motivation to push Zune sales over iPods - which you can bet they'll do with their puppet artists. Suddenly you have Universal artists carrying Zunes, talking about how cool they are, offering to send out a specific song free (wirelessly) to everyone who shows up to a concert with a Zune.

This was a very prudent business decision that Microsoft made. It wasn't a "brain fart" and it wasn't a tactical error. This ties the success of the Zune to the profitability of a major record label, one who re-negotiates it's take of the Zune's biggest competitor about every other year. Why wouldn't they want Universal in their corner?

Peter,

Both MC and Universal are corps. which are in existence for the sole purpose of making money. If you're worried about the music then that should only be tied to the artist.

Oh, and by the way, I'd say 95% of signed artists are in it for the money anyway, so I'm guessing they don't mind it when their label or studio makes more money to pay them. Right?

They're probably just trying to get in bed w/them for a video content deal.

I say YEAH, Microsoft does whatever it takes to undermine the competition. If it means building a player with better features or paying of a company I say do for it.

Im sure MS didnt just say "Hey Universal take all of our profits forever"

Yippe Zune and Vista to take over the world, whats next next Rumsfeld gets kicked out of the White House.........................

They have to do this. It starts with Universal but only because they don't want Universal to be upset later on when they offer this same deal to none other than Sony. Sony will glady sign on as long as they get some of the back end of the hardware, it lessens the sting of not being a leader in the mp3 player industry for Sony.

how is this not bad for consumers? Now people will have to pay extra for this thing just because someone at Universal thinks everyone is a pirate. They'll STILL have to pay per-song for the music from universal on top of this extra tariff.

If the things came pre-loaded with music, or came with a coupon for 100 free songs with purchase, I could see a record company wanting a piece of that pie, but you can't charge a consumer for what they *might* do with their product. For all the boneheads at universal know, people might use the things solely as portable HDs, impractical but possible, or as doorstops or tiny dancefloors for hamsters and gerbils... who knows. It certainly isn't up to the manufacturer to dictate a product's only use. I wasn't planning on buying one before and I'm not even going to look at them now.

Halenstone, you find me an artist -- ANY artist -- who cares about their LABEL making more money. Even those who are lucky enough to have good deals, good relations with their records, musicians care about checks written to them, not checks written to their label. And it's not clear at all that this will help musicians get checks.

If Microsoft did this so willingly, why did the NY Times article cite tense negotiations? This wasn't just an easy payoff from Microsoft; this came from the label.

Also, there's no mention anywhere in the press release I just got from Universal -- or anything I've gotten from Microsoft -- suggesting that Microsoft is getting ANYTHING from Universal in the Zune Marketplace. If Microsoft is keen to unseat Apple, they need to have some kind of carrot to bring consumers to their store. So far, there's none of that. Maybe that will happen in the future, but for now they've got nada. Not to mention, Microsoft's whole angle with Zune is to try to present a more "indie" face, as a different take on the market. They're not bundling Universal music or any other major label with the player; they're showing off indie music from smaller labels. Ironically, this announcement undercuts that very image.

Quite literally, the press release sent out today says, "HURRAY! MICROSOFT GETS TO HAND UNIVERSAL CASH JUST FOR SELLING PLAYERS!"

That looks fantastic for Universal, and it looks ridiculous for Microsoft. If MS comes out with some Zune exclusives in a month, great -- but couldn't Microsoft have secured that by giving Universal cash from the *Zune Marketplace* where the music is sold, rather than the player?

I mean, why not take money from the Xbox and hand it to EA Sports? This is bizarre, you have to admit.

Bad bad precedent for Microsoft to set. Now other labels will want their share of the money too, or else who would want to be a part of their store? Not only that, what about for movies and for games? Now that there is an Xbox Marketplace for movies, will every Xbox sold give money to the movies/music/game studios too? It sounds terrible for MS's bottom line, when these machines, that being Zune or Xbox, aren't making them much money (in the case of X, even losing). MS really hoping Vista will give them enough money to throw away in their other markets? MS needs Universal's support, no question, but this sounds bad. Well, at least I know my Windows 98 money is doing something! Too bad it's just lining the pockets of other corporations :S

Peter, this is only "bizarre" if you look at it from such a biased view of hoping to see Microsoft make a bonehead move. (apple fanboy are we?) And, I'm 24 and my band is signed to a minor record label, (and yes, go ahead and criticize for not being on a major lable and say "well that's the difference) and it makes a huge amount of difference if your record label makes money. It does not go directly into my pocket with a check, but that means my label is now willing to spend a little more on my production, on my tour, on my marketing, on my merchandise... all of which puts more money into my pocket.

It's a genius move by Microsoft.

So, Peter. Are you telling us that Microsoft is a poor business negotiator?

Look, I'm not looking for opportunities to criticize Microsoft. I like a lot of what I've seen of the Zune, and I think in the long haul there's big potential for interesting non-Apple hardware. (I'm not a big iPod/iTunes fan, frankly.)

The problem is this: Microsoft doesn't have a model here to explain what this deal is about. If they're paying to get exclusives, fine. But so far, that doesn't appear to be the case.

And I really like the idea of compensating artists. But a lopsided deal that impacts only one major label does NOT do that for everyone else. That's why a lot of people have suggested some sort of compsulsory, universal licensing fee, which would benefit all artists.

If Microsoft gets something out of this deal, then it may make sense. But based on the PR story we're being told, what they're getting out of it is the privilege of sending Universal a check. And they're doing it in a way that suggests labels are somehow deserving of making money off their hardware, rather than just sweetening the deal on actually selling music, as in the online music store. Note, as well, if you're an artist getting online music revenue, if your sales spike in that store, you get a cut. If the hardware is being licensed, then how does the label determine that you actually deserve something? (I.e., there's no mention of what this fee represents. Is it for pirated music? We don't exactly have charts for that. And there's no ASCAP/Harry Fox-like agency determining what you're loading onto your Zune.)

It sounds like a fantastic deal for the label, not so hot for everyone else. And it's much clearer how this benefits Universal than Microsoft, until six months from now we find out that UMG is putting all their exclusives on Zune Marketplace and not iTunes. (Which we may, I'll admit ...)

A genius move? Not exactly. Even Microsoft has a limit to how they buy their way into a market (though one is starting to doubt that with the Xbox division still bleeding like a stuck pig).

When I was 24, and in a band, I might have thought that, too. But I'm not, I'm older and wiser and realize that you may start seeing other manufacturers (name it: DVD players, game consoles, etc...) having to start paying labels for every unit *they* sell to 'cover' any potential loses due to piracy.

I'd like to have a warm fuzzy feeling about this - but I work for Uni's big, profitable parent - and I know this sets a bad, bad precedent.

Peter,

You asked Halenstone to find you ANY artist...well...if I may field this one, Halenstone?

EVERY artist cares about their label making more money. Let me walk you through this:

As an artist, your paycheck is a function of how much music you sell, how much revenue you drive to the Label, and how much the Label wants to keep you. A Label with more money is likely to try a little harder to keep artists, and to be willing to spend a little more.

Also, it is in the artists' best interest to sign with a Label that's financially sound; thus ensuring the stability of their own financial future. Would you really want to be signed to a Label that has huge outstanding debts and no profit? Of course not.

It's absurd to assume that an artist, even a particularly selfish one, wouldn't care about the financial health of their employer.

Do YOU care if the company you work for files for bankruptcy? Do YOU like it when your boss announces there's an extra million in the budget?

Don't be stupid. Of course you care. To assume artists are somehow "special" and don't follow the same relationships that every other employee/employer follow is just inane. Artists aren't special. Successful artists make the same amount that successful executives and specialists make. Period.

FYI, Pogue slams Zune today:

http://www.nytimes.com/2006/11/09/technology/09pogue.html?...

I think the problem is that the Zune Players share their music with other players. There is no defense Microsoft can make that this is any kind of fair use by the purchaser of the copyrighted material - copyright infringement is inherently built into the device - so Microsoft needs to declaw the entities that have legal teams big enough to pose a threat. The rest they have some other solution in mind, which might be an argument that their portion of the possible sharing is too miniscule to compensate. Of course this does not apply to entities such as Sony.

What would truly be wonderful is if Universal and MS can lower the music sale prices. If universal is getting paid for the hardware why not undercut iTunes by making it, let's say $.75 a song or $7.99 for an album...

Brad, look at what I said: "musicians care about checks written to them, not checks written to their label."

Which would you care about? Do you immediately hear your employer say "profits are up" and think "great, I'm rich!" No -- you think "gee, I hope that money gets to ME."

And that's my concern with this deal. Look, part of what I'm saying is that Microsoft and Universal are touting this without telling us the details (typical), so I'll be the first to admit *I don't know* exactly what this is about. But until there's a business model that says what this revenue stream actually represents, I would think artists should be rightfully suspicious.

And I also think artists benefit more from *license fees* if they're negotiated across all hardware and all labels, rather than one player, one label, one manufacturer at a time. So maybe you're happy if you're with Universal and they're generous with this deal. You're certainly left out for the moment if either of those things isn't true.

It's a genius move by Microsoft.

It's a genius move by Universal, who are getting paid for doing exactly nothing.

What happens when EMI, Sony and BMG wonder where their payoffs are? When they decide that Apple and all other player manufacturers need to be tithing too? How about when BMI and ASCAP want their piece of the hardware pie?

Slippery slope. Bad move by Microsoft (of course, doing something that damages an entire industry in favor of their own short-term self-interests is nothing new).

@Brad:

If I work for a company like Enron and they announce an extra million in the budget, that's not going to make me happy other than it lessens the chance that I might get downsized--otherwise, who cares, because personally I won't see a dime.

I just wanted to pop in to giggle at the idiot who used the phrase "I'm older and wiser" in reference to the 24 year old band member.

Anything you said after that was immediately ignored.

This thread has actually gotten quite amusing. I love the internet and its multiple prophets, lawyers, and financial geniuses.

Actually, the Times has it wrong. This is a licensing deal...check out Betanews.com for more info.

So this is like paying the mob for protection, right?

Dumb move M$. Thier greedy fat cat paw wasn't even "out" for tithing. Now everyone is going to want a cut of the "cheddar" and the little guys won't have the cash to pay... er I mean "play." (Maybe that was intentional?)

Poor form Microsoft
Can't design their own player
Mafia style biz

To those who say MS is paying Universal just to get in bed with them,

WRONG.

MS already has a relationships with Universal through MSN Music and Urge. This is simply a way to undermine Apple. Remember, Apple's made huge efforts to keep digital music prices low and the music labels don't like it. They'd rather raise prices and force everybody back to P2P. I think they LIKE suing 13 year old girls as long as it lines their pockets.

I don't see anything wrong with it.

Of course here in Canada we have been paying royalties to music entities on every tape and CD purchased for a long time....even on the iPod for a few years.

Come on, come on!

For one, if Universal could do over their deal with Apple, a similar deal to this would be in the cards. Universal gets a kickback for supporting a product and offering their library to Microsoft.

Microsoft not only gets a huge library, but they also have the edge in negotiating getting content either first or exclusively. Also, as mentioned earlier, Universal will push the Zune because it has an interest.

Another thing is that Microsoft has placed Apple in a pickle. When it's time to renegotiate the license to Universals library will they offer up the same deal Microsoft has? If not, is there a possibility that Universal no longer allows Apple to sell their material?

Also, remember that Microsoft is now opening up a Marketplace on the Xbox 360. They have a foot in the door with Universal. It's just a guess, but I'd figure that eventualy the Zune will sync up to the 360 in some fashion, so if everyone that has a 360 with Universal content on it eventually buys a Zune, then Universals bottom line looks better, and so does Microsofts since it'll be selling content. It's the big Digital Circle of life.

Oh, and artists care about their labels financials. Selfish artists want a label that will pay them more. Artists that want their music to be heard want a big label that can distribute that music to the masses. Others want the support that comes with a profitable label. The only artist that probably wouldn't care is the one performing on a corner with an open guitar case taking tips.

Peter, I dont want to call you on this but. This is quoted from the meeting.

"Under the terms of the deal, Universal will split the money it gets from Zune player sales with its artists. Morris declined to say how much artists will be paid."

The Artists Get the money, please correct your posting.

My Source http://www.foxnews.com/story/0,2933,228341,00.html

*Another thing is that Microsoft has placed Apple in a pickle. When it's time to renegotiate the license to Universals library will they offer up the same deal Microsoft has? If not, is there a possibility that Universal no longer allows Apple to sell their material?*

That's possible - but Apple has a point of leverage that Microsoft doesn't - marketshare.

What's next? TV manufacturing companies giving the networks a portion of there tv sales? DVD player manufacturers putting money in the studio pockets for what? Prudent business model or not, it sets a dangerous precedent that will end up costing the consumer more money. (Who thought that microsoft was eating the kickback? They will just pass the cost to the consumer.)

"MS already has a relationships with Universal through MSN Music and Urge."

No, MSN Music was a rebranded store: MusicNet, Loudeye, and others had a relationship with Universal. Urge is wholly owned by MTV. Microsoft has a relationship with MTV to give them a spot on a piece of software that even they are not using.

"For one, if Universal could do over their deal with Apple, a similar deal to this would be in the cards."

It WAS in the cards, and Apple said, "Hell no! This is our offer. Take it or leave it."

"Microsoft not only gets a huge library..."

Huge? By who's standards? Univeral is 1/3 of all music, but Zune's catalog is still going to be around 2 million at launch. Apple has an expanding catalog of 3.5 million already.

"When it's time to renegotiate the license to Universals library will they offer up the same deal Microsoft has?"

"Hell No!" Again.

"If not, is there a possibility that Universal no longer allows Apple to sell their material?"

Not when Apple sells MILLIONS of tracks a week while Microsoft will be lucky to sell a MILLION units a year.

"Also, remember that Microsoft is now opening up a Marketplace on the Xbox 360. They have a foot in the door with Universal."

Don't you mean Unviersal has a foot in the door of the XBox? Now Universal has a precedent to get the "piracy tax" on any MS device that can hold media content... All just to "irk" Apple?

"so if everyone that has a 360 with Universal content on it eventually buys a Zune"

WHo is this "EVERYONE"? XBox only sold 20 million units and represents about 20% of the console market. XBox 360 has sold 10 million and is moving slower than the XBox. SO if EVERYONE buys a Zune, you have 1/3 of the iPod's market and 1/3 of the PS2's market. And that's IF "EVERYONE" buys it.

"It's the big Digital Circle of life."

It's the XBox/une fanboys big Circle Jerk of Rationalization and Slf-Delusion.

Zune:
Music the way the RIAA wants it to be.

"Zune:
Music the way the RIAA wants it to be."

Oh come on durian: do you think the RIAA wants any part of any digital media player?

Vinyl and analogue is the way the RIAA wants it to be. And we had no problem with that for years.

I agree that MS is buying themselves a seat at the table to get Universal interested in selling the zune. They made a music player that's from what I hear, about the same as the jillion others. The only thing they have going for them is deep pockets to buy people into help promote it.

This is a product with a nightmare name from a marketing point of view, no special features to set it apart, and the only reason anyone has ever heard of it is because MS makes it and they have the press in their pocket.

MS spent half a Billion dollars to make Internet Explorer and crush Netscape. They charged huge penalty pricing to PC makers who didn't ONLY ship computers with Windows.

Whenever a company came up with new technology they said "share with us and license or we'll compete and crush you". This is not a company of nice people.

Bill Gates lucked out with DOS and Windows and they use their monopoly to get things, not by doing it better, just by strong arming into it with money. Nothing they do is good for us.