Microsoft to give Universal a cut on Zune sales

By Vivek | November 9th, 2006 at 03:30 am ET         

Microsoft today agreed to pay Universal not only a share from its music sales, but will also be paying a percentage revenue generated from sale of Zune players. According to news report in New York Times, Universal might be receiving $1 for each Zune player. This move from Microsoft is in stark comparison to Apple, which pays music companies on percentage basis only for the songs sold through iTunes. After wrapping up the deal with Microsoft, Universal will try to negotiate a better deal with Apple the next time around.

From the Microsoft standpoint this deal had to be done before the November 14th launch of Zune in order to give Zune customers access to Universal’s media library. Compared to few months back when Zune was just considered to be an iPod clone, Microsoft has rolled out a complete strategy around it’s release. Leaving aside the issues related to DRM, Zune battery life, and the number of songs being available at the Live Marketplace, Microsoft is all set to offer the best digital home experience for a total of $650 retail price.

However the news report also adds-

Two months ago, Mr. Morris took a public swipe at user-driven Web sites like MySpace and YouTube, telling a Merrill Lynch investor conference that “these new businesses are copyright infringers and owe us tens of millions of dollars.” (Universal later struck a licensing deal with YouTube.)

I think Universal got it all wrong. In the first place people are not running radio or TV stations out of MySpace and YouTube. Even if some of them are using their content, it is companies like Universal that are gaining free publicity. Also, if the whole case was soo wrong why did Universal sign an agreement with YouTube?

Also some David Griffin adds

“It’s a major change for the industry,” said David Geffen, the entertainment mogul who more than a decade ago sold the record label that bears his name to Universal. “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.”

Did he really go and have a look at everyone’s iPod? Can we get some real stats for these claims(we don’t need data from Universal funded research report). Also it is amazing how easily executives from media industry can blame consumers for all the problems when they originate from the lack of innovation and imagination of media companies themselves. Had it not been for Kazaa, Napster and Bittorent, we would still have been paying $20 per CD to get just 1 of our favorite songs.

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