Universal Music get fee for every Zune sold

We're not exactly sure how they finagled it, but Universal Music announced it plans to collect a share of the thin margin Microsoft's going to make with each Zune, receiving an unspecified amount for each player sold. In typical RIAA boot camp style, Doug Morris, CEO of Universal said, "We felt that any business that's built on the bedrock of music we should share in." So, if we have this straight, according to Universal, any music-playing device sold should provide some profit to them -- even if that device will never play a song recorded by Universal. And likewise, Microsoft has no problem setting a new precedent to butter up a big label partner like Universal to possibly be seen as a favorable alternative to the Jobsian iPod-stranglehold on legal music distribution when Apple's Universal contract is up. (Remember, this isn't the first time the music industry said it wants a cut of hardware sales.) Is it us, or did something start to seriously reek in here?

[Thanks, Eric]

[LOS @ Nov 9th 2006 1:02AM]

Microsoft you stupid SOB

[Silver @ Nov 9th 2006 1:06AM]

"Is it us, or did something start to seriously reek in here?"

It's called the infamous stench of Microsoft business dealings.

[Hiptrigger @ Nov 9th 2006 1:07AM]

Gradeskool arthimetic: some percentage of zero is, ah, still zero.

[Matt @ Nov 9th 2006 1:08AM]

I was considering buying a Zune. Not anymore.

I refuse to be an accomplice to this extortion scheme.

[Marian @ Nov 9th 2006 1:15AM]

A share of nothing is still nothing!

[JimD @ Nov 9th 2006 1:21AM]

So, microsoft is trying to buy it's market share? I don't get it.

[Austin @ Nov 9th 2006 2:14AM]

precisely. They made so much off of windows, they have money to irresponsibly throw at pet projects like the xbox and zune. wheras the iPod didn't lose money as they got the prodution line starting to roll, because they could reasonably sell them for 400$, apple has moved the price to 250, a price that microsuck has to match to stay competitive.

since they already have infrastructure and mindshare, they still make money, however microsoft has to build the zune machine with profits designed to sustain, not to set the thing up. that's why consoles are always so expensive when they first come out, to help cover for the cost of setting up an assembly line, initial stuff like publicity and press and in-store displays. now that everything is set up, sony can run a playstation 2 down the line for 80 bucks, make 55, and make a buttload off of games. Apple already has press, hype, mindshare, and grassroots assembly (including parts, manufacturing, shipping, and retail). microsuck has to pay for that stuff while selling them for 250, wheras apple could sell them for 400 in the beginning.

I'm not so much pro-apple as i'm anti-microsuck. microsoft needs universal. microsoft NEEDS all the records on thier side. the worst that could happen to apple is for apple to be forced to make it easier to use other stores' downloads in iTunes, which wouldn't hurt them too much considering they make all thier money off of iPods, not downloads.

[BrokenNut @ Nov 9th 2006 1:21AM]

Is this for real? How does this make sense to anyone at all? Universal has absolutely NOTHING to do with making this hardware. NOTHING!!! And yet they still get to collect a % on every sale. Huh? Because potentially thier music(which should techincally be the artists) is able to play on it? Then why not make a % off every CD player, car and computer sold? Really this is a VERY bad precedent to be setting.

[z @ Nov 9th 2006 3:01AM]

MS would have proven to be a bit more intelligent if it had decided to give a percentage to independant artists via right-management organisations. But then again, Microsoft prooves it just doesn't care about the musicians except for the few 'indies' it shows off trying to sell the Zune. Did you all check this page about how musicians must unzune? http://www.unzune.net Interesting movement no? Creative musicians and fans out there should open their eyes on what scheme MS is trying to show off through their viral marketing, the zuneinsider website is in that sense very revealing...

[Alcaron @ Nov 9th 2006 1:23AM]

Well, it IS possible that Universal just said "f u" to Microsoft unless they met their demands, they don't need Zune, Zune needs them. And maybe they are hoping that MS will be able to dislodge Apple from its throne and then they can say the same thing to Apple.

Competition in the DAP marketplace is good, but if that is close to reality then it could end up being just as bad as it is good.

Either way I think its pretty sh*tty and I almost don't believe that Universal doesn't even seem to care how they sound anymore.

[Churn @ Nov 9th 2006 1:30AM]

It's quite possible that with this, Universal would give preferential treatment to Microsoft when it comes to releasing content that's downloadable to the device. With this, they will have the edge over Apple. Dirty dealings, but that's business.

[HG @ Nov 22nd 2006 2:01PM]

Churn says: "Dirty dealings, but that's business."

Seems like a high price for consumers to pay for getting even with Apple. How about Microsoft producing a better product?

[S.A. @ Nov 9th 2006 1:42AM]

I was thinking it had something to do with the music and stuff that comes pre-installed on there. no?

[Flix @ Nov 9th 2006 1:51AM]

This is ridiculous. If Universal get paid for each Zune, then so should all other record companies...but WHY? They are not making the hardware. If I don't have any Universal artist on the Zune, why the hell should they get paid?!!

[Loonie @ Nov 9th 2006 1:59AM]

So what does the Zune customer get free from Universal then?

[Brian @ Nov 9th 2006 2:01AM]

I've preordered my zune (I got $30 off for doing so... I'd tell you where I got it, but they are already out of preorders).

This isn't going to change a thing, IMO. Let Microsoft butter 'em up until Universal lets Apple go for it's primary distributer of online music sales. Once that happens, and second gen Zune's are on their feet, it'll be better for all of us. More competition = better for consumers.

Apple (Jobs) is the second greediest electronics company in the world. (Number one being Sony.) Okay, MS would have to be number 3... but still...

[HG @ Nov 22nd 2006 2:06PM]

I don't know how you figure Microsoft is third. With 95% of the PC business and unquenchable ambition to kill its competition, I think Microsoft is way above first place and in a class by itself.

Also, Jobs is not Apple. So quit equating the two.

[keith waddington @ Nov 9th 2006 2:07AM]

how many times do people need reminding that MS has a history of dodgy business practice. They will do anything to be number 1, and have never cared about legality or morality.

what confuses me is why MS has "fans."

waddo

[HG @ Nov 22nd 2006 2:08PM]

keith wrote: "what confuses me is why MS has "fans."

They don't. They're bought off, just like Universal.

[Mr. B @ Nov 9th 2006 2:07AM]

I can only imagine why Microsoft would agree to this bullshit.

[Peter Kirn @ Nov 9th 2006 2:07AM]

Each time you buy a blank cassette tape, there's still a tiny fee paid to the record industry. Erm, assuming you buy blank cassette tapes. (Hey, they are still fun, you know, retro-style.)

But this one has me baffled. The Reuters story didn't seem to cover what exactly is going on, or why. It sounds like this fee is part of a larger deal negotiated with Universal. I don't see any Universal content on the player, so it sounds to me like what Microsoft did was negotiate a license fee on the hardware in exchange for some kind of license for the software store. That's just a guess, though.

I'm not sure why people are so worried, however: Microsoft isn't giving away money unless they're getting something in return. ;)

If they do start giving away money, we'll all go start up a record label conglomerate, okay?

[yehweh @ Nov 9th 2006 11:20AM]

You had some valid points. Now, why did you have to keep calling Microsoft Microsux? Faulty keyboard?

[holy_cow @ Nov 10th 2006 1:16PM]

Must be, I think he's using the same crappy Microsucks keyboard as me.

[DM @ Nov 9th 2006 2:20AM]

I know this is off topic, but i just realized that Inventec the hardware manufacturer of ipod is Taiwan while Zune is Toshiba. Japan vs. Taiwan. I gotta go with Japan. Anyway, whatever the producers of zune does with the $250 you pay for the player is the least of your worries. You're not gonna spend the rest of your days as a zune owner worrying about the fact that part of your $250 goes to universal music do you?

[joram Oudenaarde @ Nov 9th 2006 2:26AM]

Microsoft you utter piece of (place bad word here)... you're spoiling the entire digital music business for everyone. Why on earth do you even CONCIDER giving money to Universal because of the h�rdware you sell?! That's just insane... you make the hardware, they make the music. And Microsoft, in case you didn't know, we also pay taxes and DRM for the music, �nd you also have to pay Universal a percentage of each song you sell via Urge.

Sorry to say Microsoft, but you really suck bollocks on this one. You just made the mistake of a lifetime... again.

[mobileGadget @ Nov 9th 2006 2:29AM]

"We felt that any business that's built on the bedrock of music we should share in."

What the fun!! did RIAA invented music?

[mark @ Nov 9th 2006 2:33AM]

back in the old days of cassette tapes the music industry made a royalty on each on sold to cover illegal copying. Some countries also introduced the same type of royalty on blank CD's. This is no different

[donlphi @ Nov 9th 2006 4:19AM]

Mark said, "back in the old days of cassette tapes the music industry made a royalty on each on sold to cover illegal copying. Some countries also introduced the same type of royalty on blank CD's. This is no different"

My answer to that is... Back in the old days kids used to get slapped by their teacher, African Americans used to sit in the back of the bus, and women couldn't vote.

It does't make it right. Everybody that buys a tape doesn't copy music, some people make their own, or they make mix tapes for themself. There is no problem with that.

That money that gets paid to the studios comes from the added price. Watch prices soar to new heights as the studios make more money.

The hole point of DRM is to protect the studios... sick sick sick

[helio9000 @ Nov 9th 2006 2:44AM]

It isn�t just going to be universal - everyone is going to get some variation of this deal.

I don�t find it outrageous or dirty so much as just creepy. It is a shot at Apple in that at this point they are making most of their dough off iPod hardware and really need to guard that jealously (as they have) which would be harder to do if Zune somehow takes off. Also, it isn�t the dumbest thing in the world to give the labels a vested interest in hawking your player.

Personally, I use no-big-labels Emusic to avoid the whole rotting DRM mess but this sort of thing can�t really be that big of a surprise. Their own stupidity has led to the Apple taking the big labels by the balls. This is their own, mind-numbingly clueless, fault but they aren�t cleaning up anywhere near the way Apple is and they are flailing. At the same time MS obviously feels they need a full lineup to compete and universal is the big daddy. Desperate meet desperate!

Universal is claiming that they are going to split the Zune take with artists which, is obviously to be taken with an enormous grain of salt. I�d like to see the math behind how they divide that money up among the stable of artists.

What it kind of amounts to is the "ipod tax" that is in effect in some parts of Europe. That tax grew out of the theory that a lot of music on DAP isn't paid for and the real money is on the hardware side so that�s how everyone gets a taste to kind of make up for the fact that it makes it easy to pinch songs you haven�t paid for. That the theory anyway.

The provided link is a pretty lame article. A slightly better recap is here:

http://www.nytimes.com/2006/11/09/technology/09music.html?ref=technology

As clever as the �microsuck� dig is I�d have to disagree about calling the Xbox a �pet project�. Doesn�t seem to me that that money has been spent so irresponsibly and I doubt the Zune money will be either.

[Austin @ Nov 9th 2006 11:45AM]

Well, by "Pet Project" I mean that it had nothing to do with microsoft's buisness plan. they were spending money on something that had nothing at all to do with thier market, selling an OS and App Suite. These preoccupations is part of the reason why vista hits the street in Jan 07 instead of June 05.

[T @ Nov 9th 2006 3:34AM]

If Universal get paid for each Zune, then so should all other record companies...but WHY?

You have to ask? To offset copyright infrigement. Seems like a reasonable comprimise to me. It's similar to levies in Canada and Finland, which I actually find a reasonable comprimise position, as well.

http://en.wikipedia.org/wiki/Blank_media_tax

[Phillip Donley @ Nov 9th 2006 4:09AM]

why on earth should apple or microsoft pay for copyright infringement? Do the studios get a hunk of change from every DVD-R sold? of course not. It's ludicrous.

Does xerox pay a fee to book publishing companies because their pages are copied by SOME people.

Everybody should pay a speeding tax to help compensate for people that were speeding and did not get a ticket because nobody caught them.

Pay a towel fee for people that steal hotel towels.

if you can think of more... just add to the list. Microsoft has crossed the line. UGH!

[donlphi @ Nov 9th 2006 3:48AM]

Next they will be asking for money on every instrument sold. That is about as stupid as you can get. I can't believe Bill Gates and his crew would suck so much (fill in the blank). The only way to reverse this idiotic move is to not buy a zune. Universal makes no money and the zune drifts away to corporate heaven where it came from.

This zune is a backstabbing businessman with a mohawk. Tries to look like a "rocker" but deep down is just a talentless wannabe. GO AWAY!!!

[Phillip Donley @ Nov 9th 2006 4:00AM]

one more thing...

This pinching money from apple and microsoft to make up for money "stolen" from pirated music is a joke too. There isn't a musician in the world that gets a chunk of that change. It goes right into the pocket of some corporate fat ace.

Everybody suffers when music is stolen except for the big companies. The musicians lose, which in turn helps good musicians become bad accountants, which in turn allows worse bands to get record deals, which influence young musicians to try and imitate them, which creates this downward spiral of mediocre at best bands.

The poor poor record companies. Maybe we should just sell a green ipod and donate the funds to the "GREEDY BASTARD" foundation.

This marks the end of music as we know it... You think you don't like some of the music that's coming out now, give it a few more years. It's going to get worse.

[Al @ Nov 9th 2006 4:16AM]

At last their plan shows through. Microsoft isn't looking to take a big share of the market just screw it up for everyone else. If Microsoft pay a 'royalty' for every Zune sold they'll want the same deal from everyone else. It explains why they're just bringing a rebadged Toshiba to market and don't care about launching outside the US.

The price of DRM tracks is already too high and they make more money out of them than CD's. Now they want more? Do the likes of Universal want money for every computer that can play music too?

This is just greed from the record companies and jealousy (cause they don't dominate the market) from Microsoft.

[Shawn O @ Nov 9th 2006 4:17AM]

I'm not sure why everyone is blaming Microsoft on this one when it's Universal that's pulling all the strings. Here are the facts as I see them:

1. iTunes dominates the market to such an extent it's almost a monopoly (you know, one of the reasons Microsoft got sued?).

2. Microsoft has realized that most *consumers* want a closed-system like iPod + iTunes, at least that's what they say based on their spending patterns.

3. Microsoft needs content and fast and since the Zune is a closed system you can't hope other players will come along and pick up the slack like you can in the PlaysForSure model.

4. Universal has long wanted this "Pirate Tax" on hardware and the only reason Jobs could avoid it before was because he had a market lock. It was basically a stalemate, monopoly vs. monopoly.

5. Microsoft goes to Universal, says we need media and they get bent over while Universal says, "Your system is unproven, we are already making a ton of money via iTunes, we don't really need you to sell our music via your Marketplace. Make it worth our while, dance little monkey, dance!"

I highly doubt Microsoft wanted to give up it's slim to none profit margin to Universal, they just had no choice. Well, they could launch without Universal's catalog but that's not really an option if you want to succeed. For once Microsoft didn't have the biggest stick in the world, the only thing they had was the cash lube.

Until Universal opens it's books and shows us how much money they are really losing I'm not going to lose any sleep over how much of their material is pirated.

[bbydon @ Nov 9th 2006 9:20AM]

itunes/ipod isnt a monopoly or even close. Its a closed system.
You aren't forced to use it in anyway. But if you want an ipod you use the software that makes it work. If you don't want to use itunes....don't buy an ipod. Like if you buy a razr phone....you have to use the software that makes it function.

[HG @ Nov 22nd 2006 2:22PM]

Shawn O writes: "1. iTunes dominates the market to such an extent it's almost a monopoly (you know, one of the reasons Microsoft got sue"

Unlike the Microsoft/OEM pact that forces PC buyers to buy Windows, you are not forced to use iTunes. Therefore iTunes is not a monopoly. You're free to use any MP3 player, any music jukebox software and any music store you like.

[sergeij freud @ Nov 9th 2006 5:20AM]

well, geeeeee!
i wonder how the microsoft/zune fanbois are going to spin this juicy bit of shafting?

[Molly C @ Nov 9th 2006 6:15AM]

I don't see what there is for a "zune fanboi" to spin. It's not like MS increased the price of the Zune to cover this fee, so why would a consumer care?

Apple fanboys might care because Universal is threatening to do the same to Apple when their current contract with Apple runs out, but as long as Apple doesn't up the price of iPod to cover the fee, then I don't see why there's any reason to care about that either (well, normal iPod buyers wouldn't care; Apple fanboys would care because they get off on Apple's profit sheets, even though they see none of the money themselves (shareholders notwithstanding)).

It sounds like Universal is demanding a fee on the Zune hardware, otherwise they won't allow their music to be sold at the Zune online store. Why you guys are bashing MS rather than Universal is beyond me. And again, Zune's price didn't increase (it still costs the same as 30GB iPod and has more functionality), so why would consumers care?

[sergeij freud @ Nov 9th 2006 7:00AM]

just do the math! if universal gets a cut then the other labels will want one too. and if they can each get 1$ now then why not ask for 5$ the next time.
the simple point is that microsoft set a precedent by giving in to the label' shameless-never-ending greed. eventually this is going to reflect on the price of DAP - not now, because microsoft doesn't really care if the lose 10 or 11$ at the moment. maybe apple won't care, but i bet all the others who are trying to make a profit (like sansa, creative, iriver, etc.) are going to hurt pretty bad.
to sum it up: microsoft seems willing to f*ck it up for everyone else, as long as it helps their own interests. hmmm, i wonder why that sounds familiar?

[HG @ Nov 22nd 2006 2:25PM]

I hope everyone is a fanboy/girl of music. This OS war mentality misses the point. MS's tactics are bad for all music fans.

[Seamus D Dog @ Nov 9th 2006 6:49AM]

Why bash Micros^%$ on this? Because they are being complicit in an extortion scheme that extends that extortion from the music sales to hard drive based player sales, even if I never listen to Universal crapola, or already have legal copies I'm just ripping to the Zune. Remember also that Canada ruled the Ipod levy illegal, and Apple refunded the money to customers. I can't believe the MS fanboys here. But hey, makes no difference to me; just encourages me to find alternative sources. I mean, if I'm paying a fee to offset "piracy," then I'll definitely make sure that doesn't go to waste.

[ft @ Nov 9th 2006 5:40PM]

While I don't like this development, there doesn't seem to be anything illegal or shady about this deal.

Keep in mind, Microsoft has had deals like this in the past, only it went the other way. They used to (maybe still do) charge PC manufacturers a fee for every computer they sold, regardless of whether Windows was installed or not. For example, if Dell sold a PC with Linux on it, Microsoft got a fee from Dell. Not exactly the same, but sorta similar.

ft

[iLLW!L @ Nov 9th 2006 8:14AM]

MS is paying Universal for every Zune sold? Correct me if I am wrong, but isn't Universal amongst the labels that will be available on the Zune Marketplace?

If MS is paying a label who's songs are available on their Marketplace, how much are they going to pay the labels who are NOT on their Zune Marketplace?

After all, aren't those artists the ones who have more exposure to Zune-user piracy?

The practice does reek.

[JinKazama @ Nov 9th 2006 8:25AM]

[sound effect]Sound of screeching tires[sound effect]

Well any thought of me getting a zune has just gone out the window. Just when you think MS has finally got something right, they go ahead an ruin it. I knew the Zune was too good to be true.

In the hope of becoming #1 MS sold their soul to the devil (if they hadn't already) and set an extremely dangerous precedent where only we the consumer suffer.

Hopefully when the contract with Universal is up Jobs doesn't fall victim to this extortion attempt.

[Chris @ Nov 9th 2006 8:32AM]

Lol wow you people are dense... the studios get a cut anyway from total hardware sales on mp3 players... microsoft is just giving the larger studios an additional small cut from total sales... its called getting in good graces with the companys that matter.

What are you people cussing about the price for the unit didnt go up a dollar its still the same as the ipod's price... its just microsoft takes a buck less cut from any profits... stop whining.

[Gadget Extremist @ Nov 9th 2006 8:43AM]

""We felt that any business that's built on the bedrock of music we should share in.""

My car has a radio in it, are they going to demand that Ford give them money too?

Are they going to start demanding cash from Gibson Guitar because the buissness is tied to the music creation buisness in a same way zune is in the playback end of the buisness? Cmon RIAA this is rediculous.

[Gadget Extremist @ Nov 9th 2006 8:43AM]

It wasn't long ago that they were demanding (and still get) a royalty from every CD-R disc that is sold.

[donlphi @ Nov 9th 2006 10:33AM]

"It wasn't long ago that they were demanding (and still get) a royalty from every CD-R disc that is sold."

This is scary enough. Do cereal companies make money off of the bowls we eat out of because some people eat cereal with them. Some people eat soup too. Better give the soup company some money because soup companies are driving the sales of bowls.

CRAZZZZYYY! We need to boycott both companies! Down with Zune, Down with Vista, and down with Universal!!!