If you needed anymore proof that the current state of the music business and audio device market is absolutely unsustainable, it's this; Universal will receive a per unit payment from Microsoft for each Zune sold. According to the New York Times, Universal (the single largest mega-label in existance.. and getting bigger) strong-armed Microsoft by threatening not to offer licensing of Universal's stable of artists fro the new Zune Store. The end result, Microsoft has agreed to pay Universal more than one dollar per unit sold.
Quoteth the New York Times, "In announcing the deal with Universal, Microsoft said it would now offer similar royalty deals to the rest of the industry. In discussing the rationale for the royalty, Chris Stephenson, general manager for global marketing in Microsoft's entertainment unit, said the company "needed people to rally behind" the new device and service."
As much as I enjoy the irony of Microsoft being slapped around a bit by what amounts to a near-monopoly, this sort of back end deal doesn't bode well for the future of devices like Zune. Watch your back Apple and Sandisk.
1. I think this deal is a clever piece of judo by Microsoft. They become more friendly to the record companies than Apple currently is, and they cause the record companies to seek the same deal from Apple. Which hurts Apple much more than it hurts Microsoft, because it aims more directly at Apple's business model and business situation. See my post on the subject here: http://www.mathoda.com/archives/86
Posted at 10:08PM on Nov 9th 2006 by Ranjit Mathoda