Microsoft's Zune deal with Universal Music Group to benefit artists?

Microsoft's Zune deal with Universal Music Group to benefit artists?

Summary: This morning, Microsoft and Universal Music Group jointly announced that the two would be making songs from UMG's artists that are specially formatted to work with Microsoft's forthcoming Zune portable audio player available for online purchase (presumably through Microsoft's online Zune music store).

SHARE:
TOPICS: Legal
38

This morning, Microsoft and Universal Music Group jointly announced that the two would be making songs from UMG's artists that are specially formatted to work with Microsoft's forthcoming Zune portable audio player available for online purchase (presumably through Microsoft's online Zune music store). But what makes this announcement different from many other such deals is that some portion of the proceeds from sales of Zune hardware would flow back to UMG and eventually onto the artists themselves. The language in the press release instantly raised several questions in my mind and I contacted UMG's press relations department to see if they had some answers. According to the release:

Microsoft Corporation (Nasdaq: MSFT) and Universal Music Group, the world's leading music company, announced today an agreement which creates a groundbreaking, new revenue stream for UMG and its artists: in addition to the standard payments it will make to UMG for the sale of its music, Microsoft will also pay UMG a portion of Zune device sales. Microsoft plans to offer a similar arrangement to other music labels and their artists.

"This agreement with Microsoft around Zune is a significant milestone for our company and our artists," stated Doug Morris, Chairman and CEO, Universal Music Group. "This move demonstrates there can be a win-win situation where consumers have a great experience while labels and artists are also fairly compensated. We applaud Microsoft for its innovative and consumer-friendly Zune store and device."

"At a time of transition for the music industry, Zune aims to be a leader in supporting artists and enabling the creative possibilities associated with connected entertainment. We look forward to working with the industry to make sure labels and the artists have a very bright future," said Bryan Lee, Corporate VP Microsoft Entertainment & Devices. "We believe that the music consumer will appreciate knowing that when they buy a Zune device, they are helping to support their favorite artists."

Reading between the lines, it appears as though the goal is to tap a vein of altruism amongst music buyers by telling them that if they purchase a Zune instead of an iPod, that they'll be providing additional financial support to artists that those artists wouldn't otherwise receive.

For starters, of the music buyers out there that concern themselves with the legal acquistion of music (as opposed to those who will hunt to the end of the earth for free but illegal downloads), most of the ones I know stop concerning themselves with the welfare of the musicians as long as their song acquisitions are legal. Put another way, they don't view Apple as robbing musicians. Even if music buyers were that concerned about how much money artists were getting for their work, in order to tap that vein of altruism, the marketing dollars that would have to go into educating the market would be so extraordinary and even then, there's no telling how effective it might be (bearing in mind that iPod is the drug -- a very powerful one at that -- that must be overcome).

But, in addition to the market's willingness to pick up and process the signal (and then act on it), the deal raises all sort of questions on the execution side. For example, like many other segments in the consumer electronics space, the portable audio player market is extremely competitive and thusly, the margins are low. Throw in the fact that Zune must hit a price point that will distract buyers from the iPod, and there'll be even less money to go around.

Then, who must that money be shared with? Microsoft just said in the press release that it plans to enter into similar agreements with other record labels. So, when Robin Hood makes his first round, he'll be divvying up the money between Microsoft and all of the record labels that are in on device profit sharing. Then, after that, each of the record labels -- if I read the press release correctly -- will be passing some amount of those proceeds onto their artists. To find out how much, I contacted UMG spokesperson Peter Lofrumento. According to Lofrumento:

[The proceeds] will flow through the normal royalty channels.  In addition to the normal royalties [artists] get from the sales of their music, they will get an additional payment for each Zune that is being sold. 

But then I asked Lofrumento how many artists UMG has and what the formula might be for dividing the proceeds up amongst them. Said he:

I couldn't say how many artists we have exactly. But it's in the thousands. I can't go into those details [regarding the formula] -- I actually don't even know them -- but we have a way of doing it.

I asked some more questions, but first, I thought I'd do a little financial modeling. Forgetting for a minute how every penny that exchanges hands in the music industry is connected with a dot over an i or a cross through a t in some archive of contracts (contracts that would probably need to  be renegotiated before any money started flowing), let's say Universal Music Group has 3,000 artists. On average, what amount of total money (as a result of Zune sales) could make a material difference to each artist, assuming that the fans of those artists would be inclined to buy a Zune knowing that it ultimately helps the artist out. In other words, place a dollar value on that help. Let's say it's a measley $25,000 per year (that's actually pocket change for many of UMG's artists... but let's stick with it). Just assuming UMG takes nothing out of the proceeds for itself and passes Microsofts payment all the way through to its artists, Microsoft would have to pass $75,000,000 per year to UMG.

Now let's say that Microsoft and the retail channel was so incredibly generous that it decided to pass all of each Zune's $250 anticipated retail price to UMG. In order to make sure that each of UMG's 3,000 artists got their $25,000, 300,000 Zunes would have to be sold. OK, so it's pretty much impossible that the entire retail price will flow to UMG. Looking at some approximations however, Apple sells iPods at around a 45 percent profit margin before marketing and distribution costs. It's unlikely that Microsoft can beat that by much but let's say that after marketing and distribution and Microsoft's cut of the sale, it passes 30 percent of the retail price to UMG. Now the number of units that needs to be sold is 1,000,000.

But wait a minute, let's say Microsoft cuts the same deal with each of the remaining four major record labels (Sony, EMI, Warner Brothers, and BMG). I don't know how many artists they have but let's say the total number of artists goes up to 10,000 (a conservative estimate). Now, the total amount that must be passed through to the record labels goes up to $250,000,000 and the total units sold must be 3.33 million units per year. Possible? Perhaps.

<Update> TechCrunch is reporting, based on coverage in the NY Times, that $1 will go to UMG for every Zune sold, of which half will go to the artists. No news on the criteria for which artists get paid, but the math becomes very different at this point. If only one artist were to get $5,000 per year, 10,000 Zune's would need to be sold. For UMG's 3,000 artists alone, that would be 30,000,000 Zunes that would have to get sold per year. For 10,000 artists across all the record labels (a guess), that number goes up to 100,000,000 Zunes per year that would have be sold -- significantly more than all iPods ever sold in Apple's history.</Update>

But, assuming Microsoft and the record labels are successful at educating the market about this interesting form of altruism, my personal feeling is that they should be more transparent about the whole process. Give us some idea of how much money each of the record labels' artists can realistically expect to see after everyone gets their cut. And, if the money isn't divided evenly amongst all artists, then give us some idea of the formula. For example, will there be some sort of pro-rated formula that's connected with an artist's revenue production? If so, that changes things too. If you're a big fan of oldies like I am, but you buy a Zune, the proceeds may end up going to artists you don't care about. I'm not saying this is the case. But if Microsoft and the record labels are saying "you should buy Zune because it will ultimately help artists," then show us how.

Finally, in the bigger picture, based on what we know about how Apple forced the major record labels to knuckle under, this certainly comes across as being a more cooperative arrangement than what's happening between the record labels and Apple. To the extent that Zune is Microsoft's answer to the iPod, one can't help but wonder if UMG would back out of its arrangement with Apple given how much better of a partner Microsoft appears to be being. I asked Lofrumento about that at which point he reminded me that UMG was actually Apple's launch partner when it opened the iTunes Music Store. Said Lofrumento:

Our current deal with Apple is in place until sometime next year. [Whether that needs to be renegotiated] is something that will be discussed when the deal comes up. In terms of the possibility of Universal pulling out with Apple? It's hard to answer that. We were the first music company to do a deal with iTunes. We helped them launch with several of our top artists and we have a very close relationshihp with them.

Not to mention how Apple's iTunes Music Store commands 88 percent of online music sales (downloads) and how the iPod represents a 70 percent share of portable digital audio players. Unless Microsoft pulls a rabbit out of the hat and usurps Apple in the digital audio market, the record labels will have very little leverage against Apple's massive and growing market share.

Topic: Legal

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

38 comments
Log in or register to join the discussion
  • This is all about hammering Apple

    It's a tactic by Microsoft to lessen Apple's power in the market. They're willing to take a huge loss on the Zune, just as an effort to make Apple less powerful, to give Apple less of a presence, to stop Apple from being the driving force in digital entertainment.

    There's no reason whatsoever why a device maker should have to pay a content company a fee just to make a device. The content company gets paid when the content is purchased. If this is the way things are going, then all cd burner companies, all computers, all cel phones, heck, any electronic storage device should be obligated to pay the RIAA a fee. After all, those things could potentially hold pirated material.

    So what's obviously happening here is that MS is offering more to the RIAA companies in an attempt to woo them away from Apple, or at the very least, to add to their demands when it comes time to renegotiate with Apple. If this becomes a real demand then either 1) Apple pays it and loses a chunk of their profits, or 2) Apple refuses to pay it and loses access to content for the iTunes store. So MS wins. They continue to lose money on Zune, but Apple is weakened.

    More likely though, Zune will not see much market traction, the labels will go to Apple with this demand, and like the last set of demands the RIAA made, Apple will refuse to cave.

    Nice try though.
    tic swayback
    • EVIL!!

      [i]It's a tactic by Microsoft to lessen Apple's power in the market. They're willing to take a huge loss on the Zune, just as an effort to make Apple less powerful, to give Apple less of a presence, to stop Apple from being the driving force in digital entertainment.[/i]

      I can't believe how evil MS is for trying to compete with Apple!! How dare they even try!!!!

      Oh well, you have nothing to fear. If you are right, Zune will be a disasterous failure and Apple's monopoly will stay strong. :)
      NonZealot
      • Not evil, just smart. Well, maybe mean

        ---I can't believe how evil MS is for trying to compete with Apple!! How dare they even try!!!!---

        It's a smart move on their part, but I wouldn't really call it "competing". It's more a means to stop someone else from getting control of a field, rather than going head to head with them, product to product. Kind of like using IE to stop Netscape from growing into an operating system, rather than just fighting browser vs. browser.

        ---If you are right, Zune will be a disasterous failure and Apple's monopoly will stay strong---

        I'm not really worried much here. MS' strategy, even if it works exactly as they want it, is a long term one. They don't expect to see much marketshare or business from Zune for years. By the time their strategies pay off (if they ever do), the RIAA and DRM may not even be relevant.
        tic swayback
        • Awww, poow wittle Appwe!!

          Big bad MS, they shouldn't be mean!!

          [i]It's more a means to stop someone else from getting control of a field, rather than going head to head with them, product to product.[/i]

          Can you explain what you mean? They came out with a product, software, and a music store, none of which is "installed by default". They are also trying to cut deals with the record labels, just like Apple has cut deals with Comedy Central. Cutting these deals isn't "mean" but not cutting these deals sure is dumb!
          NonZealot
          • No reason to feel sorry for Apple, this will be a money pit for MS

            Its also a bit of an admission that Zune is not as competitive a
            product as the iPod. They're actually giving record labels money to
            let them provide media which will make them more money when
            sold.
            Its like paying someone to take your ugly sister to the prom.
            Tigertank
          • No attempt to succeed

            ---Big bad MS, they shouldn't be mean!!---

            Mean is fine, as long as it's legal. Here, it's just stupid. It sets a precedent that will hurt MS from ever profiting from Zune.

            ---Can you explain what you mean?---

            The point of Zune seems to be stopping someone else, rather than profiting themselves. They're selling a player for $50 less than it costs them. They're signing unneccessary deals with labels that cost them money. It all strikes me as being more about taking Apple down a peg than it is about actually profiting and building a successful music business for MS.

            ---Cutting these deals isn't "mean" but not cutting these deals sure is dumb!---

            Can't agree here. Cutting a deal to sell someone's product is fine. Cutting a deal to give away a portion of your profits because maybe your device might hold illegally downloaded material is stupid. Should every OEM, every hard drive manufacturer be paying the RIAA as well? Would that be a smart move for HP or Dell?
            tic swayback
          • One of 2 outcomes

            [i]It all strikes me as being more about taking Apple down a peg than it is about actually profiting and building a successful music business for MS.[/i]

            You've agreed in the past that this is a long term strategy for MS. If you are trying to enter an area where your competition has a monopoly, you [b]have[/b] to do things that will take them down a peg. Certain companies have done so by whining to the courts "WAAAAA MS has a monopoly, please fine them millions of dollars so we can get a foot in the door". MS is taking the [b]far[/b] more ethical approach.

            Besides, it wouldn't surprise me to see that the end result of these donations is that the record labels stop selling to Apple unless Apple agrees to higher prices. Apple will stubbornly say no without realizing that the record labels actually have a choice now and won't be forced to accept Apple's terms. When people can't buy music on iTMS, they will buy it on Zune and MS will start making money. Again, sounds smart and profitable.
            NonZealot
          • Won't happen

            ---You've agreed in the past that this is a long term strategy for MS.---

            Here's the thing though--is the long term strategy to sell the Zune and the Zune store, or is it just to stop anyone else from having a stronger say in how digital entertainment is sold? What if the long term strategy is to lose hundreds of millions of dollars every year on the Zune, just to take away Apple's power in the market. Apple goes away, then Zune gets dropped and disappears. I compared it earlier to IE versus Netscape. MS never made a penny off of IE, yet poured a huge amount of money and effort into it, with the sole purpose of taking down Netscape and not letting them have a say as to how the future would develop.

            So what I'm saying here is that the point is not Zune versus iPod, it's MS trying to take away Apple's power as the driving force in digital entertainment. If MS could, without dumping or antitrust issues, they'd give away the Zune and pay you to download music to win this one.

            ---MS is taking the far more ethical approach.---

            I'm not sure I can call sabotage "ethical", whether it's done by whining through the courts or through deliberately making bad deals to set up your opponent.

            ---Besides, it wouldn't surprise me to see that the end result of these donations is that the record labels stop selling to Apple unless Apple agrees to higher prices. Apple will stubbornly say no without realizing that the record labels actually have a choice now and won't be forced to accept Apple's terms. When people can't buy music on iTMS, they will buy it on Zune and MS will start making money. Again, sounds smart and profitable.---

            There is zero (0) chance of this happening. First off, the RIAA has never, never-ever refused to sell product. No matter how much they whine about piracy, they've never once been tempted to pull product from the shelf to prevent it from happening. Here, they'll whine like crazy at Apple, but there's no way any company is going to deliberately give up a percentage of its business (a percentage that in reality is pretty small, but the RIAA is banking on it growing in the future). It's kind of like the idea of MS pulling out of Europe to spite the EU for the bad court cases. No way does MS cede ground to Linux and Mac, and no way does the RIAA cede ground to independent labels and artists. And since the RIAA is made up of many companies, some would give in and get an automatically huge advantage over other RIAA companies.

            To say that people would suddenly stop buying from iTunes and buy from Zune is also kind of crazy. If I can't buy the new Britney album on iTunes, do you really think I'm going to throw out my expensive iPod and buy an expensive Zune and go buy the album there? No, I'll just buy the cd and rip it, or more likely, I'll go download it from a p2p network, and being a teenager, I'll feel perfectly justified because the RIAA won't sell it to me the way I want it.

            What I see happening is the Zune (certainly this very poor first iteration) fails to gain much traction. The RIAA's deal with Apple ends, the RIAA makes demands, Apple refuses those demands. The RIAA caves. MS is left with a crappy deal for their own store, Apple keeps motoring along.

            Which is not a good thing, in my book, as I'd rather see all the DRM based stores go down in flames as quickly as possible.
            tic swayback
          • So you say

            [i]I compared it earlier to IE versus Netscape. MS never made a penny off of IE[/i]

            This is old, very old. Apple makes no money from Safari and KDE makes no money from Konqueror. MS was simply the first to realize that a browser could be used for more than browsing the web and they acted on it. From looking at all the incredible functionality in all the incredible browsers that are out there now, I would say MS has been proven correct in the long run. Those who hate MS can say it was done to kill Netscape but those of us who can think a little more rationally on the subject can see what MS's long term goal was: reuse the power of a browser engine all over the OS. MS did it first, then KDE, and finally Apple.

            I guess you can be paranoid about what MS is trying to do and you'll certainly get a lot of support on ZDNet for that belief but I see it a bit differently. MS has Media Center. MS has XBox. MS now has Zune. Maybe you are right and MS will never make money from Zune directly but it seems to be about building a connected ecosystem and MS was missing the portable media player aspect. This has nothing to do with Apple and a lot more to do with synergistic products all working towards an MS entertainment ecosystem. That may scare you and you are free not to buy a single MS product but don't flatter yourself, this has all to do with MS making money from the [b]combined[/b] set of products (even if Zune itself loses money in the short term) and nothing to do with Apple.

            [i]What I see happening is the Zune (certainly this very poor first iteration) fails to gain much traction. The RIAA's deal with Apple ends, the RIAA makes demands, Apple refuses those demands. The RIAA caves. MS is left with a crappy deal for their own store, Apple keeps motoring along.[/i]

            Then Apple wins and MS loses. You sure seem excited about that prospect and maybe you'll even be right!
            NonZealot
          • I don't really want to choose sides here

            ---MS was simply the first to realize that a browser could be used for more than browsing the web and they acted on it---

            That strikes me as some serious revisionist history. Back when IE 1.0 came out, in 1995 when it wasn't in any way integrated into the OS, you're claiming that MS was visionary enough to realize what would be useful in 2006? You remember, this was the same year that Bill Gates failed to mention the internet in his "Road Ahead" book. No, sorry. IE was created to stop the concept of the browser as the OS, to stop Netscape from dominating and being the driving force. Later, sure, other uses were figured out for it, but no, they weren't there at the outset.

            ---MS has Media Center. MS has XBox. MS now has Zune. Maybe you are right and MS will never make money from Zune directly but it seems to be about building a connected ecosystem and MS was missing the portable media player aspect. This has nothing to do with Apple and a lot more to do with synergistic products all working towards an MS entertainment ecosystem.---

            Yes, exactly! This is about MS building and controlling the digital entertainment ecosystem. The problem right now is that one big part of that ecosystem is owned by Apple. In order to play, MS must either eliminate Apple's dominance, or find some way to integrate the iPod and constantly be playing catch-up to whatever Apple is pushing into the market. It only makes sense to try to get rid of Apple. That way, MS gets to decide how things work, gets to set the pace. Right now, Apple is refusing to let MS "integrate" with their products (FairPlay lockout). Hence, MS' ecosystem is now incomplete and incompatible with the mainstream.

            ---Then Apple wins and MS loses. You sure seem excited about that prospect and maybe you'll even be right!---

            Short term, I'm very confident that will happen. I have mixed feelings about it though. I love my iPod and am really, really happy with the way it's changed the way I listen to music. I'm not thrilled with Apple's DRM or their lock-in tactics, and want to see their store go down in flames or switch to a non-DRMed format. So I can only partially support them. The fact that unlike the Zune, the iPod can be used on both OSX and Windows (as well as Linux with a few tweaks) makes it much more palatable as far as I'm concerned. Since I know you hate lock-in and are angry at Apple for not letting you run OSX on the computer of your choice, I assume you're just as angry at MS for not letting you use Zune on the computer of your choice either, right?
            tic swayback
          • Subject:

            [i]Back when IE 1.0 came out, in 1995 when it wasn't in any way integrated into the OS[/i]

            Nor have there ever been any accusations that IE 1.0 was being used to drive Netscape out of business. It was IE4 that started this ruckus.

            http://en.wikipedia.org/wiki/Internet_explorer
            [i]Internet Explorer 4 was the first version integrated into Windows Explorer and other core parts of Windows. The integration with Windows, however, was subject to numerous criticisms (see United States v. Microsoft).[/i]

            I'm not suggesting that IE1 was viewed to grow into what it eventually grew into but I am saying that it was only when the IE4 engine was reused in Windows that anyone started accusing MS of trying to kill Netscape.

            [i]IE was created to stop the concept of the browser as the OS[/i]

            IE1 wasn't even created, it was licensed. By the time IE4 rolled around, it was a totally different beast.

            [i]This is about MS building and controlling the digital entertainment ecosystem. The problem right now is that one big part of that ecosystem is owned by Apple. In order to play, MS must either eliminate Apple's dominance[/i]

            Says you! Listen, if MS were to come up to me and say "We can offer you the full range of entertainment products" I would reply with "you don't have a media player". Now MS does. This is similar to a couple other discussions we've had where you look at what is going on and immediately think "how can I spin this to make it look like MS is evil?". Can I show "evidence" that you are wrong? Of course not, nor can you show "evidence" that you are right. I can show counter theories and one counter theory is that this has nothing to do with Apple and everything to do with offering a complete line of products. Right now, their digital entertainment line-up is missing one major product and Zune is an attempt (whether it succeeds or not) to fill that gap. You said it yourself: [i]Hence, MS' ecosystem is now incomplete[/i] and then followed up with [i]and incompatible with the mainstream[/i]. And since [i]Apple is refusing to let MS "integrate" with their products[/i], what choice does MS have? They can live with an incomplete line-up or, since Apple is so [b]mean[/b] ;) they must come up with their own player. You think that is mean of MS. I think it only shows that Apple has left MS with absolutely no choice.

            [i]Since I know you hate lock-in and are angry at Apple for not letting you run OSX on the computer of your choice, I assume you're just as angry at MS for not letting you use Zune on the computer of your choice either, right?[/i]

            You forget that my disgust is more about artificial lock-in than with a refusal to rewrite software to work on other platforms. Apple actually had to go to extra lengths and costs in order to prevent OSX from working on any Intel PC. What you now have to show is that MS created OSX compatible Zune software and then refused to distribute it. I doubt you'll succeed. So why did Apple go to the trouble of writing iTunes for Windows but MS won't write Zune for OSX? You are all giddy to talk about how Apple has all the power in the portable media player market but then conveniently forget that MS has all the power in the OS market. For Apple not to port iTunes to Windows would have been a [b]disaster[/b]. For MS not to spend millions of dollars to port Zune to OSX probably means that MS will save millions of dollars. MS would have to spend money to port Zune, Apple has to spend money to [b]prevent[/b] people from running OSX. See the difference?
            NonZealot
          • Browser business

            Was Netscape seen as a threat to MS? Were all the predictions of the browser as the OS troublesome for MS? Do you think that perhaps some of the drive to break the law and put Netscape out of business was based upon this fear?

            Again, what I'm trying to do is differentiate between a straight-up attempt to compete, to sell a product in the same market and go head to head with somebody (say, the Xbox versus Playstation), and the idea of helping your business by knocking out some other competitor. Basically entering a market to take out the number one company there, rather than to sell your own products in that market. That's how I see the deal with Universal, because honestly, I can't see any other reason for it. One other poster here did have a good motivation for it--Universal refused to license its music to the Zune store without getting this ransom from MS. Perhaps he's right, and MS is just being held over a barrel here.

            And it's fascinating to watch MS issue a product that they know is inferior, that they know will not make them any money, and that they know there's no hope in profiting from for years if not decades. It's all about future iterations of the product and the store being better. Yet they expect people to buy it now. Remember that the key function of the Zune relies upon having a network of people to swap with. Without that, the Wifi is useless.

            And I can only see it from a consumer's point of view. I don't care what the costs are to the company to avoid lock-in, all I care about is, am I locked in or not locked in? What it means to someone else's profits shouldn't matter to us as buyers.
            tic swayback
          • Can't think of subject

            [i]Again, what I'm trying to do is differentiate between a straight-up attempt to compete, to sell a product in the same market and go head to head with somebody (say, the Xbox versus Playstation), and the idea of helping your business by knocking out some other competitor.[/i]

            Well, when your competition has a monopoly and is mean about it, I don't see being able to do one without the other. MS is nice by not introducing a kill switch on Windows when it detects that it is being run on a Mac. You talk about bootcamp and parallels being win-win because Apple sells the hardware and MS still gets the sale of a Windows license and you are right. This is possible because MS is nice. The situation in the media marketplace is different. Apple refuses to license FairPlay and so there are no win-win options. For MS to win, Apple [b]must[/b] lose (at least a little). This is Apple's choice, not MS's. Apple is gambling that no one will ever be able to touch their monopoly so why play nice? We'll have to see if they are right.

            [i]It's all about future iterations of the product and the store being better. Yet they expect people to buy it now.[/i]

            I can agree with this. I'm much more tempted to buy one of those full-screen iPods than a Zune.

            [i]What it means to someone else's profits shouldn't matter to us as buyers.[/i]

            You are affected by Apple's OSX lock-out because third party companies aren't as willing to write OSX native software. It affects your bottom line when you have to live without some specific, custom built piece of software (like realtors, teachers, doctors offices, etc.) or you have to pay for a Windows license after you've just paid for a very expensive OSX license. And, as you so quickly point out, you ensure that Zune will never get a native OSX port because it simply isn't worth it when you look at OSX's marketshare. I know tic, this upsets you greatly, but it's the truth! Deal with it, you will never get a native OSX port of Zune... [b]NEVER[/b]!!! ;)

            BTW, this just triggered a thought that is more relevant to our other thread but I'll put this here. Why [b]should[/b] MS create a native Zune port of OSX when it is so easy to run it in Parallels or Bootcamp? OSX users aren't locked out of Zune because OSX users on Intel Macs with a valid Windows license are more than capable of using Zune. Apple [b]had[/b] to port iTunes from OSX onto something else because 96% of the world does not own hardware that is allowed to run OSX. Again, this is Apple's choice and Apple's consequences and has nothing to do with any decision that Microsoft has ever made.
            NonZealot
          • Here's why

            ---Well, when your competition has a monopoly and is mean about it, I don't see being able to do one without the other.---

            I generally agree with you, but in this case, I see MS doing one part much moreso than the other. Right now, it seems to be more about taking down Apple than it does making a really good product and store to compete with them. The balance is too far to one side.

            ---You are affected by Apple's OSX lock-out because third party companies aren't as willing to write OSX native software---

            Sure. The question then is whether the available level of software and the positive benefits (quality) offered by the product outweigh not being able to get 100 different versions of the same program, or a bunch of games. For me, the balance still tips towards the Mac, even moreso since the switch to OSX which has resulted in a massive explosion of availability of freeware and shareware programs.

            ---Why should MS create a native Zune port of OSX when it is so easy to run it in Parallels or Bootcamp?---

            Because it's awkward and expensive. When you're way behind in a market and you want to overthrow the champ, you have to make life as easy for the customer as the champ does. Apple could have made the iPod available on Windows only through some difficult hoop jumping as well, but it would have been dumb to do so. If MS is after the whole market, then the 40 or 50 million Mac users (a desirable upscale and influential segment of the market) might be worth going after.
            tic swayback
    • That's one way of looking at it

      Although, I figure that MS probably made Universal pie in the
      sky promises about how good Plays For Sure was going to be ...
      you know, blah, blah, blah you'll be making billions and billions
      on music rentals from all our partners plus sales of drm'd tracks
      and together we'll crush iTunes ... blah, blah.

      Well, we all know what a failure that was!

      So now, this time MS goes to Universal to get music for the Zune
      library and Universal has them over a barrel. They held out and
      MS crumbled. When was the last time you ever heard of MS
      paying a royalty on anything?

      Now both companies are spinning this as a win-win, but MS is
      the loser. And yes, maybe this will be a disruptive deal for
      iTunes, but we've yet to see Zune selling in any kind of numbers.
      Apple still has way more clout than MS in the music business.
      Len Rooney
      • Good point

        Could be, you may be onto something. I was trying to find MS' motivation for doing something this stupid, perhaps you're right, they didn't want to do it, but were forced to, to get music into their store. By the way, the MS store has a lot less music available than Apple's (it's only 2/3 the size) so perhaps they're having trouble getting the labels to sign on.
        tic swayback
  • Obvious questions

    1) Is MS offering a share of "profits" or of "revenue"? If profits, then the whole thing is a joke--MS will lose $50 on every Zune sold (they had to accept a loss to meet Apple's price point), so there will be no profits, hence no money goes to the labels.

    2) If I'm paying a piracy tax when I buy a Zune, does that mean I'm entitled to listen to pirated music? After all, I've already paid for it. Why should I pay for music twice?
    tic swayback
    • Spying out answers

      [i]Is MS offering a share of "profits" or of "revenue"? If profits, then the whole thing is a joke--MS will lose $50 on every Zune sold (they had to accept a loss to meet Apple's price point), so there will be no profits, hence no money goes to the labels.[/i]

      Remember Spyglass Software? The little outfit that Microsoft got IE from? The one that agreed to a lower upfront payment in exchange for a share of the sales?

      Yeah, that's right -- MS ended up giving IE away and Spyglass ... well, have you heard anything about them lately?
      Yagotta B. Kidding
  • "For the children"

    Watch carefully: it all goes through the same accounting as the regular royalty stream. In other words, it's going to be a percentage added on top of artists' regular royalty checks.

    How much will that be? Well, according to quite a few top-selling artists from the past fifty years that amounts to ... zero. Somehow, all of the contractual royalties end up being recoupable (that is, the labels' costs charged against the artist), leaving at most nothing.

    As Janis Ian put it, every royalty statement she's ever received shows that [u]she[/u] owes the [u]label[/u] money.
    Yagotta B. Kidding
  • My thoughts exactly!

    When I first saw an article on this new scheme to "save music" as the article I read was claiming, my first thought was "how could the small amount of each Zune sale that Microsoft would be paying the record labels make any real dent in the amount that artists have been losing?" The answer is of coures - it can't and won't, this is purely a PR deal on MS's part.

    Right now, writers / artists get a standard rate of a few cents a song royalty for every CD sold, and from Apple's prices, it looks like they are getting about the same rate from iTunes music store sales. A few cents x the amouunt of songs on a CD x units sold = $25,000 NOT being pocket change to any artist except a very select few, so you are correct in your math that this money spread over all a labels artists will not even keep them in guitar picks.

    What WILL save the music business - or any intellectual copyright based business, fo rthat matter - is an easy and affordable way to find the music you want and pay for it, with an effective enough way of policing the whole thing that no one will see trying to bypass payment as worth it at all.
    Doug Perkins