In what has to be the oddest story (to date) about the forthcoming Microsoft Zune is that Microsoft has agreed to play Universal Music Group (the music publishers) $1 per Zune sold. This is regardless of whether anyone ever adds a single Universal-published song to the Zune, ever.
I simply don’t understand why Microsoft would agree to this, except out of extreme desperation. Imagine if they were unable to go live on November 14 as planned because no-one buying a Zune could download and play music from any significant artists on the device. In such a situation, Universal might recognize their position and put Microsoft over a barrel, and insist on receiving this per-device payment.
Microsoft, of course, claims that this was a deal to benefit the artists, as the payment is to shared with the Universal artists, and that they plan on cutting more such deals with other publishers. Some have speculated that Microsoft is trying to screw Apple; imagine if Apple were forced to pay $1 per iPod to Universal (and Sony, and Warner Music and…). Last Christmas season, Apple sold some 14 million iPods. Think the music publishers would like a piece of that pie?
This year, Apple has the $79 iPod shuffle; imagine paying $3-$5 of each iPod shuffle. Think that’ll cut into Apple’s profit just a tad? Thus, the “Microsoft screwing Apple” meme. But Daring Fireball’s John Gruber differs on this. He suggests that
What we’ve got here is a nice, warm, shit sandwich from Universal Music, and Microsoft concluded that they had no choice but to eat it…. this is Universal’s idea, not Microsoft’s.
The music publishers certainly would like the free money. I just don’t imagine Apple to be in the same position as Microsoft here. People have come to expect the latest songs from top artists on iTunes, and if suddenly a whole set of artists were to disappear overnight, people aren’t going to blame Apple, they’re going to blame the artists, and, eventually, the publishers. After all, Apple is able to claim that they’re selling millions of dollars of music through their store, and are a Top 5 reseller of music, behind Amazon, Target, Best Buy and Wal-Mart. Think one of those other retailers would enter into a deal like this?
Microsoft is simply getting a taste of its own medicine: you want to work with us, you’ll take the deal.
Welcome to the other side. Enjoy the view.