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Summary:

When Zune goes on sale next Tuesday, Universal Music Group stands to gain a royalty for every unit sold by Microsoft, according to the terms…

When Zune goes on sale next Tuesday, Universal Music Group stands to gain a royalty for every unit sold by Microsoft, according to the terms of a deal announced by the two companies. In turn. UMG will pay its artists half of the fee, reported by the NYT to be more than $1 per $250 device. UMG also will receive royalties for music purchased through the Zune Marketplace.
— The move, while not a first, marks a variation from the pay-per-download or pay-per-play models. Earlier this year, Sirius agreed to pay the four major labels a fee for every S50 sold after the companies complained that a device allowing users to store music wasn’t covered under the fee they are paid for music played on satellite radio.
Music companies that gave Apple, Sirius, XM and others rigths in exchange for relatively small fees have been increasingly frustrated by the inability to profit from device sales, particularly from the popular iPod. One reason: the low number of iTunes downloads actually sold per iPod and the perceived high amount of music stored without being bought by the device owner.
NYT: UMG Chairman Doug Morris gained some attention recently for calling YouTube and others “copyright infringers” who owe rights holders “tens of millions of dollars” — and then signing a licensing deal with YouTube that actually includes a small equity stake. Morris told the NYT: “I

  1. It seems that in the long run, the content publishers such as Unviversal and others maybe left out in the long run.
    What is to stop MSFT or Apple or any other vendor who maybe supply the device and the content as well and make the deals with the creators of the content directly.
    In the Oil industry we have that wherein, the Oil company owns the oil and supplies it to the consumers through it's franchised gas stations.
    I would not be surprised if in the near future, the Universals and others get either cannibalized and or folded into the likes of MSFT etc.
    What do the Record companies provide that is unique to the Content creators. If marketing is what they provide and traditional retail outlets are dwindling and more and more content is being distributed digitally, it maybe not a great value proposition to have the record companies or the studios be the sole providers of content.
    Today alot of people who are screaming foul are those who see the writing on the wall in the long runa nd are trying to scramble to pass legislation and or find ways to hold on to their little fiefdoms.

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  2. The word "extortion" comes to mind. But the labels only get away with it because artists still sign deals with them in the first place. Until a viable alternative system gains strength, artists will still keep getting suckered into deals with the labels, the labels will still have huge profit margins, and the rest of us will keep paying extortion fees (yes, MSFT is paying, but you and I pay indirectly).

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