NY Times: Universal Music has convinced Microsoft to pay royalties on the sales of its portable MP3 player, Zune. “Universal, which releases recordings from acts like U2 and Jay-Z, said it would pay half of what it receives on the device to its artists. The company is expected to receive more than $1 for each $250 device, according to executives who were briefed on the pact.” Universal’s logic is unassailable — people are buying less of its product, so it wants to receive money for people buying Microsoft’s product. Apparently the average iPod buyer goes on to buy 20 songs from iTunes, obviously a fraction of the capacity of the device, which led to claims they were being filled with copyright-infringing music and Apple was making a huge profit off that…which is probably true, although it’s also true that there is a lot of format shifting with people putting their CD collections onto their iPod.
Anyway, now that Universal has done the hard work of bending Microsoft over a barrel until it broke (MS needs Zune to be a success, and Universal has around a third of new album sales in the US) Microsoft has said it will now offer similar royalty deals to the rest of the industry. This will give the labels leverage in their quest to get a slice of the iPod.
Which brings us to music phones…if the labels manage to get all the portable MP3 makers to pay royalties, its a fair bet they’ll go after music-capable phones next. Until recently the handset manufacturers didn’t have anything to do with the sale of songs, which was handled by the carriers. However, large manufacturers are beginning to launch their own music stores in a bid to make their handsets desirable, such as Sony Ericsson’s new M-Buzz.
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