“Today’s New York Times notes that Microsoft has agreed to share some of the revenues from its upcoming Zune music player sales and services to Universal Music,” Carl Howe writes for Blackfriars’ Marketing.
MacDailyNews Note: Please see: Microsoft to pay Universal for every Zune sold – November 09, 2006
“While this sounds like a simple ‘we wanted to get a major music label on board deal,’ it’s really an attempt to poison next year’s licensing contract renewal between Universal and Apple. After all, Microsoft is unlikely to sell more than two million Zunes in the next six months to a year, so this costs them little. But I estimate that Apple will sell nearly 20 million iPods just this quarter (more about that tomorrow), and hundreds of millions of songs as well. And if Apple has to forfeit a dollar of every $79 iPod shuffle sale to Universal (and presumably to Sony, Warner, and EMI as well), well, that’s a nice way to make Apple pay for Microsoft entering this market,” Howe writes.
Howe writes, “This is classic Microsoft: crafting deals to attack competitors instead of spending the time and energy to positively market the product uniquely and powerfully. The problem: Apple already pays Universal millions of dollars in licensing fees for music it sells, so it has huge leverage with the labels that Microsoft just doesn’t have… I don’t rule out Apple negotiating a device/song revenue split, but let’s just say that Jobs knows he has invested a lot more in digital music than Universal has, and fully expects to keep most of the profits from creating that market.”
Howe writes, “We’ve said it before, and we’ll say it again: Zune is just the last in many attempts for Microsoft to buy its way into the music market without doing the hard work of creating a unique and defensible niche. But until they figure out that good marketing is as important as the technology and deals behind the product, Microsoft won’t succeed.”
Full article here.
[Thanks to MacDailyNews Reader “LinuxGuy and Mac Prodigal Son” for the heads up.]
The Microsoft sleazebags aren’t going to be able to pull this one off either.
Let’s go to the scoreboard! Apple iPod: 72,000,000+. Microsoft Zune: 0.
Related articles:
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Fu*kers!
Zune will be dead before that deal comes up for renewal, and the fact that they made this deal with Microsoft should piss off Apple enough to not do a new deal with them, and let them squirm for a while. Maybe Apple will drop the price that they get on each song sold on iTunes by a few cents.
I dont understand as to why Apple should give their hardware profits to the music label. Sony did not do it with the walkman.
Am i missing something here?
Just a matter of time before MS pulled some dirty trick to try and bring down Apple.
Fine, time to start spreading FUD about the Zune.
Gloves come off.
Lie out your ass if you have to.
Or tell the truth, that should be enough to scare people from buying it.
Do you really think that Microsoft will sell even 1/10 as much in the next year as Apple will in the current holiday quarter? Noooooo…..
It’s easy for MicroSlop to promise payments for hardware and music sold, they’re not selling any. If Zune goes bye bye it’s no skin off Ballmers head.
Leave it to the French to need a “leave behind”
Jobs should simply start his own record label offering to split the profits equally with the artist. All artists music would be sold exclusively through iTMS and CD’s. He just could not call it Apple because of Yoko and the Gang….
Perhaps he could make a deal with Yoko to become part of the new label in exchange for Beatles songs on iTMS.
To say that Microsoft is unlikely to sell more than 2 million Zunes in 2007 is an understatement. I doubt they will sell more than 200 thousand. Less even, if they keep the price equal to the iPod.
/the bigger they are the harder they fall.
Mafia$oft’s motto: “If you can’t beat ’em, kick ’em in the balls and bitch-slap ’em like a complete sissy.”
Microsoft’s evil gamble will actually strengthen Apple’s negotiating position next cycle. When the Zune fails, it will be a double affirmation that the iPod/iTunes ecosystem is the correct business model, and that there is no way they can coerce Steve to cut the record companies in on a piece of device sales.
very bad news for artists. They will never see a dime of this money. Labels will simply license all the hardware vendors and start giving away music. Independent labels won’t be able to survive. It would have been better to offer all copyright holders a percentage of Zune sales…based on DOWNLOADS.
My official boycott of ALL THINGS Microsoft begins. Self-serving buffoons.
This is bullshit. Microsoft had no choice. Universal had them by the short and curlies. Without Universal’s 1/3 of the new music selection, Zune really was DOA.
Universal’s Bromfman learned his business tactics at the feet of his grandfather and great uncle. They were business associates of Al Capone. Good old Uncle Al Capone sure knew how to get a piece of an associate’s action.
Bromfman is trying to get a piece of Apple’s iPod pie and he blackmailed Microsoft into helping him. Microsoft, a blackmailer from way back, knew who had the power this time and paid up.
Gee, is ANYone surprised by this? Microsoft is the master of scummy business practices.
I wish someone would make a list of all the companies that Microsoft has crushed, stolen from, bullied or outright put out of business over the years.
Oh, wait, the DOJ had an anti-trust suit and just slapped Microsoft on it’s limp wrist.
Clearly, Microsoft is more than willing to throw away money trying to weasel it’s way into some kind, ANY kind of position in the music player/download market.
Another example, like the XBox, to gain market share while losing money. With no debt and over 50 billion in cash reserve, they have to power to do so. M$ is nothing but businessmen with leverage, and the only high-end competing hardware solution they have is their mouse. The new Play-station will set the new standard and at the same time substandard the X-box, high price or not.
Let’s go to the scoreboard! Apple iPod: 72,000,000+. Microsoft Zune: 0.
MDN, for a second I thought you were talking about viruses and just got numbers confused: MS Window: 114,000+. Apple MacOS X: 0.
OK, so Microsoft will sell 2 million Zunes in the first year. iTunes Store, in the meantime, is selling songs at the rate of about 850 million a year, which nets Universal about $180,000,000 (assuming 1/4 Universal content and $0.85 per song to the label). So they will lose more money being kicked off iTunes for a week than they will collect from Microsoft in a year. Really makes sense…
First off let me say that I am a Mac head and I love my iPods. But everyone here should look at the screencast videos of the Zune. While the menus do not scroll like the iPod it has some nice ideas. Im guessing that Apple will trounce the Zune with its touchscreen model, but right now the Zune has custom backgrounds for each screen. and the Album art is displayed as the background. Also it allows the user to rate songs in the same screen, something that I find kindof annoying with the iPod. The features of the Zune are not world shaking but some are very nice and I would like to see better implemented in the future iPods which Im certain they will be. I do think that MS is screwed in every way, their distribution system is so stupid and they have too many services that are conflicting within and with their partners.
This article gets exactly to the point of why MS is doing this whole thing. The Zune hardware/software is crap, but they are willing to roll over and expose their belly for the content providers, who are as forward thinking as the flat-earth society. Apple will have more difficult negotiations, though they have the leverage of market share, thank god. However, should Apple be forced to budge, the consumer will end of paying in the end. If MS does make progress here, this will lead to increasingly tighter, more restrictive DRM and higher prices.
Fortunately, the market share of Apple is not the only thing the consumer has on their side. Consumers are likely to vote with their money about whether they will stand for changes in pricing (it is a safe bet that the only tracks less than 99 cents will be K-Fed or similar artists) and DRM.
Why Universal deserves any money from hardware is beyond me. I do not believe downloads drive portable player sales. The idea that iPods and their ilk only contain downloaded music is bizarre. I believe downloads are driven by people that want downloads. Which store they select may be dictated by the player they select, but there is no other correlation the other way. I am sure there are anecdotes of people that had purchased $500 of tracks from iTS, then felt trapped into buying an iPod as a portable device, but I suspect those cases are in the < 1% category. Also, you can burn those tracks to CD and transfer them, so even though it is oh so illegal, even the RIAA is not gonna go after that…yet. There are probably just as many people that download music and <<gasp>> only listen to it on their computer. Shockingly, the music plays on computers and, if burned to CD, CD players (I’m speaking about most players here – Zune is so f’d up, I would believe it if it only plays on Zune after you insert a quarter). Universal already gets money from the sale of the tracks. That is all they have a right to get.
Microsoft and Zune will not survive the scrutiny and criticism if Zune and the Marketplace are flawed, and fail to meet consumer expectations. Any attempt by Microsoft to conceal known flaws will be exposed almost immediately and will result in Microsoft throwing good money after bad, just to placate consumers.
Apple settled a class action lawsuit over battery life advertising resulting in $50 dollar in-store credit or a free battery replacement.
Apple survived the Neistat brothers shenanigans and while their video, iPod’s Dirty Secret, may have had an impact on Apple’s battery replacement policy, it shows clever consumers will not tolerate substandard business practices.
Then there was the ordeal regarding hearing loss after prolonged use of iPods which forced Apple to introduce a volume limit option on all subsequent iPods.
There were also criticisms about Bass response, Equalizer functionality, viruses and quality control standards, and finally worker exploitation. And while it has been rumored that a few of these campaigns were seeded by Apple’s competitors, at the end of the day, Apple did what was best for their consumers and made improvements with each subsequent generation of iPod.
I attribute Apple’s lofty high standards in manufacturing and design and their fluid approach to adjust to criticisms and concerns is what has allowed them to keep moving forward with minimal fuss.
In their rush to deliver the next iPod killer, Microsoft may have underestimated the zeal with which consumers will voice their contempt for a pricey, second-rate music player.
Consumers have witnessed the evolution of 5 generations of iPods and is the de-facto standard by which Zune will be compared and if Microsoft has sandbagged Zune and the Marketplace, I fear the Mac zealots armed with iMovie will unleash the hounds of hell.
DRM sucks. “thank god. However, should Apple be forced to budge”
So you believe that Apple deserves capitalizing, while God doesn’t?
You’d better watch your back, someone IS up there.
Does it sound kinda illegal?
Sounds like MS is trying to bribe the labels.
I’d like to know the real details of this deal. Some reports say $1 per player will be going to Universal, others say that a share of the profits will go to Universal. Few reckon there will be any profits, so a profit sharing deal may not be too attractive after all.
We all know that when the new iPods came out, Zune suddenly had $50 hastily lopped off it’s price. Now another $1 is sliced off that price, presumably other labels would also like a cut too. Ballmer insists that Microsoft won’t be losing money by selling Zune players. The bottom line is that a product designed to be sold for $300 is going to sell for $250. If Microsoft isn’t losing money on that deal, then somebody else is – ie they’re screwing their suppliers. In many ways, that would be the worst case scenario for Microsoft. Smaller companies don’t have the resilience to take a big loss for long and they would soon go out of business and who would take on that contract in their place ?
There isn’t any profit to be made from selling Zunes at $250 and no hope of selling them for more than $250. Then when you factor in the lavish marketing, setting up a music store and buying an army of friendly journalists to write glowing stories about Zune, it’s hard to see a point where the entire Zune project could cease being a financial drain for Microsoft.
This is a deal that’s meant to work to the advantage of Microsoft and one label. What both parties overlook is that the good times were in the past and things are changing. Microsoft is losing influence on every front, while downloading music direct to customers drastically reduces the need for labels.
The deal is probably intended to spoil things for Apple, but Apple can respond in many ways, or simply sit it out and wait for it to collapse all by itself. Some of those ways could hit Microsoft, others could hit Universal and others could hit all labels. On the face of it, the fee for Universal is good for Universal, but my bet is that Steve Jobs finds a way to counter that deal and make things better for consumers and in the longer run, Universal will learn the folly of taking Bill’s dollar.
I HATE MICROSOFT.
I am looking forward to the results Disney/ABC Microsoft negotiations.
If I ever meet a MS executive I’ll have strong desire to deck them.
They really are the sleaziest bunch of shitbags ever made…