“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.
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Just look at Adobe. If they could get off the OS X platform they probably would, but 35% or so of their earnings come from the platform, so they are in essence forced to stay onboard.
Until Zune captures at least this % of user-base, count on Universal or any other label at having zero leverage with Apple. If any label can stand losing that much money in an instant… well, they can’t, and their shareholders would have them shot if they did.
If I were an MS shareholder I would send an angry note to Ballmer. Not only is it daft to give money to a non-MS company of whom the Zube (as in ‘you big Zub’ – ask a Lebanese) customer may only rip CDs and never download a song, not only does it set a precedent to pay ALL labels, not only does it open them to more DOJ scrutiny into anti-competitive business deals, but it is unethical as a bribe.
Apple has the influence to say no, especially if Zune sales fall flat. Will be interesting to see how Steve J handles this.
“[Jobs] fully expects to keep most of the profits from creating that market.”
Apple gives the vast majority of the iTS revenue to content providers already. Digital music is already a cash cow for labels like Universal, who have to spend *nothing* to put their tracks on iTunes. These are tracks that they were going to release anyway.
Microsoft and the RIAA are two peas in a pod.