Following Zune deal, Universal expected to demand iPod royalties from Apple [UPDATED]

“In a first-of-its-kind arrangement, Microsoft Corp. is paying a major record label a percentage of the sales from its upcoming Zune portable music player in order to license songs for Microsoft’s digital music store, which launches next week,” Ben Charny reports for MarketWatch.

“So far, Vivendi’s Universal Music Group is the first to agree to what Microsoft calls a ‘ground-breaking’ royalty arrangement. Financial terms of the deal announced Thursday weren’t disclosed,” Charny reports. “The Vivendi deal, according to a company spokesman, marks the first time someone licensing music has ever agreed to pay for the rights using a percentage of music player sales.”

“The arrangement raises speculation that many more record labels will require a percentage of a music device sales, when applicable, to license anything from their catalogs. In particular, UMG is expected to demand the same royalties from Apple Computer Inc., makers of the iPod music player, when UMG renegotiates its licensing deal with Apple next year,” Charny reports. “From the record labels’ perspective, the extra cash is to help compensate artists for the thriving market for pirated music. A recent JupiterResearch study concluded that up to 95% of music tracks on a typical iPod has [sic] not been paid for.”

Full article here.

[UPDATE: Nov. 10, 12:19am EST: The last sentence quoted in the MarketWatch article above has been amended to read: “A recent JupiterResearch study concluded 95% of music tracks on a typical iPod are not purchased online.”]
Ben Charny seems to lack the basic ability to read and comprehend a simple report. JupiterResearch’s report,” Portable Media Player Owners – Understanding iPod Owners’ Music-Buying Habits,” released September 14, 2006 does not conclude that “up to 95% of music tracks on a typical iPod has [sic] not been paid for.” In fact, the report’s author, JupiterResearch analyst Mark Mulligan, has blogged (see: Straightening the Record) the following regarding the report:

So this report got a lot of attention in the media, which shows how much interest there is in the topic. However some of the coverage has been quite selective in which parts it has highlighted and some have even used it as evidence for Apple-bashing. So for the record here are the key thrusts of the report (all of the below refer to Europe): MP3 player owners of all types (iPods included) don’t regularly buy much digital music. iPod owners are actually more likely to buy digital music than other MP3 player owners. Free online music consumption significantly outweighs paid, significantly more so for owners of non-iPod MP3 players. Device owners are much more likely to buy CD albums online than digital albums.

The facts: up to 95% of the tracks on a typical iPod are not tracks that were purchased online. Most tracks on a typical iPod come from CDs that users have legally purchased and ripped via iTunes. That’s what the report really says, Mr. Charny. That’s a big difference from the outright falsehood you’ve reported. You call iPod owners thieves. How’d you like to be called a liar or an incompetent idiot that’s incapable of basic reading comprehension? You probably wouldn’t like it one bit, right? Seriously, get it right or get another job; you’re obviously not very good at this one.

In fact, Mr. Charny, the truth is that iPod owners are significantly less likely to steal music than the average person. iPod owners are “substantially less likely to download using filesharing software with only 7% of iPod people downloading illegally compared to 25% on average. And they’re more likely to be buying CDs, with your everyday iPodder buying 2.3 albums a month compared to the average of 1.8,” XTN Data reported in a January 2006 report. XTN Data surveyed over 1,000 UK and US music buyers to arrive at the data. XTN Data also found that 50% of iPod owners regularly download music from Apple iTunes Music Store. Sorry to further confuse you with actual facts, Mr. Charny.

Contact: Ben Charney via browser-based email form here.
Complaints to MarketWatch can be directed here.

As far as Universal demanding the same ludicrous royalty scheme from Apple Computer Inc. to which Microsoft capitulated with Zune: Universal needs Apple a helluva lot more than Apple needs Universal. If Universal doesn’t want to sell music to what will then be in excess of 100 million iPods sold via what will then be a U.S. top five music outlet, Apple’s iTunes Store, then Universal can go pound sand. If Universal makes such a bad decision, they’ll be crawling back to Steve Jobs on their hands and knees within weeks begging for forgiveness. If they want to play hardball with Steve Jobs based on a deal they made with the sleazebag Redmond Zunatics, they should understand that a Jobs fastball thrown straight to the head will sideline them not just from that game, but from many games to come.

Related articles:
Microsoft attempts to poison Apple’s licensing deals with music labels – November 09, 2006
Microsoft to pay Universal for every Zune sold – November 09, 2006

Study reports the obvious: most music on iPods not from iTunes Store – September 17, 2006
Study shows iPod owners significantly less likely to steal music than the average person – January 13, 2006

USA Today’s Baig: Microsoft Zune is no Apple iPod – November 09, 2006
Forbes: Microsoft’s Zune stinks; like ‘Microsoft Bob,’ only more embarrassing – November 09, 2006
NY Times’ Pogue: Zune should come in green to match Microsoft’s iPod envy – November 09, 2006
Mossberg: MS Zune has ‘too many compromises, missing features’ vs. ‘thin, sleek, elegant’ Apple iPod – November 09, 2006
Microsoft to pay Universal for every Zune sold – November 09, 2006
Analysts: Microsoft Zune may end up being a flop – November 08, 2006
Are 58% of iPod owners really thinking of a Zune switch? – November 08, 2006
Survey: 58% of iPod owners planning another MP3 player purchase will consider Microsoft’s Zune – November 01, 2006
Zune is from Microsoft, but Microsoft doesn’t want anybody to know about it – November 07, 2006
Microsoft Zune to be US-only, no firm plans to launch anywhere else globally – November 03, 2006
Five Microsoft Zune TV commercials – November 02, 2006
JupiterResearch: Apple’s iPod will dominate for foreseeable future; Microsoft’s Zune insignificant – October 25, 2006
Ellen DeGeneres Show gives away Microsoft Zunes, studio audience goes berserk – October 23, 2006
More Microsoft Zune myths explored – October 20, 2006
Five more Microsoft Zune myths – October 18, 2006
Microsoft Zune intensifies chaos in Apple iPod+iTunes also-ran market – October 16, 2006
Newsweek Q&A: Apple CEO Steve Jobs discusses iPod’s impact, Microsoft’s Zune, and more – October 15, 2006
Microsoft’s Ballmer: Zune device not money loser, wishes Apple’s 30GB iPod was $299 instead of $249 – October 11, 2006
Microsoft’s consumer electronics track record: long string of failures – October 11, 2006
MP3.com founder: ‘Zune will be an expensive failure for Microsoft because consumers aren’t stupid’ – October 06, 2006
Microsoft fails to secure key Zune domains – October 04, 2006
Microsoft rigs Zune with tricky pricing and proprietary money schemes – October 03, 2006
Why Microsoft’s Zune won’t kill Apple’s iPod – October 03, 2006
10 Apple iPod vs. Microsoft Zune myths – October 02, 2006
Analyst: Zune could lead to ‘civil war’ between Microsoft and Windows Media partners – September 29, 2006
Thurrott on Microsoft’s Zune: ‘The makings of a disaster, what the heck are these people thinking?’ – September 29, 2006
Analyst: Microsoft Zune’s as good as dead on arrival – September 28, 2006
Microsoft sets 30GB Zune price at $249.99 – September 28, 2006
How Microsoft’s Zune can kill Apple’s iPod – September 21, 2006
Microsoft’s Zune insanity – September 21, 2006
The Microsoft Zune 1.0 dud – September 20, 2006
Microsoft’s underwhelming Zune a ‘viral DRM’ device – September 18, 2006
SanDisk teams with RealNetworks against new common foe: Microsoft Zune – September 18, 2006
Creative does Apple’s dirty work by immediately attacking Microsoft’s Zune – September 17, 2006
Motley Fool’s Jayson: Microsoft’s ‘just plain ugly’ Zune a meager offering, not an iPod killer – September 15, 2006
What’s in a name? ‘Zune’ a French-Canadian euphemism for penis or vagina – September 15, 2006
Crave at CNET: ‘Microsoft Zune, all the excitement that brown can bring’ – September 15, 2006
Microsoft’s Zune underwhelms – September 15, 2006
Enderle: Microsoft Zune ‘a design mistake’ – September 15, 2006
Microsoft hypocrisy exposed with Zune: What ever happened to ‘choice?’ – September 14, 2006
Analyst: Microsoft Zune with fake scroll wheel ‘hardly an Apple iPod killer’ – September 14, 2006
Analyst: Microsoft Zune won’t spoil Apple’s biggest iPod Christmas ever – September 14, 2006
Microsoft unveils Zune 30GB player, Zune Marketplace; declines to disclose prices – September 14, 2006
Analyst: Microsoft’s Zune an ‘underwhelming’ repackaged Toshiba Gigabeat; no threat to Apple iPod – August 30, 2006
Microsoft confirms brick-like Zune to be made by Toshiba – August 25, 2006
Microsoft Zune is chunky brick made by Toshiba – August 25, 2006
Microsoft to sell single Zune model this fall, rumors of Wi-Fi capability were greatly exaggerated – August 10, 2006
Microsoft to spend hundreds of millions, several years on Zune trying to catch Apple iPod+iTunes – July 27, 2006
Zune: Apple cannot lose. Microsoft cannot win. – July 26, 2006

68 Comments

  1. So if I have one track that’s not been paid for, that falls into ‘Up to 95% of music tracks on a typical iPod has not been paid for.” Wot a load of rubbish.

    BTW-All my tracks are paid for.

  2. Freddy: Pretty calm over here. Just laughing a bit at the audacity of Universal expecting royalty from the sales of iPods. Even if people who use iPods listen to pirated music on them, exactly why does that mean Apple should pay compensation for it? Do gun manufacturers pay compensation to families of people murdered using their products?

  3. I use my iPod as a diagnostic tool. I’ve got an OS on it, dozens of disk images, and every utility I need to boot and troubleshoot the Apple’s I service.
    MW “music”!!!
    Music? What music?

  4. Quote MDN take ; “The facts: up to 95% of the tracks on a typical iPod are not tracks that were purchased online. Most tracks on an iPod come from CDs that users have purchased and ripped. “

    ————————————–

    Actually, many people in the music industry consider tracks that have been transfered from the original purchased medum (CD) to another medium (iPod) to be ‘un-paid for’ ..

    Carefully read the link below to understand the legal aspect of this idea.

    http://en.wikipedia.org/wiki/Audio_Home_Recording_Act

    The law actually considers such transfers to have value to the copyright owner. We will likely see the industry become more dilligent in enforcing their implied rights to charge for such transfers, including more fees on hardware.

  5. Microsoft – in a pathetic desperate move to gain credibility.

    Pretty soon tire manufactures will demand a cut of car sales – even though you never buy their tires.

    That is just the lamest business plan ever. I hope MS pays a LOT of cash to Universal.

    They are gonna Zune themselves.

    Let’s all sit back and watch Microsoft crash and burn.

  6. It’s going come to a showdown, at high noon.

    It will be Apple vs. Universal and this is one fight Apple must win. I hope that when the showdown happens, Steve will have all his guns lined up and unleash them before the twits at Universal even know what hit them.

    Because this fight is unavoidable, and necessary, in order to run out the greedy bastards from town once and for all.

  7. I still buy cds and rip them more than I download from iTunes, but I like the idea of digital downloads best, if done right. I wish we could choose the quality of the downloads, plus have digital booklets with the same lyrics and artwork as you would find on the (physical-format) cd.

  8. When the recording companies agree to place their music on iTunes Store, they are very well aware of the FairPlay DRM being used by Apple. If they don’t like the established DRM of iTS, then they can take their online music sales elsewhere.

    After such a successful iTunes/iPod system, Apple isn’t about to change the user’s restrictions.

    Perhaps Apple should start using a Microsoft-like point system where 1 song = 79 points and you must buy at least 400 points at a time ($5.00) before you buy the song. Some marketing dweeb convinced his Microsoft bosses that people will be so confused and think the song appears to be $.79 when in reality it is $.99.

    Like everything else, Microsoft obviously doesn’t have the brains to actually create innovative products, so they just try to buy their way into the music industry by offering a share of the dead-before-it-hits-the-shelves Zune. I see no reason why Apple needs to share it’s hardware profits with the music industry.

  9. M$ and the music labels are scared of Apple and they see that Apple’s growing stronger. How did that strength develop? A straightforward approach to customers: this is what we offer, take it or leave it. No need to dupe anyone. A known, certain quality for a consistent price.

    This is in contrast to 40 different versions of Windows and Office and “flex” pricing for music. Oh, you like this little extra thing, well, you’re gonna’ pay!

    Apple seems like they charge a premium price until you realize they don’t try to sell crap, then up-sell you the good stuff.

    I don’t think M$ and the music companies realize that iPod isn’t successful because of the music store. It’s successful because it’s really, really good at what it does. Even if the iTunes store closed, the iPod could continue to grow– people want their media with them. They don’t care where it comes from.

    Microsoft. Seriously– you suck. Hard.

  10. Ummm…I beg to differ. If record labels and companies demand royalties as a group, Apple will have to capitulate or close the iTunes Store….what Microsoft did was make a deal with the devil and made a short term great, long term bad business decision for all MP3 players….

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