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. and in other news the music industry has demanded portable cd player, home hi-fi, in car stereo manufacturers to pay a fee to them to compensate all the cd-r piracy there is in the world else it would stamp around the fall on the floor crying and kicking it’s arms and legs then eventually hold it’s breath till they give in

    typical m$ move always trying to buy it’s way into something with a crap product and force others out

  2. The store makes a small profit. Statistics show that a relatively small amount of songs are legally downloaded– most are bought and ripped from cds, or stolen. While the iTunes store is the “face” of the iPod system, it’s not really the heart of it. Remember, the tv shows are not at play in this dispute right now.

  3. No way iTunes is closing up shop. The record labels are the only ppl making REAL money off iTunes anyway. Greedy, filthy bastards. The artists get jacked as well.

    I think record labels are in their death throes. Who needs them, anyway? Get rid of the middle man.

    Good riddance.

    m

  4. Up to 95% of tunes on a typical iPod has not been paid for???

    Apart from the bad English, I resent that comment. Vivendi was taken over by one of the young Bronfman’s….the son was a drunk and a crack head. He almost made Vivendi go under.

    He is a scabby, pus sucking hedonist. Small wonder Vivendi is the first a t the trough.

    If it ever happens, I will boycott all music by these guys (or better still….aim at making that stupid 95% statistic being all Universal music!

    Ugh I think I will go shower now, I feel dirty……..

  5. A battle is nearly over (one way or the other) when the complaintants descend to personal attacks. MSFT must be sweating like a pack of pigs.

    Heard in the conference room. “This is our second front. We’ll squash them with the Zune, and gut their profitability by cutting in the labels.”

    The elder man listened, digging the vibe. “But won’t it cost a load to pay Universal blood money?”

    “Sure, but it’ll hurt them more.”

    “Right. Well, we only have to win on one front to be successful.”

    “Ah….”

    It’ll be fun to watch. Like knocking an asteroid off its course with a high powered brown pellet rifle.

  6. You know, it’s downright frightening how often these kinds of misinformation stories are found in the media. Makes you wonder about
    things you read that you don’t really know the subject. Is all media this
    bad? When you read these misquoted stories so often, it really makes you wonder. Mark Twain wrote that people who don’t read the newspaper are
    uninformed, and people who do are misinformed. Guess he was right,
    that is if I actually got the story correct. ” width=”19″ height=”19″ alt=”wink” style=”border:0;” />

  7. Thoughts on Nani’s comment:
    ******
    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.
    *******

    Why is it we can move an artist’s print from our old house to our new house, but we can’t move an artist’s song from our compact disc to our hard disc. The labels are most certainly out of their skulls, because i own that song, same as i own that print.

  8. Crow,

    You can move a print from your old house to you new house, just as you can take any CD that you own from your old house to your new house.

    What the copyright law does is to make it illegal to make a copy of anything that is copyrighted.

    I’m personally in favor of personal use exemtions to copyright, but it really should be clear to everyone that copyright law is about THE RIGHT TO COPY things.

    That’s whay it’s calkled COPYright.

    In fact you can’t legally make a perfect copy of that artists print just because you own it.

    Enforcement of such copyrights is really rare. It obviously can’t be enforced if you make a copy for personal use, but the copyright owner has the legal right to persue any means within the law to get compensated for copying of their copyrighted material – as the law stands.

    An example of this is the use of licensed graphics in the media. Technically you can’t just cut and paste any image you want and use it any way you like. There are copyrights and licenses on just about all media.

    There is always a legal difference between something you actually buy and a copy of that thing.

    From the US Copyright office

    http://www.copyright.gov/title17/92chap10.html#1001

    (a) Digital Audio Recording Devices. –

    (1) Amount of payment. – The royalty payment due under section 1003 for each digital audio recording device imported into and distributed in the United States, or manufactured and distributed in the United States, shall be 2 percent of the transfer price. Only the first person to manufacture and distribute or import and distribute such device shall be required to pay the royalty with respect to such device.

  9. “If record labels and companies demand royalties as a group, Apple will have to capitulate or close the iTunes Store”

    If record labels and companies demand royalties as a group, Eliot Spitzer or any seeking-fame replacement, and/or the Dept of Justice will be on them for collusion in a second.

    If the labels refuse to deal, Apple will appeal directly to consumers and artists. In selling over 1.5B songs in just over 3 years, Apple has given almost $1B in royalties to those labels. How could 65 cents a song not be enough, when the labels no longer need to pay for manufacturing, distribution, and the margins needed for brick-and-mortar stores?

    But if they want to cut off iTunes, no matter, people will then fill their iPods with CDs and pirated music. And the remaining labels will continue to reap the revenues.

    In any case, Apple has seen this coming and the iPod is rapidly moving away from being just a music player, thus the leverage of the music labels is decreasing.

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