“So the big Zune news this week is that Microsoft’s deal with Universal Music Group includes a per-unit royalty on each Zune player they sell,” John Gruber writes for Daring Fireball. “What we’ve got here is a nice, warm, shit sandwich from Universal Music, and Microsoft concluded that they had no choice but to eat it. Oddly enough, this puts me in the same boat as Paul Thurrott,1 whose analysis of the deal — Microsoft Caves to Universal in Music Deal — almost completely jibes with mine. Thurrott writes:”
Sensing that [Microsoft] was in no position to bargain, given the failure of its previous digital music initiative, PlaysForSure, and the uncertain nature of its new Zune go-it-alone approach, Universal demanded the per-player royalty payment. The deal comes “after weeks of tense talks,” according to a report by “The New York Times”.
If Microsoft had vetoed the payments, it would have been forced to go to market with only a portion of the music available on the Apple iTunes Store. (Universal sells one-third of all music worldwide.) That limitation would likely have killed Zune before it even had a chance to fail in the market on its own. Meanwhile, Apple hasn’t been forced to make a similar deal because it enjoys the dominant position in the market. If Universal pulled out of the iTunes Store now, that action would harm Universal more than Apple.
Gruber writes, “Don’t get me wrong — if this deal somehow does wind up polluting Apple’s deals with the music labels, Microsoft won’t be shedding any tears. Misery loves company. But this is Universal’s idea, not Microsoft’s.”
Gruber writes, “Far from seeing this Universal dollar-per-Zune deal as some sort of nefarious Redmond plot, I think it’s actually giving Microsoft a nice taste of its own medicine. Thurrott is right: Microsoft needed Universal’s support, Universal knew it, and they’re making them pay.”
Gruber writes, “Even in the worst case, I don’t see this precedent as posing much of a problem for Apple (or, really, for Microsoft, for that matter — one dollar per unit amounts to a rather small turd in this particular shit sandwich). A few dollars on a $249 iPod amounts to very little. I mean, they lose one dollar on each unit just by pricing them at $249/$299 instead of $250/$300 — another couple of dollars for the record labels wouldn’t amount to much.”
Gruber writes, “Apple, though, surely will continue to resist, if not outright laugh off, such deals. Partly out of general principle, but mainly because unlike Microsoft, Apple has leverage over the music labels because they have something the labels need: popularity.”
Full article with much more here.
So, what do you think, did Microsoft just get PlayedForSure by Universal or are the Microsoft sleazebags trying to poison Apple’s future negotiations with the even sleazier music labels or is it a combo platter of a “nice, warm, shit sandwich from Universal” with a tall glass of Microsoft poison?
Universal Music Group CEO calls iPod users thieves – November 11, 2006
Following Zune deal, Universal expected to demand iPod royalties from Apple [UPDATED] – November 10, 2006
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 shows iPod owners significantly less likely to steal music than the average person – January 13, 2006
Warner’s Middlebronfman: ‘We sell our songs through iPods, but we don’t have share of iPod revenue’ – October 05, 2005
Warner CEO Bronfman: Apple iTunes Music Store’s 99-cent-per-song model unfair – September 23, 2005
Real CEO Glaser calls Apple iPod owners thieves – May 11, 2006
Microsoft CEO Ballmer: ‘Apple iPod users are music thieves’ – October 04, 2004