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Zune Profits Go To Record Label 155

genegeek writes, "The New York Times reports that Microsoft has a new deal with Universal to share profits from Zune player sales. David Geffen, the media omniboss, is quoted: 'Each of these devices is used to store unpaid-for material...' The new business rationale is that stolen music should be paid for by profit sharing of newly sold Zune music players. Does that mean if you are not stealing music, you should get a discount on the players? Universal expects a similar deal from Apple when their current contract expires." Reader Gallenod adds, "Microsoft appears willing to spend millions and defer any potential profitability of the Zune simply to weaken Apple's bargaining power with recording companies and set a precedent for hardware manufacturers paying music companies."
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Zune Profits Go To Record Label

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  • by ronanbear ( 924575 ) on Thursday November 09, 2006 @11:51AM (#16786157)
    Microsoft pay Universal money for each Zune sold. Maybe that helps them get a better deal with Universal songs on the Zune Marketplace. The songs will still be $0.99 though.

    The other record labels don't get any money so they seem to be losing out.

    What about European/rest of world customers? Does this mean that the Zune will be a different price in each country due to licensing requirements? What about not available?

    To me this looks like honest customers being charged for music twice. The RIAA has been quite vocal about p2p piracy. Does this mean they won't go after Zune owners? I don't think so.
  • Both Ways? (Score:5, Interesting)

    by longbot ( 789962 ) <longbottle&gmail,com> on Thursday November 09, 2006 @11:54AM (#16786217) Homepage
    So, does this mean that if I own a Zune, that I'm then entitled to pirate enough music to fill it? And if not that much, then where do they intend to draw the line? After all, if I've already effectively paid for the lost profits from pirated material, why would I want to pay twice?
  • by NtroP ( 649992 ) on Thursday November 09, 2006 @12:07PM (#16786417)
    I'll tell you what, Apple. You don't renew your contract with Universal. I'll buy an iPod. I'll buy any conent I like from iTunes (i.e. the content from studios that AREN'T asshats) and I'll pirate Universal content. Zune sales (all three of them) can salve Universal's wounds. So basically, everything is square. I purchase content I can get legally, but pirate content that I can't or has DRM that is too restrictive for me. Everyone (except Universal) will be happy.
  • by Gospodin ( 547743 ) on Thursday November 09, 2006 @12:13PM (#16786497)

    "Each of these devices is used to store unpaid-for material."

    The only way he could be sure of this is if Microsoft is delivering Zunes with something pirated... Hmmmm.

  • by dlim ( 928138 ) on Thursday November 09, 2006 @12:29PM (#16786651) Journal
    Actually, the Zune is designed to store "unpaid-for material..."

    We haven't already forgot about the "feature" that allows you to send your songs to your friend's Zune, which stores them for 3 days (even if it's stored in a DRM lockbox), have we? I think that case may be harder to make with an iPod.

    Also, the author's logic is a bit flawed. To say that because Apple did not sell me every song on my iPod means that the rest were either stolen or ripped from CDs is not a valid argument. For example, much of the music on my iPod was purchased through other services, such as eMusic.

    I'm also wondering if taxing devices will help to invalidate the consumer lawsuits that labels such as Geffen, through the RIAA, have been launching for the last few years. Or maybe the labels / RIAA have figured out that they can't get away with extorting their customers too much longer.
  • Profit, what profit? (Score:2, Interesting)

    by Anonymous Coward on Thursday November 09, 2006 @12:30PM (#16786665)
    This is brilliant. Kudos for MS!
    Get the labels to bid on fool's gold.
    MS just had to drop 50 bucks on Zune price to be competitive with iPod.
    What is the profit? -$50? or maybe -$100.
    So, maybe Universal will be giving 25 usd to MS for every Zune sold.
  • by Anonymous Coward on Thursday November 09, 2006 @12:32PM (#16786703)
    1. Microsoft are yet again using their "illegal monopoly money" (from Windows, Office) to force their way into other markets and destroy the competition. If the USA legal system was really about justice and not bribes, they should never be allowed to do this.
    2. If this passes, expect movie studios to sue Sony, JVC, Toshiba, Hitachi, Panasonic, etc. Also expect publishers to sue Xerox, Brother, HP, etc.

    So either Microsoft are willing to lose money AND get thrown in court yet again and/or the RIAA expect to be the only one to be able to extract money from hardware vendors without paving the way for a huge precedent that will make the whole "media" economy go down the drain (or at least throw everyone in court).

    Microsoft has too much money from illegal business practices, the RIAA is too greedy and stupid, and the lawyers are about to get a lot richer.
  • by Anonymous Coward on Thursday November 09, 2006 @12:34PM (#16786727)
    This is a great opportunity to help send a consumer message to the industry: Stupid anti-consumer deals equate to zero sales.

    Microsoft is poisoning the market because they can't compete. Don't support them by buying their products! Make Zune fail and punnish Microsoft!

    By all reports they've spent 10's of millions on development and allocated somewhere north of $300m for marketing - on standard consumer electronics margins they'll have to sell 16 million players to approach making back their investment, probably more due to the deal they're cutting. Wouldn't it be nice if they only sold a couple hundered thousand and ate $390m in development costs?

    Spread the word: Boycott Zune!
  • by AHumbleOpinion ( 546848 ) on Thursday November 09, 2006 @12:39PM (#16786793) Homepage
    I can't wait for Apple's contract to come up, and for Steve Jobs, still owning a good 85-90% market share, to bitch-slap these new Zune-happy CEO's to the ground like the little greedy trolls they are.

    Apple's current market share won't last, we are at a very early stage in the development of the digital music player market. I'd say we have barely progressed beyond the early adopter stage, the bulk of the potential market has not committed. I'd say Apple's current iPod position is not unlike their Apple II computer position when the personal computer market was at a very early stage before the bulk of the population entered the market. Personally I think Apple has learned from past mistakes and won't become a niche player again, but I do expect them to be one of several major players. Microsoft's positioning also fits in pretty well with basic theory of how a market evolves, I would say they are positioning themselves for digital music players becoming commodity items.

    Since I expect responses regarding the lock-in myth I'll address that now. iPods are predominantly used to play music that is completely portable, MP3s and non-DRM'd AACs. iTunes rips to non-DRM'd AACs or MP3s. The only non-portable music files are the purchases from Apple's iTune Music Store (iTMS). iTMS purchases are easily replaced given file sharing, add to this the fact that the psychological barrier to downloading is far lower given that a person "paid for that song" in their mind. Even if that were not the case the music market has a history of abandoning their current investments when moving from one format to another. However this format transition is even easier to make, iTunes and whatever comes next can happily coexist on your computer.
  • by DulcetTone ( 601692 ) on Thursday November 09, 2006 @01:16PM (#16787125) Homepage
    What do the labels actually DO anyhow? Apple should approach artists, offer them double what they last got from an old-school record label, and tell them, "We'll sell your music in the form consumers actually prefer". They don't need shelf space (who sees these alleged "shelves", anyhow?), and offering double the cut to artists will resonate and be cheap to offer, given Apple's ITMS overhead.
  • Adaptation (Score:3, Interesting)

    by shark72 ( 702619 ) on Thursday November 09, 2006 @03:55PM (#16788289)

    "GET WITH THE FREAKING PROGRAM, PEOPLE!!! Technology has found a way around your business model, and IT WOULD BE BENEFICIAL FOR YOU TO ADAPT TO IT."

    This is precisely what they are attempting to do. This is exactly why Messr. Geffen is quoted in the article as saying "It's a major change for the industry" and "It certainly changes the paradigm." In short, rather than waiting to make profits on sales via the Zune Store (since buying music is so 20th Century, according to many Slashdotters), they are getting some of the money up-front on the sale of the player. I think that is pretty clear.

    When Slashdotters exhort the record labels to change their business model, I think they mean this in terms of "be content with less money" or "don't attempt to make a profit" or similar strategies that one should not realistically expect from a for-profit business with shareholders. The record companies are indeed changing their model... it's simply not in a fashion that many Slashdotters would like.

...there can be no public or private virtue unless the foundation of action is the practice of truth. - George Jacob Holyoake