saipothuri
Broken In
NEW YORK (Reuters)—Microsoft Corp. has agreed to pay Universal Music Group a fee for each new Zune digital music player it sells when the iPod rival launches next week, the companies said on Thursday.
The groundbreaking deal could redefine the digital music business pioneered by Apple Computer Inc.
Rivals including cell phone makers eventually could pay for hardware sales as well as for the music itself, Universal said.
Microsoft is trying to break into an industry closely aligned with archival Apple, which is credited with nearly single-handedly building the legal Web music world with its iPod players and iTunes music store.
But Apple does not give a cut of sales of iPods to music companies. It only pays labels for songs sold on its iTunes music store.
"We felt that any business that's built on the bedrock of music we should share in," said Doug Morris, chief executive of Universal, owned by French media giant Vivendi .
He did not disclose the amount of the fee for the Zune , which launches next Tuesday.
The iPod has a nearly 80 percent share of digital media player sales, and its iTunes music downloads site is also the dominant online music store.
That has given Apple founder Steve Jobs a strong hand in negotiations with the music industry to date.
"We were very early in working with Steve on the launch of the iPod and he's been a very good partner and done a lot for the industry," Morris said in an interview with Reuters.
Like other record companies, Universal has a revenue-share deal with iTunes but no share of iPod sales.
"We have a current contract with him and at the end of that I'm sure we'll negotiate," said Morris, whose company accounts for nearly one in three CDs sold in the United States.
Morris said the deal could set a precedent in negotiations with other device manufacturers, including mobile phone makers, who are increasingly seeing music as important to the future of their businesses.
Microsoft, which has already had early talks with other labels about the fee, said it is keen to work closely with artists in the development of Zune . Apple has benefited from working with artists including Universal act U2—with whom it developed a special version of the iPod.
Chris Stephenson, general manager for global marketing at Microsoft Entertainment, said the fee was not a new idea. "It's not a new conversation, it's been out there in the industry for a while," he said. "We've been careful in thinking about it from an economic point of view from day one."
There have been calls for a so-called iPod tax in some countries including Canada, Netherlands and the UK to help music companies who have lost sales to digital piracy, mainly through peer-to-peer file sharing over the Internet.
Microsoft's 30-gigabyte Zune will launch at a retail price of $249.99 with songs available for download at the Zune Marketplace service at 99 cents each.
The Redmond, Washington-based software giant has said it will invest hundreds of millions of dollars to develop and market the Zune , and that it may take a while to be profitable.
*www.eweek.com/article2/0,1895,2054629,00.asp
The groundbreaking deal could redefine the digital music business pioneered by Apple Computer Inc.
Rivals including cell phone makers eventually could pay for hardware sales as well as for the music itself, Universal said.
Microsoft is trying to break into an industry closely aligned with archival Apple, which is credited with nearly single-handedly building the legal Web music world with its iPod players and iTunes music store.
But Apple does not give a cut of sales of iPods to music companies. It only pays labels for songs sold on its iTunes music store.
"We felt that any business that's built on the bedrock of music we should share in," said Doug Morris, chief executive of Universal, owned by French media giant Vivendi .
He did not disclose the amount of the fee for the Zune , which launches next Tuesday.
The iPod has a nearly 80 percent share of digital media player sales, and its iTunes music downloads site is also the dominant online music store.
That has given Apple founder Steve Jobs a strong hand in negotiations with the music industry to date.
"We were very early in working with Steve on the launch of the iPod and he's been a very good partner and done a lot for the industry," Morris said in an interview with Reuters.
Like other record companies, Universal has a revenue-share deal with iTunes but no share of iPod sales.
"We have a current contract with him and at the end of that I'm sure we'll negotiate," said Morris, whose company accounts for nearly one in three CDs sold in the United States.
Morris said the deal could set a precedent in negotiations with other device manufacturers, including mobile phone makers, who are increasingly seeing music as important to the future of their businesses.
Microsoft, which has already had early talks with other labels about the fee, said it is keen to work closely with artists in the development of Zune . Apple has benefited from working with artists including Universal act U2—with whom it developed a special version of the iPod.
Chris Stephenson, general manager for global marketing at Microsoft Entertainment, said the fee was not a new idea. "It's not a new conversation, it's been out there in the industry for a while," he said. "We've been careful in thinking about it from an economic point of view from day one."
There have been calls for a so-called iPod tax in some countries including Canada, Netherlands and the UK to help music companies who have lost sales to digital piracy, mainly through peer-to-peer file sharing over the Internet.
Microsoft's 30-gigabyte Zune will launch at a retail price of $249.99 with songs available for download at the Zune Marketplace service at 99 cents each.
The Redmond, Washington-based software giant has said it will invest hundreds of millions of dollars to develop and market the Zune , and that it may take a while to be profitable.
*www.eweek.com/article2/0,1895,2054629,00.asp
