UMG's announcement that they will receive a fee for every Zune sold is scary to say the least. While I applaud their ability to push a giant like Microsoft into this agreement, the implications from such a deal are disturbing.
Universal Music Group officially disclosed its new deal with Microsoft, an announcement that largely confirms earlier details. Universal will grab a per-unit commission for every Zune Sold.
The premise is simple: Microsoft pays UMG a fee for every Zune sold (rumour has it at around $1 per unit). In return, Microsoft will have a less resistant path to a full digital music offering. This fee is in addition to the royalties that Microsoft will already pay for the sale of music.
According to the story, Microsoft is looking at similar arrangement for other labels and artists.
First of all, it's simply wrong. Just as rant-o-saurus Bob Lefsetz stated so well, it's like food companies getting paid for every stove that is sold. Or TV producers getting a cut every time you buy a new TV. The product manufacturer shouldn't have to pay just to function.
Secondly, it smacks of arrogant contempt. While the deal doesn't make sense, the comments after the fact patronize the consumer. Microsoft acceptance of the agreement states:
"We look forward to working with the industry to make sure labels and the artists have a very bright future," said Bryan Lee, corporate vice president of Microsoft Entertainment & Devices. Lee also applauded Universal for sharing the revenues with artists, noting that "the music consumer will appreciate knowing that when they buy a Zune device, they are helping to support their favorite artists." Digital Music News
Bullshit. When you buy a Zune device you are not supporting your favourite artist. Your $1 is supporting UMG. How they will disperse those funds will likely depend on sales, or some other random rating system. Or it will go to prop up sliding sales. How much of the commision gets dispersed is also a mystery. (Wouldn't it be an interesting twist to pay bands inversely proportional to sales? Justin Timberlake gets nothing, where new ABC band with no sales get the biggest piece of the pie. Just a thought.)
There is no reason to believe that the songs you may eventually put on your Zune are even owned by UMG - but they will still get their cut. And if other labels get the same deal, your multi-dollar contribution to the industry gets shared across everybody.
This deal helps nobody but UMG (and potentially all the labels). The problem is that it doesn't really impact anyone else too much. A few bucks on a device worth hundreds is nominal to Microsoft, especially when you factor in the full service that is offered. To the consumer, a couple extra dollars is also negligable - albeit a little annoying. This deal will get a little attention and argument at first, but then it will pass into acceptance. To the label, however, it is a lucrative revenue stream, and sets the stage for future deals.
$1 from every device that can play a song is a lot of money. Players, phones, computers, ...the new XBox. It doesn't end.
Microsoft wants to take a massive bite out of iTunes market share with Zune, and although early reports of the product weren't earth shattering, they were favourable. However, they also needed access to music to do it, and they appear to be willing to stop at nothing to make sure they get it. I believe they will live to regret this door that they have opened.
Read the whole article: Universal Music Group Officially Announces Zune Deal
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