Did Karma Bite Microsoft?

[Aaron Roma]

<div class='os_post_top_link'><a href='http://www.freedom-to-tinker.com/?p=1086' target='_blank'>http://www.freedom-to-tinker.com/?p=1086</a><br /><br /></div><p><em>&quot;There&rsquo;s an interesting echo here from Microsoft&rsquo;s antitrust history. Once upon a time, Microsoft insisted that PC makers pay it a royalty for every PC they sold, whether or not that PC came with Windows. This was called a per-processor license. PC makers, in a weak bargaining position, went along. Microsoft said this was only fair, claiming that most non-Windows PCs ended up with pirated copies of Windows.&quot;</em></p><p> </p><p>There has been much controversy, and rightfully so, surrounding last week's announcement that Microsoft has reached an agreement to pay Universal Music Group a royalty for each Zune player it sells. (In case you've been living under a rock, yes, that is a royalty for each player, not song!) Speculate all you want about the reasoning behind this agreement, but as I see it, it boils down to one thing. Universal strong-arming Microsoft because UMG feels it should be compensated for the potential pirating that Zune users might do. The folks over at Freedom to Tinker pointed out something quite interesting. Maybe this deal is just an example of karma coming around and biting MS on the rear. It seems that back in the day, Microsoft enforced what was referred to as a &quot;per-processor license&quot;. Microsoft apparently forced PC manufactures to pay a fee on every PC sold, even if that PC did not have Windows installed! Microsoft reasoned that most PCs would end up with an illegal copy of Windows, so they might as well get their money up front. Sounds eerily familiar, doesn't it? Of course, as usual, we the consumer are the big losers here.</p>

[Vincent M Ferrari]

I see it the exact opposite way. I have a feeling it's MS bribing Universal in the interest of getting them to allow their music to be sold on, what at least initially, will be an unpopular also-ran.

In the long term, Microsoft will have a stronger bargaining tool (ie: Much stronger Zune sales, barring a collapse of the market) and can probably talk their way out of it. Or release another Zune. For all we know, this agreement only covers the first gen Zunes.

The fact, however, that Universal seems to think they're entitled to anything because the market is built around music and they make music is what's truly disturbing. If I use the Zune for nothing but my own self-produced content, why should Universal see a penny from me?

That's where Microsoft went horribly wrong. Universal said every customer with a Zune is a pirate. Microsoft nodded their head and handed over a buck.

[Felix Torres]

Urban legend.
The per procesor charges date back to the DOS days, but they were *not*MS idea; both the FTC (twice!) and the DOJ looked into it and cleared MS.
What happened was that hardware vendors, in order to avoid the extensive book-keeping needed to keep track of what boxes shipped with MS-DOS designated specific *models* as MSDOS/Windows boxes and paid MS based on total sales of that model. When ABMers called in asking for an OS-less version of those same models, the sales staff would say they were forced to pay for DOS whether it shipped with it or not, which wasn't true, and refused to deduct anything. But that was their choice, simply because they didn't want the extra overhead of tracking individual OS installs.
Dell, for a while, kept separate SKUs for OS-less boxes parallel to the same hardware with DOS/Windows but the price differential was about $20 and the sales were so low that the need to wipe the drives after testing led them to cancel the approach.

BTW, the oh-so-successful bundling of Office with PCs in the 90's wasn't MS's idea either; it was Ted Wait's at Gateway. They originally offered customers a choice of Word, excel or Powerpoint. It was so successful, Dell copied it and expanded it to full office.

MS gets too much credit and too much blame for what their partners do.