Universal Could Take a Bite Out of Apple

[Darius Wey]

<div class='os_post_top_link'><a href='http://tinyurl.com/2wnt2o' target='_blank'>http://tinyurl.com/2wnt2o</a><br /><br /></div><em>"Other recording companies have yet to follow Universal's hard-line lead, particularly in suing online video and social networking sites. They appear happy to let Morris carry the fight through lawsuits and other measures. In his tussle with YouTube, Morris called the site a hub for pirated music videos and negotiated a licensing deal that landed Universal and other labels small stakes in the company just before it was acquired by Google for $1.76 billion US last year. Morris has already suggested, albeit guardedly, that his next target will be iPod-maker and No. 1 online music retailer Apple Inc. With Apple's licensing deal to sell Universal music on iTunes set to expire in May, Morris said, "there might be other ways to get paid." Last fall, Morris threatened not to license Universal music to Microsoft just days before it was scheduled to launch its own online music store and its Zune digital music player. In response, the software company coughed up a royalty of just over a dollar for every Zune sold and paid music fees."</em><br /><br />Whether you like it or not (chances are, you don't), Universal is on a mission to milk everything for what it's worth. Zune, of course, fell victim to the label's strong-arm tactics late last year, and come May, the iPod could be next. And beyond? Only time will tell.

[Vincent M Ferrari]

The Zune fell victim to Microsoft poisoning the waters for the competition, plain and simple. I hope Apple tells 'em to shove it right along with their "you're a pirate because you own a portable audio player" tax. :mad:

[Sage]

The major music labels are greedy, arrogant and Ludditian. I can't wait for the day when the internet allows small labels and bands to thrive without the need for Universal's PR and distrubition clout.

[Jason Dunn]

The Zune fell victim to Microsoft poisoning the waters for the competition, plain and simple.

What the heck does that mean? Please expand upon this concept...

[Vincent M Ferrari]

Unless I'm completely wrong and somehow a music company managed to bring a company with 85% of the OS market share to its knees, Microsoft gave in to Universal with their per-device fee in order to make it more expensive for the people they're competing against to carry Universal's music.

It's not such a wacky theory and frankly it explains a lot, namely why any company would automatically go along with this "piracy tax."

[kryptman40k]

I think people are making a big deal out of very little. I mean, if you knew where most of your dollars went when you bought a hamburger you probably wouldn't be that happy about it either.

So universal gets a dollar out of my zune. Good for them. They haven't made a doller out of me in a good 15 years because they don't put out decent music.

Lots of companies strike deals to cut into the profits of others, thats just how our amazing system works.

[David Tucker]

And I'm sure the fight that MS wanted to ahve on its hands the moment the Zune launched was with the RIAA to get content on its device. Universal has been trying to do this to Apple for a long time.

[Vincent M Ferrari]

The schmuck from Universal said that he wanted the money because he knew there was unpaid for content on people's Zunes that belonged to Universal. Microsoft agreed and gave him the money.

You guys don't realize it, but that's the start of what's going on with Vista and their "design compatible hardware with the help of content providers" processes.

MS Acquiesced to claims its users were all pirates. If you're okay with that, so be it.

[rohitharsh]

First of all MS did the right thing by paying the Universal at that moment. This is not a school fight where you act on emotion. At the time MS needed Universal so they went ahead with the deal. In future MS will expect something back from them.
As Bryan Lee said “"We went to them when we started up with the Zune and said, 'We can do this to you, or we can do this with you. We want to do it with you,'" Lee said.”
In business you do not start a confrontation from the word go. In case by paying $1 to Universal if MS does get a better deal where they get exclusive content then it will be worth it. Or if they get the Universal to relax the 3 day 3 play rule (as speculation suggest), then again it will be worth it.
However in the end if MS feels that Universal is not following the line and are being too restrictive as then Bryan Lee said “We can do this to you”.
Give it time and let’s see how it plays out.
Bryan Lee article:
http://blogs.chron.com/techblog/archives/2007/01/music_industry_meeting_could_change_the_zune.html

[NPrtmn4evr]

I really don't see what the big deal is. So Universal gets $1 from my Zune purchase because MS struck some sort of deal with them, big whoop. I don't pretend to really know all the politics behind this deal, or why it's such a "bad thing," but it doesn't really affect me so whatever. If the Zune gets more support because Universal gets a buck for every Zune sold, then who am I to complain?

[Jason Dunn]

Unless I'm completely wrong and somehow a music company managed to bring a company with 85% of the OS market share to its knees, Microsoft gave in to Universal with their per-device fee in order to make it more expensive for the people they're competing against to carry Universal's music.

That's one theory, but how about this one: the Zune is an underdog in a fairly mature market massively dominated by an entrenched player, and they needed Universal and their music catalogue more than Universal needed the Zune Marketplace as a revenue generator for their music. In fact, Universal probably couldn't give a crap about the Zune because they know it will take years before the Zune is selling in significant numbers that Universal would be losing out on any significant revenue opportunities.

Don't get me wrong, I'm ticked off at the idea that I'm a music pirate because I bought a Zune, but from a business standpoint, how much WORSE would the reviews of the Zune be if the Zune Marketplace didn't have any music from Universal's catalogue? You know full well the reviews would have been even worse, slamming the Zune Marketplace for lacking music from one of the biggest players in this arena. People are always slamming the Zune Marketplace because it only has 2 million tracks instead of the 3.5 million that iTunes has (or whatever).

Also, we have to keep this in perspective - if Microsoft hits their goal of selling 1 million units this year, that's only $1 million it's going to cost them. That's not a big sacrifice for the Zune team to make in order to get access to popular music they needed.

[Janak Parekh]

Also, we have to keep this in perspective - if Microsoft hits their goal of selling 1 million units this year, that's only $1 million it's going to cost them. That's not a big sacrifice for the Zune team to make in order to get access to popular music they needed. Your points are all very true, and yet, one can't help but wonder if Microsoft made a "deal with the Devil", so to speak... and will that hurt them, and possibly everyone else, later down the road?

Interestingly, this ties into Damion's latest post about Microsoft ditching PFS (http://www.zunethoughts.com/news/show/600/balmer-zune-s-drm-is-microsoft-s-future.html). One thing I don't get is that they had Universal on board on the PFS stores, including URGE, right? So if Microsoft actually just evolved their PFS ecosystem slightly, they wouldn't have gotten stuck between a rock and Universal... instead, they tied consumers in, but also locked themselves into a lose-lose negotiation strategy.

--janak

[Aaron Roma]

I want to see this come up in a lawsuit. I want to see a user caught downloading pirated Universal music to his Zune. Universal sues. Defense wins because said user has already paid Univeral for his illegal music when he purchased his Zune.

[Janak Parekh]

I want to see this come up in a lawsuit. I want to see a user caught downloading pirated Universal music to his Zune. Universal sues. Defense wins because said user has already paid Univeral for his illegal music when he purchased his Zune. Are you volunteering to be the first? ;)

--janak