Zune Profits Go To Record Label

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."

Great

"set a precedent for hardware manufacturers paying music companies."

Yeah, remind me to thank Microsoft for all this 'innovation' they've done for the customer the next time I'm up in Redmond.

'Each of these devices is used...

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

Really? That guy is a dipshit (pardon my language, but nothing "softer" is better at describing this)

WTF. /NONE/ of the music on my portable mustic player is or has ever been stolen. I know plenty of people in the same boat. Admittedly none of them are Zune, but that that doesn't make the asshat's claim any less false.

Expects to cut the same deal with Apple?

Didn't the record labels try to "alter the deal" the last time their contracts were up?

Didn't Jobs spank them back into submission?

Can't see it any different this time.

What do customers get from this?

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.

I'd want money from Universal then...

They're trying to charge me (indirectly) for stealing their music (which I don't, never have, and never will) -- so I'd want my money back. Greedy bastards. How dare you treat customers like presumed crooks?

Here's hoping Apple will hold strong

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.

What a pantload.

So how much will MS be paying all the unsigned bands who are duping their own discs without the "benefit" of a label?

Yeah right...

"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."

This will go over like gangbusters with Apple and consumers alike. To think that the record industry will try to leverage a deal with another business with regards to consumer goods (music) is ridiculous. Nevermind the fact that Apple will simply leverage their massive iPod fan base against the labels, customers just won't stand for it. Especially when the market for digital media players is already supported by people who have proven they are willing to pay for music, a label-imposed "tax" on those players to cover "stolen content" won't fly.

Both Ways?

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?

What they expect and what they get are different.

This is kind of amusing. So does this mean if we pay a "piracy tax" up front, that we can then pirate music? And how can a music company possibly expect Apple to make some sort of deal like this. Are they going to boycott Apple if they don't? Haha.

Not Good.

This is not a good precident. I know other countries already have a blank media tax, and I always thought this was ONE way the USA was better off then said countries.

The concept of paying RIAA companies because they are selling something that COULD be ussed to infringe on their copywrites is just a horrible idea.

Even assuming that this is a good idea, the problems are still obvious:
Do unsigned bands get a share? what about companies not part of the RIAA?
Do gun manufacturers have to proffit share with police (after all, guns could be used to commit crimes), what about with regular citizens, quikymart owners (after all, they are at a higher risk)?

Just because somethign CAN be ussed to to commit an offence does not say that it WILL be.

and as TFS says, if I only use my MP3 player for legitamite purposes, can I seek a refund? (as I am sure that MS is not going to just hand over part of their proffits, they will just include the price in the player).

pissing in the pool

Ok, who invited Micrsoft, their pissing in the pool again.

Great strategy, if you lose, then wreck it for everyone.

On the flipside...

If I'm paying for pirating music before I do so, it's now ethical for me to pirate however much music I want.

The amusing thing here is that the 'prepaid pirating fee' doesn't go anywhere near the artists. Ever. It's just an inter-company corporate bribe. Between monopolistic organisations. Man, can't you feel that capitalistic efficiency?

All you can eat

If it means I no longer have to pay for any Universal CDs because Microsoft is doing it for me then I'm getting a Zune right now! Woo hoo!

But I suspect that just like with the "blank cds tax" it means you are paying for being suspect of doing something that's still illegal and which you might get sued for. Brilliant... a tax that you shouldn't be paying, either because you don't download illegal MP3s or because accepting the tax as rightful means admitting to doing "copyright violations".

Selling at cost or loss is hardly new ...

"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."

Selling at cost or a loss to gain marketshare is hardly anything new, we're talking Econ 101. Apple basically did so with their on-line store, they wanted to spur use of the iPod. Microsoft is doing pretty much the same thing except they are discounting the hardware to spur use of their on-line store. On-line sales is where Microsoft sees the future, take a look at XBox Live, micropayments of add-ons, etc.

With regard to "setting a precedent", more Econ 101. Using a low price point to establish a barrier to entry. Another predictable move as digital music players become mass market commodity items. iPod dominates the current market, but the current market is a small fraction of the potential market. We are only now leaving the early adopter phase. iPod's current success is not unlike Apple's success with the Apple II when the personal computer market was in it's infancy. Apple pioneered the way then and now, but back then failed to capitalize on that early success to dominate the emerging market. Has Apple learned, or will history repeat itself? I don't know. I tend to think Apple has learned, however I think that this will translate into Apple being one of several major players in the future mature digital music player market. I don't think anyone will be able to dominate as IBM did with PC hardware and Microsoft did with PC software.

I've got a deal for you Apple...

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.

In other news...

Porsche AG announced it will be sharing part of the profits of its sports-car sales with local police forces everywhere. "It's well-known them por-shees is just too damn fast for us to ketch 'em, so anybody drivin' one is a CRIMINAL!", Sherrif Roscoe P. Coltrane explained.

Not buying one

Since I'm not buying a Zune, I don't care where Microsoft sends its money.

Therefore ...

Setting: a courtroom somewhere in the US

RIAA Attorney: Your honor, the defendant admits pirating music ...
Defending attorney: Excuse me your honor, but the defendant owns a Zune.
Judge: Case dismissed.

Apple has no incentive to do this

Apple already operates the iTunes Music Store at close to zero profits. It only exists to spur sales of iPods. They're not going to forgo iPod profits to please overly greedy record companies.

Apple has stood up to far less ridiculous demands before, like price increases. They're not going to cave on this one.

Dumbest possible move

Microsoft has just done the unthinkable: they have acknowledged some "social responsibility" to police themselves, genuflect before the Altar of Starving Musicians and Aggrieved Businessmen and generally do the bidding of another industry. It's as f$%^ing stupid as a gun manufacturer agreeing to whatever Handgun Control Inc wants in the name of "keeping guns out of criminals' hands."

Policing bad behavior is for the courts. People who make perfectly valid tools don't owe jack to those who are hurt by their misuse. Get a damn grip, Microsoft. You aren't hurting Apple's marketshare, you're hurting your lobbying efforts and things like that.

I am SO F*CKING SICK OF

the whining record/movie execs. "Oh, people are steeeaaaling! Pirates! Go to jail!" 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.
 
The more you resist, the more 'old-school' you'll become.

Nothing like paying twice...

Under the deal, Universal, the world's largest music corporation, will receive a percentage of both download revenue and digital player sales when the Zune and its related service are introduced next week.

So let me get this straight: you pay Universal when you buy the device, and then you pay them again for the music you load on to it?

What if I never listen to any of Universal's music?

What really strikes me as ridiculous is that Universal's terms seem to imply that even a legitimate music purchase is still piracy .

At this point, the only moral thing to do is to stop buying music. You aren't going to appease the record companies - they'll call you a pirate no matter what. If we all stopping funding the RIAA lawsuits, maybe they would go away.

Wi-Fi 3 day song sharing? Harder to sue customers?

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.

Cease and desist!

So, what this technically tells me is that everyone who buys a Zune already pledges guilty of being a criminal, infringing copyright? Because, well, at least in my country, there should be no punishment without verdict, no (positive) verdict without crime.

So either lift that or I will not even go near a Zune. I am NOT infringing copyright, and anyone who says otherwise should either put proof on the table or face me in court.

Re: Here's hoping Apple will hold strong

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.

It already happened with the "Tape tax"

Yes, the "tape tax" bill/law from the early 1990's is a tax on blank cassettes sold commercially, and (some of) this money goes to commercially recorded music artists (through their recording labels). This same tax applies to "Music CD-R's" which have the bit set needed for stand-along CD-R recorders to record on them. Of course, "data CD-R's" used on computers were mainly used for backup and legitimate data transfer way back when, and so are exempt from the tax, but now these are surely used mostly for making unlicensed copies of commercial music.

Hardware and media taxes are luducrous, and are unfair to those who use such items legally (podcasts, paid-for downloads from Itunes and similar sites, and musicians recording their own songs). The bad news is such taxes are here to stay. This story of a hardware manufacturer paying a "license fee" to a recording label isn't technically a tax, but with the other already existing taxes, this sets an informal precedent and paves the way for REAL taxes on such devices and blank media.

Adaptation

"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.

Strategery!

1. MS introduces unprofitable business model to light a fire under Apple's ass.
2. Unprofitable business model sinks Zune (ill-conceived hardware design/UI notwithstanding).
3. MS pulls Zune, retreats to XBOX and Windows Bloatware Caves of Profitability.
4. Non-Existent Zune = Profit???

5. Jobs laughs maniacally. Deadpans, "No," when RIAA attempts feebly to re-negotiate on the basis of a ludicrous business case built on an eleventh-hour all nighter fueled by energy drinks, Chinese takeout and heavy doses of THC.

Lesson to RIAA: When MS strongly encourages you to drink their Kool-Aid, don't.