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[According to the New York Times][1] Microsoft has agreed to pay Universal Music "more the $1" for every Zune sold. The article claims:
>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.
Ever since I mentioned it in the morning reboot, I've be trying work exactly why Microsoft would cut Universal Music in on the deal. [Several analysts have suggested][3] that this [has the makings of a new business model][4] -- hardware manufacturers cut content producers in on the profits of device sales.
The logic is that since online music sales aren't picking up with near the pace at which retail CD sales are declining, kindly hardware manufacturers can cut them in on some profits.
That would make sense if Microsoft were a charity organization, but obviously it's not. But Google has reportedly reached similar set of agreements with various entertainment companies regarding YouTube, so maybe this idea is gaining some traction.
Canada tried to institute an "iPod tax" for a while in an attempt to compensate the music industry for what it perceives as lost revenue through file sharing. The law was later struck down by Canadian courts.
Apple's tactic so far has been to compensate the music companies through sales on the iTunes Music Store. But online music sales aren't exactly raking in the money. According to an unnamed study quoted by the Times: "Apple has sold an average of 20 songs per iPod."
Naturally music industry claims the decline in sales is directly attributable to file sharing. To a certain extent they're probably right. But presupposing that your entire consumer base is criminal, which is what something like the Canadian tax does, seems a bit extreme.
Perhaps this wouldn't be a bad model for the music industry to adopt. I for one would much rather pay $25 or $50 more for an iPod or Zune if I could avoid DRM and download whatever I wanted whenever I wanted.
Personally I think that with more and more bands selling their music outside the traditional realms of the music industry, and many of them making a healthy profit doing so, that alternatives to current structure are more likely. Already sites like [Amie Street][5] offer musicians better ways of delivering their music to the world and I expect we'll see many more similar services pop up soon.
Of course well established acts like U2 and Britney Spears aren't going to go this route, but the acts that will inevitably supplant them as the new industry leaders may well be coming from outside the existing industry.
What do you think?
[1]: http://www.nytimes.com/2006/11/09/technology/09music.html?ex=1320728400&en=b380ce3d90e6a342&ei=5090&partner=rssuserland&emc=rss "New York times says Microsoft to pay Universal Music a portion of Zune proceeds"
[3]: http://techdirt.com/articles/20061108/235014.shtml "Techdirt on the microsoft Universal deal"
[4]: http://www.techcrunch.com/2006/11/09/on-universal-music-groups-zune-tax/ "TechCrunch on the Microsoft Universal deal"
[5]: http://amiestreet.com/home.php "Amiestreet.com"
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