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“This move demonstrates there can be a win-win situation where consumers have a great experience while labels and artists are also fairly compensated.”
——Doug Morris

ZUNE BOON: UMG GETS A PIECE OF THE HARDWARE ACTION

In an Industry First, Microsoft Agrees to Share a Portion of Zune Device Sales
Just call him Digital Doug.

Doug MorrisUniversal Music Group has opened yet another revenue stream, and this one’s a biggie, as Microsoft agrees to pay UMG an undisclosed fee for every Zune player sold. The two companies made the joint announcement this morning. This fee is in addition to the standard payments Microsoft will make to UMG for the sale of its music. The software giant plans to offer a similar arrangement to other major music labels and music publishers.

For perspective, imagine a world in which Apple had paid the majors for every one of the tens of millions of iPods it sold in the last five years. Whoa.

“It’s a major change for the industry,” David Geffen told N.Y. Times reporter Jeff Leeds, who broke the story. “Each of these devices is used to store unpaid-for material. This way, on top of the material people do pay for, the record companies are getting paid on the devices storing the copied music.”

Leeds further noted that UMG had plenty of leverage in the negotiations that resulted in this groundbreaking pact: Microsoft couldn’t launch the device and service without content from the #1 major.

"This agreement with Microsoft around Zune is a significant milestone for our company and our artists," said Morris in a statement. “This move demonstrates there can be a win-win situation where consumers have a great experience while labels and artists are also fairly compensated. We applaud Microsoft for its innovative and consumer-friendly Zune store and device."

Microsoft Corporate VP of Entertainment & Devices Bryan Lee chimed in: "This is an industry in transition, and we at Zune feel that artists should be paid fairly. The agreement we are announcing today is one of many innovations we plan on introducing to the entertainment industry with our partners and highlights our commitment to growing the digital music space. We believe that the music consumer will appreciate knowing that when they buy a Zune device, they are helping their favorite artists get paid."

The Zune device and online store, which launch next Tuesday (11/14), will include content from all of the Big Four as well as most of the indies.

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