Feeds

Microsoft Universal deal sure to be challenged

Anti-trust ahoy

Providing a secure and efficient Helpdesk

We suppose we have to record the big news story of the week, covered by everyone from the New York Times down, that Microsoft is letting Universal Music Group get some revenue every time it sells a Zune player.

The record labels have made it very clear that they resent Apple's success with its iPods, which they see as being sold on the back of iTunes, and their content.

The only problem with going forward with Universal is that all of the labels will have "most favored nation" terms in their contracts and so will also want the same terms, while Microsoft cannot have such wording in its favour.

Universal will get less than one per cent and insiders said they expect around $1 for each $250 device. If every major record label took the same amount it could be getting on for two per cent to three per cent of the value of the device, and as much as six per cent of the amount that Microsoft gets paid by a retailer. It makes turning a profit on the Zune far harder than on the iPod.

Microsoft confirmed it would now offer similar royalty deals to the rest of the industry.

But that cannot be the end of the story. Has Microsoft got better terms for the sale of each piece of music. In other words, will it reasonably recoup its lost dollar in music sales as they rise? Regardless, the Zune is scheduled to be launched next week.

Another reason given for the reverse royalty is that this will compensate artists for loss of revenue through piracy. It is well known that iPods tend to carry copies of unprotected CDs and some pirated works, but this is just being used as an excuse by Universal. Why should its artists get recompense, and not those of the 2,500 or so independent labels, or the other major labels.

That's what equipment levies are for, so Microsoft sells a Zune outside the US, in a country like Germany, which has storage high levies, and those levies are being paid twice over.

It looks to us like this payment might be construed as an abuse of dominant position, and might get challenged, certainly in countries in Europe. You cannot be in a dominant position and ask for money for something that doesn't involve the sale of your product. If Universal tries this with Apple, Steve Jobs would, we are sure, have no qualms in cutting it out of a huge amount of existing music revenue.

Copyright © 2006, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

Secure remote control for conventional and virtual desktops

More from The Register

next story
Facebook pays INFINITELY MORE UK corp tax than in 2012
Thanks for the £3k, Zuck. Doh! you're IN CREDIT. Guess not
Happiness economics is bollocks. Oh, UK.gov just adopted it? Er ...
Opportunity doesn't knock; it costs us instead
YARR! Pirates walk the plank: DMCA magnets sink in Google results
Spaffing copyrighted stuff over the web? No search ranking for you
In the next four weeks, 100 people will decide the future of the web
While America tucks into Thanksgiving turkey, the world will be taking over the net
Microsoft EU warns: If you have ties to the US, Feds can get your data
European corps can't afford to get complacent while American Big Biz battles Uncle Sam
Don't bother telling people if you lose their data, say Euro bods
You read that right – with the proviso that it's encrypted
prev story

Whitepapers

Choosing cloud Backup services
Demystify how you can address your data protection needs in your small- to medium-sized business and select the best online backup service to meet your needs.
Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
Storage capacity and performance optimization at Mizuno USA
Mizuno USA turn to Tegile storage technology to solve both their SAN and backup issues.