Should Universal be Entitled to Zune profits?

On November 14th, the Microsoft Zune, a wireless portable media player, will be available for sale. The hype in anticipation of the Zune has been pretty darn big, and apparently other companies (read: Universal, the world’s largest music company) are looking to cash in.

Microsoft announced yesterday that it would be giving over $1 per each Zune sold to Universal. That’s $1 per a piece of hardware that Universal had no involvement in producing. However, the agreement reached means that Universal will now be licensing its music in the Microsoft Zune store, which leaves the status of iTunes to be determined.

Microsoft’s agreement to pay Universal per Zune unit sets off a heat wave and puts a lot of pressure on Apple to do the same (Apple currently pays off a portion of royalties per iTunes sales and does not compensate anyone for the sales of its iPods). Universal has one year left of its licensing agreement with the iTunes store, and who knows what kinds of negotiations will be made once the Zune precedence is set. Apple is Microsoft’s biggest competitor in the portable music market, so Microsoft played the pretty devious card when agreeing to this deal.

Microsoft ZuneStill, while iPods and Zunes and Zens and other portable MP3 devices might be where the majority of the world’s MP3s are stored, what about car MP3 players, or a PC, or an MP3 boombox — should Universal be cutting deals with the manufacturers of these products to take a cut of their sales — even if the individual never stores any media from Universal on their devices?

I don’t think so.

Do people really think that it is unrealistic to assume that Universal music is going to be installed on every media player owned by every individual? I hate to say it, but they are wrong.

My father owns a ShasPod. This nifty little 20GB iPod has absolutely no music whatsoever on it. The ShasPod contains a daily shiur, or lesson, on the Talmud. The iPod in this case is being used as an electronic audio book.

If there’s a market for ShasPods, there is a market for other ‘pods too that serve a similar purpose. This might be a small portion of the entire market, but there still is a market for this kind of portable media player usage.

Therefore, I personally think that Universal does not deserve a penny, so hopefully Apple will be able to withstand the pressure of the market shift and hold its ground. (After all, I’d still buy a new iPod over a Zune any day — the excitement over the Zune never swayed me.)

Interestingly, after thinking about Universal’s seeming role in all of this, does the music company really need money from Microsoft, or is this a joint conspiracy between M$ and Univer$al to pressure Apple? On the other hand, if it wasn’t a joint conspiracy, is the largest music company in the world just letting its ego run loose, assuming it’s entitled to anything and everything? (We know Google thinks that of itself, so why not Universal as well?)

Tamar Weinberg is a hustler and juggler. She is the VP of Marketing at Ruxly Creative, a creative marketing agency. She's the Director of Sales at Internet Marketing Ninjas, a 100+ employee search engine marketing agency located in upstate New York. She also rocks global sales at financial media publication Wall St. Cheat Sheet. Finally, she is the Chief Strategy Officer of Small Business Trends. Oh wait, and she's also the community manager at Namecheap. Yeah, like a boss.

2 Comments