In a deal which could change the relationship between the music business and the electronics firms making music players, Microsoft has agreed to pay Universal Music Group a fee for each new Zune digital music player it sells. Microsoft's competitor to the iPod launches next week, accompanied by its own iTunes style download platform, the Zune Marketplace. But the new deal means that Universal will benefit from hardware sales as well as any tracks sold via the download platform.
Universal chief Doug Morris confirmed his deal with Microsoft this week, though he wouldn't be drawn on how much his company will earn off each Zune sale. But he did tell reporters: "We felt that any business that's built on the bedrock of music we should share in".
Presumably the other major record companies will look for similar deals with Microsoft. What will be more interesting to see is if the record companies are able to factor in similar cuts on hardware sales with the manufacturers of other MP3 players or music-player phones. Obviously the record companies do not currently receive such a payment on the sales of Apple's market leading music player the iPod. On that fact, Morris continued: "We were very early in working with [Apple boss] Steve [Jobs] on the launch of the iPod and he's been a very good partner and done a lot for the industry. We have a current contract with him and at the end of that I'm sure we'll negotiate".
It's not clear whether Microsoft will enjoy any content exclusives out of the deal, which might give their new player and download service some competitive advantage over Apple. Microsoft Entertainment's Chris Stephenson said, simply: "It's not a new conversation, it's been out there in the industry for a while. We've been careful in thinking about it from an economic point of view from day one."