Can't Buy Me Love (or can you?) - Universal Gets Paid for Zune

Michael Gartenberg | November 09, 2006, 07:54 AM

Interesting news out of Redmond late last night that Microsoft will be paying a cut of Zune's sales to Vivendi Universal Music. Interesting move "A gesture of this type shows our commitment to the industry" said their spokesman. A gesture to say the least.

No doubt that part of the Zune strategy is to win the hearts of the labels. (makes sense since Apple owns the hearts of 75% of consumers) First, they make the the Zune sharing feature acceptable by making shared songs self destruct and now paying them outright. By agreeing wih statements like "We felt that any business that's built on the bedrock of music we should share in." from Universal's CEO, Microsoft could reap some benefits down the road and hope to drive a wedge in between the labels and Apple. (Edgar Bronfman made a similar comment about getting a share of the iPods revenues a while back)

But does this really help? Let's face it, the targeted 18-24 year old who likes indie music isn't going to jump on Zune because the labels like it. In fact, if Microsoft is seen as cozying to close to the labels, their whole targeted demographic strategy could backfire. Be interesting if other labels take up Microsoft's offer. This move's not something likely to affect Zune sales near term but this is a war that's just getting underway.

Update - David Card thinks I'm wrong. Perhaps, but I don't think so. First, it's not about the payout to Universal, it's the whole perception of creating an eco-system that that labels would love, such as crippling the sharing feature. And MSFT is taking a lot of heat over it. Just read the boards and no, they're not all hackers and theives :) And it's intresting that it's MSFT taking the heat, not Universal.