Marketplace®

Daily business news and economic stories

Zune challenges iPod with royalty deal

Microsoft's new MP3 player debuts next week and with it comes an unprecedented agreement: Universal Music Group will get a small cut of every $250 Zune sold. What's in it for Microsoft? Janet Babin reports.

TEXT OF STORY

KAI RYSSDAL: There’s word of a corporate deal today that even a musician could love. Microsoft has announced it’ll write a check to the Universal Music Group for every one of its new MP3 players it sells. In exchange Microsoft gets better access to Universal’s artists. Microsoft’s banking on the deal to help launch its MP3 player Zune next week. But Janet Babin reports from the Marketplace Innovations Desk at North Carolina Public Radio it’s facing a tough fight against Apple and the iPod.


JANET BABIN: Microsoft is entering what could be called a one-note enterprise: Apple enjoys a 75-percent share of the music player market, and the lion’s share of online music sales. Microsoft’s deal with Universal may be an attempt to rankle the competition.

Universal has a high-profile partnership with Apple — one of its best known bands, U2, advertised the iPod.

Peter Gaston with Spin Magazine says Universal has some other key acts that Microsoft would like consumers to now associate with Zune:

PETER GASTON: I mean, the Killers are a Universal band. A ton of big bands in the iTunes marketplace are definitely under the Universal umbrella, and Zune obviously sees that as something that could really benefit them in their battle against Apple and against the iPod.

While this agreement may sweeten the pot for the record labels to do business with Zune, it would be nearly impossible for them to offer Microsoft exclusive content when most people get their music from Apple.

David Berlind with ZDNet calls this a publicity deal:

DAVID BERLIND: Microsoft is pretty desperate here. They’ll do anything to stimulate sales of Zune and try to attract buyers that normally would buy an iPod away from the iPods and the iTunes music store.

The companies didn’t disclose how much money Universal artists would get from Zune sales. Microsoft plans to offer similar arrangements to other music labels and their artists.

In Durham, North Carolina, I’m Janet Babin for Marketplace.

Related Topics

Tagged as:

Latest Episodes

View All Shows
  • Marketplace
    14 hours ago
    26:08
  • Make Me Smart
    15 hours ago
    27:42
  • Marketplace Morning Report
    21 hours ago
    7:08
  • Marketplace Tech
    a day ago
    11:03
  • This Is Uncomfortable
    4 days ago
    56:05
  • Million Bazillion
    25 days ago
    32:45