Microsoft agrees to share profits of the Zune with Universal and possibly other record abels.
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In a rare move, Microsoft said yesterday that it had agreed to pay a percentage of the sales of its new portable media player to the Universal Music Group.
Universal Music, a unit of Vivendi, will receive a royalty on the Zune player in exchange for licensing its recordings for Microsoft’s new digital music service, the companies said.
Universal, which releases recordings from acts like U2 and Jay-Z, said it would pay half of what it receives on the device to its artists. The company is expected to receive more than $1 for each $250 device, according to executives who were briefed on the pact.
The deal represents a big departure from the standard set by Apple Computer, which pays record companies for songs sold through its iTunes service but does not give them a cut of the sales of its hugely successful iPod.
Under the deal, Universal, the world’s largest music corporation, will receive a percentage of both download revenue and digital player sales when the Zune and its related service are introduced next week.
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In addition, the deal may provide leverage for Universal to insist on a cut of future iPod sales when its existing contract with Apple expires next year.
“It’s a major change for the industry,” said David Geffen, the entertainment mogul who more than a decade ago sold the record label that bears his name to Universal. “Each of these devices is used to store unpaid-for material. This way, on top of the material people do pay for, the record companies are getting paid on the devices storing the copied music.”
He added: “It certainly changes the paradigm.”