The New York Times reported late last night and the press release has just gone out about a deal between Universal Music Group and Microsoft concerning the Zune. Microsoft will pay Universal more than $1 for every $250 Zune that is sold. (Or is that $251?) Universal says half of the money will go to Universal artists.
I don’t think it’s a big deal. Not at all. Some people are concerned that it’s a slippery slope and that every big music publisher could demand $20 per device soon. I think the market will prevent that – a “Zune tax” will either stay within an acceptable range for consumers or it won’t.
A number of countries around the world have tried levying an “iPod tax” to compensate the music business for all the unpaid for music on iPods. In Canada “anti-piracy” taxes have raised the price of some iPods by $25 – Canadian courts ruled that such a tax was invalid, the music companies were ordered to return the proceeds to Apple and Apple offered to compensate consumers for the taxes they had paid. In this case it’s probably fairly voluntary between Microsoft and Universal and that’s good. Universal is rumored to have demanded some sort of compensation in order to license their music for the Zune, but they aren’t obligated to license their music to anyone. Asking for a chunk of the hardware sales revenue seems like a fair request to me. Maybe there’s something I’m not seeing here, but I don’t think this is something to get up in arms about.
Other writers highlight the possibility that Apple could lose favor with the music publishers if it doesn’t offer a similar kind of deal. Isn’t that a logical function of the market as well? If you believe studies that find that only a small percentage of music on iPods has been purchased at iTunes (and how could you not believe that?) then the impact of this on the iTunes music store is not of much importance either.
Someone has to come up with some sort of new business model for music. We’ve written about Universal’s partnership with startup SpiralFrog, a Napster-esque subscription service that will let users download music for free as long as they regularly check in with the company’s website and watch ads. That’s awful. We’ve written about Amie Street, a very cool model that prices music based on demand. Someone needs to come up with some way to compensate the artists and the industry for their work. I like the idea that music should be free and I’ll pay for added value goods and services. I am also happy to pay more when I purchase hardware if a significant portion is going to artists or will shut up all the claptrap about piracy.
Some people say this is a case of customers being presumed guilty, but I say take money from me at the point of hardware purchase or don’t take it at all.
Unfortunately, it’s hard to believe that any new model is being offered in good faith by the music industry. Big music corporations rank right down there with telcos and companies that dump toxic waste next to childrens’ playgrounds as far as many people are concerned. So much of the discussion around so called piracy has been disingenuous that it’s hard to believe that any proposed remedy will be sufficient for the big players in the music industry. (See Weird Al for more on this.) I don’t think anyone is of the belief that $1 per device is going to end the battles over file sharing. I would gladly pay a healthy chunk of money per device if I could access any high quality MP3 I want, for free and without DRM, without getting hassled about it.
Wouldn’t it be weird to pay extra for a machine to make up for the music you might not ever play on it? I might really ONLY use it for the music I bought (I do) or only for Podcasts or only as a nice looking portable drive. I think it is very strange to give the music industry money for each player sold. The iTunes model seems much more logical to me.
Would it be strange if Apple started donating 10 dollar of every sold Mac to Adobe to make up for all the illegal copies of Photoshop on all those Macs?
Atleast microsoft thought of giving back something to the community ( musicians group) which is going to make the device popular
Everyone keeps overlooking emusic.com. Subscription based service focused on the independent labels with no DRM. Tracks end up costing around 30 cents each. 1.5 million tracks in their catalog.
not a bad alternative.
Hahaha. I cannot believe that Universal allows you to download songs on SpiralFrog for free as long as you come in to the Universal website regularly to watch ads. “That’s awful” is definetely a great way to describe it.
Definetely agree with the MS/TC viewpoint of the MS model to take $1 from the $250 retail to pay off Universal and not being obligated to anything after, such as having to add watching an advertisement on Universal’s website to your schedule. Sounds as obligatory as a dentist check-up.
Unless of course, these ads are of Super Bowl quality
Mike, thanks for the comment. You’re right, emusic doesn’t get the love it deserves. It sure does have a loyal user base, though. Every time it doesn’t get mentioned someone pops up and says don’t forget emusic!
Why do media companies continually attack their own consumers instead of embracing the kinds of formats they want?
Rajan Tawate, you have it all wrong. This wasn’t some brilliant idea by M$ to pay back the musicians, but was a licensing fee imposed by Universal as part of selling their music to put on Zunes. M$ pays or they don’t sell Universal music. Every musician I know, and all those you see on TV and elsewhere walk around with an iPod, not one of them will dare, unless paid huge sums, show up in their new video sporting one of those brown Zunes.
Right now, M$ is losing an arm load on each Zune they sell, plus they are paying Universal and every other smart publisher that comes along money for each one they sell, plus a cut of the money from downloads. Go do a Google News search, there are plenty of articles out there today about this.
What next NBC demanding money from Tivo, or Apple, just because you could use it to view their content
Considering how Universal Music Group’s earnings from operations for 2005 was well over half a billion dollars, I don’t think the five hundred bucks or so the Zune tax brings in is going to make much of a difference one way or the other.
This deal just shows how clever Universal is in their quest for new streams of revenue. Universal doesn’t need to license their music to anyone — especially Microsoft. If Microsoft wants to support their users and sell a ton of supposedly mediocre Zune devices then they’ll need to have the catalogs of all the major labels, not just Universal.
eMusic and Amie Street might be great sites offering terrific indie music, but 95% of the world wants pop hits by No Doubt, Kanye West, U2 et al. that aren’t available (and probably never will be) through those services.
The SpiralFrog model is especially interesting since the music will be essentially fully subsidized (read: free) by major advertisers. Isn’t this the same model as TV? Next time you watch free television shows like Gray’s Anatomy or SNL or Letterman you’ll notice these :30 bits of content. These things, affectionately known as commercials, may be watched less and less, but some of them have proven to be quite effective. If I have to watch a few commercials because I don’t have a credit card or don’t have the financial resources to buy the new Mariah Carey record that seems like a good deal to me. Coming back to the website to update my license every month is hardly a big deal. I come to TechCrunch several times a week. Why is checking in at the website to update the license so awful? Surely it’s a compromise, but it’s free. If the money gets paid back to the label through advertising revenue, well, then surely the artist gets paid, right?
The best thing the major labels could do is offer MP3’s through the paid services and not continue to support new restrictive DRM technologies like Zune’s.
doesn’t “Zune” mean “fuck!” in hebrew?
Take the other approach. Let’s assume that this is less about a tax and more about helping artists (which is how the press release positions it). At approximately 50 cents per unit (that apparently goes to the artist), how many units must be sold to really make a material difference to the artists. Bear in mind we know nothing about how UMG or the other record labels (that Microsoft plans to do the same deal with) will decide how to divvy up the proceeds. To all of their artists? Some? On a pro-rated basis connected to revenue production? I did some back of the envelope calculations on my blog (http://blogs.zd...com/BTL/?p=3919) along with a look at some other execution variables. I agree with Marshall. This tastes great at first look, but in the end, for artists, it’s less filling.
I think this is a precendent and it is ridiculous.
More than that, it’s dangerous. It’s saying that people who own an MP3 player are theives and must pay in advance for sins they may or may not commit.
Check the language in the NY Times article: Geffen is very sure that people who own iPods are stealing from him. He’s wrong in my case, and I don’t plan to pay more for suspicion of misconduct.
Anyone else feel that is the most half-assed logo , for a corporation this big.
So you buy a Zune today and Universal kindly gives some money to their artists based on said purchase. In a year you put music on your Zune from a new artist who wasn’t around when you got your Zune. They get nothing. Is this fair? Can you only play music from artists around before you got your Zune? What if I never use my Zune for recording artists, only for myself. Why should I give Universal anything? How can I boycott Universal if they already have my mp3 player tax money?
What if they stop signing artists tomorrow and everyone they have leaves at the end of their contract? Universal will still be getting money. Universal gets money without doing anything for it.
This is ghastly.
How is this a new “business model.” The money I pay to Universal (via Microsoft) gets me nothing. I get no access to their music, no credit for a song. Nothing. If I buy a Zune, Universal gets money and I get *NOTHING* Last time that happened to me, the kid who stole my lunch money got sent to the principal’s office.
I think this deal is a clever piece of judo by Microsoft. They become more friendly to the record companies than Apple currently is, and they cause the record companies to seek the same deal from Apple. Which hurts Apple much more than it hurts Microsoft, because it aims more directly at Apple’s business model and business situation.
Ranjit
See my post on the subject here: http://www.math...com/archives/86
An interesting thought that I don’t think I’ve heard anyone else mention:
Say a person does buy a zune and pay the extra dollar or whatever to the universal. This dollar is paid based on the assumption that the user will be obtaining universal’s music; so does the user therefore have a right to obtain some universal music without paying for it (again)?
Along these kines, accusing anyone who has bought a zune of stealing universal’s music would be akin to double jeopardy, wouldn’t it?
Just my $0.02 ..or perhaps my $1.00
The idea of an ipod tax always struck me as lunacy as it would legitimise the behaviour it was supposed to supress – piracy. Dumbly perhaps I have not a single stolen note on my ipod but I might have thought again had some over-zealous legislator have hit me up for a few pounds on purchase . . “I paid my money now i want my stolen tunes”. As a European, why do I suspect that the countries looking at such a thing were pretty close to me?
Someone has to pay for artists to make music. Every since MP3’s hit the world, look at the crap that is pushed out by the labels–Think its a coincidence? Scratch your chin for a while and think about it. Watching ads for free music is a great idea; (if the artist is directly paid; NOT through their label) and TechCrunch is a 1000 miles off on that one.
The whole music label system needs to updated… Period.
Artists must be paid for great music to be made in the new world economy of free.
It may have never been cheap to be an artist, but try having a thriving life filled with fun, friends, hanging out and doing simple things that don’t cost you a mint–All those great things that make making great art great art.
Right now everyone freeloading has given us a world of empty musical choices.
Andrew, You are right on the money. I am a musician with 10 albums out and three are with major labels. I have never seen a penny in royalties even after selling 50,000 copies of any one. The only income I receive from recordings is from Ascap who manages to track the performance plays around the world. If it wasnt for them, we’d be getting nothing. Oh — and Kufala.com – I have an album out with them and they give 50% off the top of each album sold to the artist- they have a decent model but the majors are still stuck with their heads in the sand (or elsewhere) – we have to remember this is a YOung industry – most of the guys who founded the industry are still around – time for a change!
>I don’t think it’s a big deal.
You think having to pay for something you either don’t use or have already paid for is not a big deal? I think “fuck this.” I’m not going to pay for a music device if that money is going towards the major labels. I don’t want to listen to their music, and I don’t want to give them money to produce more of that music and to sue their consumers.
I only listen to artists who are:
1) on independent labels
2) selling their music on the internet
3) giving their music away
Besides, Microsoft knows that they won’t sell a lot of Zunes in the coming years. This whole thing has one aim, and one aim only: To force worse conditions on Apple. Now the labels can go to Apple and demand similar conditions, and since Apple sells a huge amount of iPods (compared to Microsoft’s non-existent amount of Zunes), this will hurt Apple.
So screw Microsoft and screw the majors. I’ll never buy into something like this, and I hope others won’t, either.
Regarding “some sort of new business model for music,” there’s Weed (http://weedshare.com/), a truly visionary idea that is presently hamstrung by the infeasibility of an iPod-compatible implementation. If Zune played well with Weed (it presently is incompatible with Microsoft’s existing DRM, upon which Weed relies), that could change.
hwe5yeru
…another lovely business model brought on by Universal. The Video sharing site, Grouper.com is now employing Audible Magic — an application that scans every upload’s audio track for a matching waveform from one of the songs in its jurisdiction. Get a match and the upload fails. That means home made video clips of bobby’s track meet with an AC/DC song as its soundtrack from the CD YOU BOUGHT will be considered an intellectual copyright violation and will be removed. These guys just keep thinking of new ways to attack their artists loyal fans. sheesh.
s’true too true … in the same way the car industry has been forced to charge extra for its cars (due to the fact they are often used in the commission of crimes like drunk driving), Apple should be forced to pay up for the possible illegal music installed on its ‘pods.
It TOTALLY makes sense! And it certainly is nothing to get upset about. Bobby’s track meet should not have a sound track anyway. The problem is people are just too saturated with media crap: reject the iLife style and GET A LIFE PEOPLE. Listen to the birds (the one’s with feathers not the band) while you jog and dump those iPods in the trash. Smash your TVs and your iPods.
I’d especially like the arms industry to pre-pay an anti-crime tax: for every gun legally sold the manufacturer should have to pay a 100% tax into a fund to compensate victims of gun crimes. Bush is totally anti-terror so MAYBE he will pass a law like that before he leaves office so as to prevent needless death and destruction BEFORE it happens.
Andrew/Christophe: where do you get the idea that artists must be paid to create? “Empty musical choices”?? Thanks to the internet the number of bands and tunes accessible to the average person has increased a millionfold. Those with artistic talent have always created, relying for their income on *performing*. The relatively recent concept of “intellectual property” has twisted expectations, so that people expect to be able to live forver off the income from a song that took them a day to write and a week to record. Just because we have a perverse system that has actually allowed a few people to do this doesn’t mean it’s the right system.
The Zune tax is short-sighted of both Universal and Microsoft. It entrenches positions in the IP war, and the “rights holders” can only lose. Consumers will always win, because we have the money.
One day not too far from now, when the RIAA’s death-rattle ends, artists will revert to the medaieval model of earning a decent living from performances (be they actual performers or directors/producers/songwriters etc.). Instead of touring to try and persuade people to buy CDs, they will give away MP3s to try and persuade people to see them live.
CC
I, and my supermodel girlfriend, stumbled over this really ugly brown thing called a zune while we were buying the kids that live in the next apartment Christmas presents. The sales person saw us laughing and thought that we were, perhaps, pleased with something we’d found in the dreariest corner of the gadget shop.
We explained that we were laughing at the idea of displaying a donkey turd. We thought it was funny to put a fake scroll wheel on a turd. It was more funny to put the turd in a display cabinet. The sales person apologized and said that he was sorry he couldn’t tell us much about the turd. Apparently his boss had been really embarrassed when the turds had turned up. She’d told all the sales people to forget about the turds and get on with selling the things that kept the store going. Like iPods.
We liked the turd so much that we bought three of them (the total stock of the store) and took them home with us. The store manger was so thankful that we’d taken the smelly turds out of her shop that she shed tears as we held our stinky shopping bag at arms length and left the shop.
The neighbors’ kids really loved the nanos that Sarah and I gave them.
On new year’s eve we partied with good friends and at sometime after midnight we remembered our funny plastic turds and showed them about. Everyone laughed like we’d done when we’d first seen them. Soon everyone realized that these things were trying to look like music players so we stacked the three of them up and (after stoking the iPod fed music system with some Jimmy Hendrix) torched the dirty little cheap plastic turds.
As they burnt on their own little bonfire we all danced around them like Jimmy – knowing that they were not going to the same place … and therefore could not offend him. At daybreak, with the iPod still pumping we looked at the filthy melted pile of cheap plastic and finally realized we’d done something magical… something important. We’d come-up with zune 2.0 way before microsoftcock!