Microsoft, Zune & The Music Mafia

The New York Times reports that Microsoft has cut a deal with Universal Music Group which will allow the music giant to get a percentage of the sale of its upcoming digital music player, Zune. The report says that the amount being paid to UMG is going to be at least $1 per $250 device. Microsoft is going to extend the same deal to others in the music business.

UMG had been holding off on licensing music to Microsoft, which would have threatened Zune plans to take down iPod and Apple. Classic Mafia shakedown: pay us or else. The argument being made is that people are not buying enough via digital downloads, so the music industry should get a piece of the hardware action.

The New York Times brings up the tired old study that shows 20-songs per iPod to support the music industry argument. Music industry argues that people are ripping their CDs and putting music on their iPods. Or they are stealing their music from P2P networks!

“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.”

Copied music? What a bunch of crap? Any business that perceives its end customers as crooks and thieves should go the way of the a broken ice cream cone on a hot summer afternoon. The CDs I buy, I pay for, and I can do whatever with them. Play them on my CD player, rip and transfer to my MP3 player, or simply put them in the microwave and nuke the damn thing.

In this battle of the monopolists, Microsoft blinked and decided to pay up. (Would this have happened a few years ago, when Microsoft ruled the technology planet?) Remember how Jobs stood up to these music industry bullies. Today they are asking $1 a device; what is to stop them from asking for say $10 or $20 per device down the road. This shakedown should result in a serious investigation into the music industry cartel.

If Apple had to pay at least $1 per device for every iPod sold over past two fiscal years, its cost would be $62 million at minimum: or about one more song per device. If music industry cannot sell one additional song to consumers (and has to blackmail for more money) then, you as a business, have lost grip over your core competency.