Microsoft rolls over for Universal
Mega music oligopoly Universal Records pushed Microsoft into a corner today after they inked a download deal for the Zune Marketplace one week before it was due to go live.
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.
Microsoft Strikes Deal for Music – NY Times
It is obvious that Universal held out as long as Microsoft could to get the concession that they had always wanted.
In 1999, a federal appeals court ruled that one of the earliest digital music players, the Diamond Rio, was not covered by a federal law that required makers of certain audio recording devices to use anti-copying technology and pay a royalty to the record labels.
The operative word is recording devices. Because recording is not on the Rio, or the iPod, they are not recording devices under the Act and hence no royalties are payable. However this agreement creates a precedent they are looking for.
What remains to be seen is whether they can bring Apple in line with this and this largely depends on the success of the Zune and if they can make a dent in the iPod Market Share.
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