UMG and Microsoft’s Unholy Alliance

Microsoft is in the news today for making a deal with Universal Music Group to provide a slice on the sales of their forthcoming digital media player, the Zune. According to the NY Times, UMG will get more than a dollar per unit sold. UMG head, Doug Morris, comes off sounding like the CEO of AT&T, Ed Whitacre, who made lots of waves last year for disingenuously claiming that Internet companies get a free ride and owed monies to cable/phone companies for sending data through their networks.

This is just a ridiculous scheme on the face of industry claims of massive losses due to piracy. What’s a buck per Zune sold going to do to offset that? How does a consumer benefit whatsoever by this arrangement? This is a clear play against Apple, so that Doug Morris can use this deal to try pushing Steve Jobs around for more favorable pricing on iTunes when their deal comes up for review next year.

But here’s the problem: there’s a tonnage of music being traded illicitly each and every day. The size of this black market is larger than anything the iTunes store has thus far generated. Portable music players should have been seen as a cash cow instead of branded as pirates’ tools. Embracing the new dynamic of music acquisition would result in far greater penetration of music. If every usage of music was licensed reasonably, from YouTube lip sync videos to eMule downloads, we could herald a whole new age of music and revenue.

But the industry has a ways to go before protectionist stupidity is at an end (like DRM insistence, customer lawsuits, or deals like this Zune one). I know there’s a lot of naysayers out there, but I’d suggest a brief refresher in the econ 101 concepts on elasticity.


~ by Som on November 9, 2006.

2 Responses to “UMG and Microsoft’s Unholy Alliance”

  1. Most music I buy is from independent artists or labels.

    Why should Universal get money for that?

  2. Darkbhudda, I agree with your sentiment. The big problem is that Universal doesn’t believe people like you really exist.

    Therefore they take an adversarial approach which has succeeded in doing little more than alienate their customer base….

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