...'cause this smells like racketeering at it's finest! I hope Apple doesn't play into this farce!

this is intended to create pressure on Apple - M$ can afford to lose money on the Zune - Apple can't - so this move is intended for labels to go to Apple and say, 'so, are you going to give us a cut of iPod sales? Microsoft is.'

And Apple's response of course will be, 'call us when Microsoft is selling 30 million Zune's a year'

This is the most ridiculous thing I have read in ages. Absolutely incredible.

Could this deal allow MS to avoid paying music royalties for each piece of music sold? If so, music companies would no longer care if people paid for their music or stole it. If MS is paying on both sides of the deal, that's stupid, but it could position record labels to start caring less about legal music sales and more about media platform sales which are harder to steal. Think about it this way, if 10% of a hardware sales goes to the music company and the device is 400 bucks, that 40 dollars profit if a song is sold or not. How many songs would a recording label need to sell to each person to make 40 dollars in profit in royalties? I don't know, but at least 40 songs. Then, assume that the average person will buy a new player every 2 or 3 years. From a business perspective, this could make good sense. The real question is, how bad does the artist get screwed? My guess is pretty bad. From MS's perspective, they have a new ally in selling zune's to replace all the third party vendors the upset since producing this product.

Correct me if I'm wrong, but isn't illegal to sell a product under what it costs to manufacture it while using the resource from another product to maintain it simply to undercut the competition? aka Windows

the terms of this agreement are coming to a better light today. Its actually a licensing deal. From BetaNews:

"

UPDATED November 9, 2006 2:00 pm ET In a formal statement issued this morning, Microsoft and Universal Music Group –- one of the "Big Four" music publishers worldwide -– announced they have reached a licensing deal, which would allow for royalty payments to be attributed to the new Zune MP3 player, to be launched next week.

A UMG spokesperson, in a discussion this afternoon with BetaNews, flatly denied elements of a story published this morning by The New York Times, which sought to clarify elements of this deal. While UMG is not willing at this time to discuss the royalty schedule itself in detail, what it did provide to BetaNews does contradict most of what has been published since a Microsoft spokesperson first confirmed the existence of the deal during a Merrill Lynch investment analysts’ conference call yesterday.

Here are the facts as we now understand them: Microsoft has agreed not only to share revenue from songs downloaded from its Zune music service, which is a common deal in the industry, but to also share a portion of proceeds from the device itself. The formula for these proceeds will be calculated based on the number of Zune units that eventually sell through to consumers. This fact is critically important, especially since it distinguishes the type of royalty payments Microsoft will be making, and how they may be regulated under current US law.

The royalty payments, UMG told BetaNews, will not be a percentage of the revenue from retail sales, but instead a flat fee based on the number of Zunes that end up in consumers’ hands. This is also critically important for several reasons. Typically, royalties collected on sales of units –- especially of books –- are calculated based on how much resellers and retailers paid for them, as opposed to 1) the number of units sold, and 2) their sale to consumers at the end of the chain. This means that resellers will not, in effect, be responsible for royalty payments, or that UMG would be responsible for units left unsold by retailers."

me of the ugly guy who couldn't get laid in a w**** house with a fist full of $20's sometimes. Talk about desperate!

that MS gives the record companies a fee per zune irrespective of album/track sales. Why actually bother with artists, songs, at all? Open lots of record labels and hoover money from MS as it tries to break the iPod. This..is ..unbelievable.