On Universal Music Group's Zune Tax

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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.

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