Microsoft agrees to give a piece of Zune sales to Universal

Microsoft Corp. on Thursday conformed to give Vivendi SA's Universal Music Group a fee for each new Zune digital music player it sells when the iPod rival debuts next week, in a deal that could give a new meaning to the digital music business pioneered by its chief rival, Apple Computer Inc.

Under the deal, the software giant Microsoft will give a fee to Universal for every Zune player sold, and in return Universal will provide Zune users more access to artists and rights to music. However, the amount of the fee for the unreleased Zune is not disclosed yet.

According to Zune Marketing General Manager, Chris Stephenson, similar offers have been made to other major labels and some independent record companies. Stephenson, who declined to comment on financial terms, in a statement said he expects to announce more such deals in coming weeks.

Microsoft's 30-gigabyte Zune, which is scheduled to be released on Nov. 14, will be available at a retail price of $249.99 with songs available for download at the Zune Marketplace service at 99 cents each.

The launch of music player and the music service is Microsoft's attempt to compete with Apple Computer Inc.'s extremely popular iPod player and iTunes music service. Apple’s iPod has 75 percent of the U.S. market for digital music players.

By including a wireless technology to its Zune, the Redmond, Washington-based Microsoft is hoping to distinguish itself from iPod. The added technology allows people share some of their favorite songs, playlists or pictures with other Zune users who are nearby by.

Stephenson said that Microsoft intends to make financial deals with the record labels to easily get their support for distributing music in new ways such as sharing between users. The Universal deal could provide the company with more liberty to permit song-sharing or other promotions, Stephenson added.

However, Universal is not committing to give Microsoft any specific content or consideration as part of the agreement, he added.

Apple does not give a piece of sales of iPods to music companies, however, only pays labels for songs sold on its iTunes music store. Like other record companies, Universal has a revenue-share accord with iTunes but no share of iPod sales.

Universal, Sony Corp. and Bertelsmann AG's Sony BMG Music Entertainment, EMI Group Plc and Warner Music Group are also looking for ways to get a cut from digital music players that sometimes house illegal copies of songs.

Besides selling songs, Microsoft will also offer a Zune Pass subscription service, which will allow users listen to any of about two million songs for $14.99 per month.

Microsoft has said it will invest hundreds of millions of dollars to develop and market the Zune.