When Zune goes on sale next Tuesday, Universal Music Group stands to gain a royalty for every unit sold by Microsoft, according to the terms of a deal announced by the two companies. In turn.  UMG will pay its artists half of the fee, reported by the NYT to be more than $1 per $250 device. UMG also will receive royalties for music purchased through the Zune Marketplace. 
-- The move, while not a first, marks a variation from the pay-per-download or pay-per-play models. Earlier this year, Sirius agreed to pay the four major labels a fee for every S50 sold after the companies complained that a device allowing users to store music wasn’t covered under the fee they are paid for music played on satellite radio.
Music companies that gave Apple, Sirius, XM and others rigths in exchange for relatively small fees have been increasingly frustrated by the inability to profit from device sales, particularly from the popular iPod. One reason: the low number of iTunes downloads actually sold per iPod and the perceived high amount of music stored without being bought by the device owner.
NYT: UMG Chairman Doug Morris gained some attention recently for calling YouTube and others “copyright infringers” who owe rights holders “tens of millions of dollars”—and then signing a licensing deal with YouTube that actually includes a small equity stake. Morris told the NYT: “I’m hopeful that technology companies and creative companies will understand how each other’s futures are intertwined. It can only work if one doesn’t try and take advantage of the other, and so far we’ve come out on the short end.”
David Geffen, who sold his label to UMG: ”It’s a major change for the industry. Each of these devices is used to store unpaid-for material. This way, on top of the material people do pay for, the record companies are getting paid on the devices storing the copied music. ...  It certainly changes the paradigm.”
Reuters:  Morris: “We felt that any business that’s built on the bedrock of music we should share in.” No (public) criticism for Apple or Steve Jobs though: “We were very early in working with Steve on the launch of the iPod and he’s been a very good partner and done a lot for the industry.” But he doesn’t sound interested in maintaining the status quo for old times’ sake: “We have a current contract with him and at the end of that I’m sure we’ll negotiate.” He’s hoping the Microsoft deal will be a game changer when it comes to device manufacturers.
Chris Stephenson, GM-global marketing, Microsoft Entertainment: “It’s not a new conversation, it’s been out there in the industry for a while. We’ve been careful in thinking about it from an economic point of view from day one.”