"Microsoft Corp. (MSFT.O: Quote, Profile, Research) has agreed to pay Universal Music Group a fee for each new Zune digital music player it sells when the iPod rival launches next week, the companies said on Thursday. The groundbreaking deal could redefine the digital music business pioneered by Apple Computer Inc. (AAPL.O: Quote, Profile, Research). Rivals including cell phone makers eventually could pay for hardware sales as well as for the music itself, Universal said. Microsoft is trying to break into an industry closely aligned with archival Apple, which is credited with nearly single-handedly building the legal Web music world with its iPod players and iTunes music store. But Apple does not give a cut of sales of iPods to music companies. It only pays labels for songs sold on its iTunes music store."
At this stage, we're not quite sure how this adds up. None of the pre-loaded content
appears to belong to Universal or its sub-groups, and they still get a cut even if the user doesn't load a single Universal track on to the device. So what's going on? Perhaps Microsoft and Universal are getting ready to ink a deal that will put the Zune in a favourable light, and this is just a woo tactic to keep Universal from getting too cozy with Apple. We'll be keeping our eye on this one.