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In an attempt to gain advantages for its Zune music player over the almighty iPod, Microsoft has agreed a new deal with Universal Music.

This deal with give Universal a cut of the profits from sales of Microsoft’s iPod rival, the Zune. In return, Microsoft will receive rights to distribute content to Zune’s users for limited wireless sharing.

This could be a gamechanger for Apple, which has so far avoided cutting this sort of deal with content owners.

The Zune proposition is that users of the player will be able to send tracks to others who can play them up to three times before being prompted to buy them. Microsoft is also said to be chasing similar deals with other labels.

Last year, labels tried to get a cut of iPod sales as they argued the iTunes was a loss-leader to sell hardware and they, as content providers, should get a share of the market.

Apple’s dominance of the music download market has so far enabled them to resist record company pressure, but Microsoft’s deal now sets a precedent which goes some way to undermining Apple’s stance.

This move also indicates the importance Microsoft is placing on the ability of Zune users to share tracks, one advantage it has over the iPod.

In Microsoft’s favour in its battle with the iPod is the fact that record companies would love to see a competitor weaken Apple’s stranglehold on the music downloads market.

Also, the sharing of hardware sales represents an attractive revenue model for the record companies.

As Engadget mentions, Universal will get a cut from the Zune even if the device never plays a song recorded by one of its artists.

Graham Charlton

Published 9 November, 2006 by Graham Charlton

Graham Charlton is the former Editor-in-Chief at Econsultancy. Follow him on Twitter or connect via Linkedin or Google+

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