Microsoft has signed an agreement with Universal Music to contribute a portion of the profits from its Zune media players to the record label.
The payment is intended to compensate Universal for pirated music that consumers are expected to play on the devices.
"This move demonstrates that there can be a win-win situation where consumers have a great experience while labels and artists are also fairly compensated," said Universal chief executive Doug Morris.
Peter Moore, a vice president for Entertainment and Devices at Microsoft, added: "Zune aims to be a leader in supporting artists and enabling the creative possibilities associated with connected entertainment."
Microsoft said that it intends to offer similar arrangements to other record labels.
Derek Slater, an activist with the Electronic Frontier Foundation, stressed that it is important to ensure that consumers have a choice.
He pointed out that digital media players are not just used to violate copyright. They also expand the market for digital media because consumers will access content in new places.
Slater likened the phenomenon to the rise of the VCR, which created a market for home movies and movie rentals.
Government-sanctioned levies on recording media such as recordable DVD disks and MP3 players are commonplace in Canada and several nations in the EU.
Consumers in Germany, for instance, pay a €9.21 levy for a new video recording appliance and between €10 and €150 for a printer. France proposes to instate a €20 levy for digital media players with 20Gb to 40Gb of storage.
Electronics manufacturers in Europe, meanwhile, are battling mandatory levies because they allegedly hurt sales. Computer and printer makers in Germany are fighting a decision to impose a levy on their devices.
Nokia, Philips and other consumer electronics manufacturers sent a joint open letter to the government of The Netherlands last October, asking it to abandon plans to expand levies to portable digital media players including MP3 players and mobile phones.
Microsoft's Zune media player is scheduled to go on sale on 15 November.
1 euro = $1.67
Microsoft to share Zune profits with record labels
By Tom Sanders on Nov 13, 2006 10:02AM