Microsoft seems to have made a very strange arrangement indeed to pay royalties on the Zune music player.
Microsoft's private deal with Universal Music to pay the record label a voluntary royalty of $1 for every Zune player it sells has raised eyebrows across both the technology and music industries. But it might not be the last payment Redmond owes from Zune, we've discovered.
Recently, Steve Gordon, entertainment attorney and Reg music columnist, took a skeptical look at where Universal's Zune dollar might end up. He reminded us of a little known US tax, which harks back to the "Home Taping Is Killing Music" era. Under the Audio Home Recording Act of 1982, recording devices carry a small royalty which is then divvied up between the performing artists involved. The royalty is administered by the Alliance of Artists and Recording Companies, AARC.
(Steve explained the details here.)
You don't hear too much about AHRA or AARC, because as a consequence of a 1999 court settlement over the Diamond Rio player, it's generally assumed that all MP3 players are exempt.
But not so fast, AARC's executive director Linda Bocchi reminded us.
"People tend to throw that Rio decision around a little haphazardly," she told us. "Rio didn't say that all MP3 players are exempt. The decision was based on the fact the Rio could not record unless via the hard drive of your computer."
"But Zune is going in another direction. People can record off of FM radio, and share from one Zune player to another. It's moving away from the direction set by the iPod, and it's a grey area."
This could actually be really a rather large problem for them. How amusing if they do get into trouble with the law?