Much was made of the deal Microsoft did with Universal Music in which they agreed to pay UMG a portion of the proceeds of each Zune.   Given the timing of the announcement, clearly there was a lot of brinksmanship going on.  In fact the lack of UMG content in the store was noted in some other reviews.  And so MSFT blinked.  Good deal for UMG, less because it will move the needle for them financially -- as Paul Resnikoff noted, it will probably amount to a few million dollars for them quarterly -- but it allows UMG to set precedent and then go after other hardware manufacturers and others that want to license UMG's catalogue.  This category could include mobile devices, game consoles and, of course, ipods.

And if you think that's unlikely, don't forget that it was Universal that did the first music video licensing deal with a portal that established the precedent of paying a fee for music videos.  They then used this to get license fees from the rest of the industry.  The portal they did the first deal with?  MSN.   

Besides UMG, the other labels stand to benefit from the precedent, either when their deals come up for renewal, or if they have MFN clauses in their contracts with Microsoft.

Sean Ryan writes why it is deals like these that make him glad that he's no longer working in digital music!

[Cross-posted from www.ragsgupta.com]