Count on Microsoft Corp. (NASDAQ:MSFT) to be as clever as the devil. The new Zune business model will turn Apple Computer, Inc. (NASDAQ:AAPL) on its ear. Microsoft will give Universal Music a cut of the sales price of each Zune sold. Apple only gives content providers a piece of the downloaded music or video.
One of the reasons this model is attractive to music companies is that much of the content on most iPods comes from ripped CDs, which means that the music publisher gets nothing. Now comes Microsoft with a way to that assures the music firm revenue from the Zune.
The ball now goes to Apple's court. The iPod maker does have over 70% of the share in portable multimedia devices, but music companies are somewhat ambivalent about the device. While iPod gives them huge distribution, Apple keeps most of the revenue pie.
Apple will probably see no need to counter Microsoft's move immediately, but if the music industry warms to it, MSFT may find itself in the role of preferred provider to entertainment companies that think its revenue model is more attractive.
And that could be tough for Apple.
Douglas McIntyre is a partner at 24/7 Wall St.