Mass Concentration

David Geffen’s Universal just managed to extract a promise from Microsoft to pay a fee for every one of its new media players sold. Why would MS agree to this so readily- apart from using it as an obvious bribe to get Universal music sold on its website? Given MS’s new focus on its own device rather than encouraging an ecosystem of 3rd-party devices, it makes perfect sense.

Should this become a precedent and eventually propel legal manoeuvring to such a degree that *all* mp3 players have to pay a “poll tax” to several content companies in order to be sold, we could expect to see consolidation in the market and a reduction in the number of players sold. Effectively, it creates a high barrier to entry and penalises small manufacturers. MS can afford to pay such a levy, many others can’t or won’t.

Ultimately, it is part of a strategy to create an MS/Apple duopoly in the mp3-only marketplace, instead of the rather fractured situation at present. Finally, it’s an attempt to move the entire market towards a subsidised subscription model, which MS would love to get into with the mobile phone makers. Encouraging a rise in the price of content players increases the relative sales of service-subsidised players (such as phones sold on contract by phone companies) versus non-subsidised players. These huge companies would really prefer to only have to deal with each other around a cartel-shaped table rather than being forced to participate in huge scrummages with hundreds of vendors at trade fairs and such-like.