Online Music: Hold On To Your WalletsOnline Music: Hold On To Your Wallets

Microsoft's agreement to pay Universal Music Group for every Zune music player sold will likely have some interesting ramifications. Most likely it will mean more money coming out of consumers' wallets.The money grab won't happen right away--after all, as the new kid trying to grab market share from Apple, Microsoft can't very well come out of the gate with something that's vastly more expensive. A 30 Gbyte Zune player will sell for $249.99, with songs available for download at 99 cents each, exactly the same as for the iPod and in the iTunes world. (Other prerelease details about Zune are available here.)

Also, Microsoft has already put Wall Street on notice that it will take a very long time to recoup its investment in Zune. All this says the company is probably quite happy to take a loss for a while in the interests of building a following, and, of course, being Microsoft it has the deep pockets to do so.

Instead, rising prices will take a while to come to fruition. As Microsoft has negotiated with Universal, it will likely follow suit with Sony BMG and other major labels. At some point, this revenue-sharing arrangement will begin to eat into Redmond's bottom line and shareholders will begin to scream.

Meanwhile, the music labels' existing deals with Apple will come up for renewal. And instead of them agreeing to the current Apple policy of paying Universal and the gang only for songs that are actually purchased by customers, the music giants will likely push for the same deal they got from Microsoft. Despite its market-leading 80% share of all music players sold, Apple will be able to hold out for only so long, given the squeeze from Microsoft and from others, like Creative and SanDisk/RealNetworks, that are targeting this space.

Eventually, Apple and Microsoft will be forced to raise their fees to help cover the costs of these deals, and I'm guessing this will likely mean higher prices for the songs themselves or for the monthly subscription services. Hardware price/performance being what it is, I think the vendors will have a harder time justifying that.

Ah, competition. And speaking of, seems Apple won't necessarily have an easy time holding on to its market share. A new survey suggests iPod customers aren't as loyal as the Mac base has long been.

That's the way I see it playing out. What do you think? We'll get more details on Tuesday, when Zune starts to ship. Stay tuned, and in the meantime please feel free to comment below.Eventually, Apple and Microsoft will be forced to raise their fees to help cover the costs of the deals with the music labels, and I'm guessing this will likely mean higher prices for the songs themselves or for the monthly subscription services.