Nov. 9 (Bloomberg) -- Microsoft Corp. agreed to give Vivendi SA's Universal Music Group a cut of sales from the Zune music player to gain the music company's backing for its bid to take market share from Apple Computer Inc.'s iPod.

Without the deal signed yesterday, Microsoft would have been forced to begin selling Zune on Nov. 14 without songs from the world's largest music company. Similar offers have been made to other major and independent labels that are providing music, Marketing General Manager Chris Stephenson said in an interview.

Microsoft, the world's largest software maker, described the accord as a move to gain an edge over iPod, which has 75 percent of the U.S. market for digital music players, by showing Zune's commitment to the industry. Universal Music Chairman Doug Morris had a different take, saying Redmond, Washington-based Microsoft only agreed because Universal insisted.

``We told them we wanted a royalty, a piece of the action,'' said Morris, who is also Universal Music's chief executive officer, an interview. ``They weren't going to give it of their own volition.''

Universal will be paid more than $1 for each Zune sold.

The agreement ends three months of negotiations in which Microsoft sought to license Universal's catalog for sale in its Zune music store. Universal, whose artists include Kanye West and U2, isn't committing to give Microsoft any exclusive content or consideration as part of the agreement, Stephenson said. He said he's hoping that will happen in the future.

Future Benefits

``This is another way for Microsoft to try to drive a wedge between Apple and the record labels,'' said Michael Gartenberg, an analyst at JupiterResearch in New York. ``Where it will pay dividends: it could gain Microsoft exclusive content or content before Apple and all it costs Microsoft is money.''

While Morris said today that Microsoft's first response to the royalty request was ``a polite no,'' Stephenson said yesterday that Microsoft wants financial deals with the record labels to make it easier to get their support for distributing music in new ways such as sharing between consumers.

``There are many different models that we are saying to the labels `Hey guys support us,''' Stephenson said. ``Rather than going back to them time and time again, we are saying just be partners with us on this device.''

Stephenson said he expects to announce more accords in coming weeks. A portion of the proceeds will go to the artists under a new model designed to let them benefit from the popularity of digital music devices.

Shares of Microsoft rose 28 cents to $29.26 as of 4 p.m. New York time in Nasdaq Stock Market composite trading.

Tough Competitor

Microsoft faces a tough competitor in Apple, which has sold more than 67.6 million iPods since their introduction in October 2001. JupiterResearch predicts iPod will retain its dominance for at least the next 12 months to 18 months.

Record labels get a cut when their songs are sold in Apple's iTunes store. They don't benefit from sales of the device. Morris now says he will try to negotiate a change to that ``when the time comes.''

``We feel that any business based on the sale of our music we should participate in,'' Morris said. ``We have to protect our artists and the safety and financial security of the record business.''

Declining Sales

The agreement comes as recorded music sales in the U.S. fell 6.1 percent in the first half of the year. Gains in sales of digital music and mobile-phone revenue failed to offset a drop in CD sales.

The digital proportion of total music sales doubled to 18 percent, leaving the record labels looking for additional ways to tap into growing interest in digital music devices.

Universal, EMI Group Plc, Sony Corp. and Bertelsmann AG's Sony BMG Music Entertainment, and Warner Music Group are also looking for ways to get a cut from digital music players that sometimes house illegal copies of songs.

``They have told us they'll be offering us a fee for each Zune device they sell,'' said Jeanne Meyer, a spokeswoman in New York for London-based EMI. She said the companies ``are in negotiations.''

This is the first such agreement in the music business, Stephenson said.

``A gesture of this type shows our commitment to the industry,'' he said.

To contact the reporters on this story: Dina Bass in Seattle at dbass2@bloomberg.net; Don Jeffrey in New York at djeffrey1@bloomberg.net.

Last Updated: November 9, 2006 16:02 EST