Reuters is reporting that Microsoft has agreed to pay Universal Music Group a fee for each Zune sold.  This is a groundbreaking new deal that lets Universal participate in the device profits in addition to the content profits.

This seems to me to be a fantastic development that aligns the interests of MS and Universal to sell more of everything and it makes it easier to offer content at different prices depending on how many extra devices can be sold if the content is more affordable.

It will be interesting to see what this does to Apple’s relationship with the content providers and how other labels will respond to Univerisal getting a cut of the hardware profits.

UPDATE- This is from a NY Times article

Universal, which releases recordings from acts like U2 and Jay-Z, said it would pay half of what it receives on the device to its artists. The company is expected to receive more than $1 for each $250 device, according to executives who were briefed on the pact.