The New York Times' Andrew Sorkin demonstrated Microsoft's new Zune on CNN today. In what appeared to be an unrehearsed discussion of the Zune (the "heavier" "wannabe iPod killer"), they had some not-so-nice things to say. (Click here for video.)

When Sorkin described the limits of the social networking feature of the Zune (two users must agree to share music between their Zunes, and then the recipient of a song can play it only three times without buying their own copy), CNN said "Oh, wow--lot of fine print there."

CNN: "You can e-mail with this, right?"

SORKIN: "No."

CNN: "Can you pull songs off a network?"

SORKIN: "No."

CNN: "Who do they think is going to buy this?"

When the CNN anchor brought out her shuffle (which she was obviously excited about), Sorkin admitted "That's the thing--that's a lot sexier than this" and her co-anchor remarked "Isn't that neat? Oh my G_d."

After the CNN anchor described the Zune as "clunky", he asked "Why don't they get some decent design people?"

SORKIN: "No comment."

This is delightfully ironic. The only reason Microsoft put the unit into Sorkin's hands was to sell the freaking thing, and the whole episode spontaneously turned into an iPod ad.  

Reuters reported this weekend that Microsoft Corp. has agreed to pay Universal Music Group a fee for each new Zune digital music player it sells.

Neither Universal nor any other record company has such a deal with Apple, though record companies have asserted in the past that they are entitled to a share of Apple's iPod profits on the assumption that every iPod user will use the iPod to store and listen to stolen music. (Apple didn't buy it, and neither should any of Apple's law-abiding customers.)

So, why did Microsoft agree to this? Is Microsoft paying off the music industry to ensure they aren't the target of future litigation? Or did Microsoft have trouble negotiating with Universal to get their songs in Microsoft's store? Probably the latter; as of just a few days ago, songs on Universal labels still weren't in the beta Zune Marketplace store, though Microsoft asserted they would be before the Zune's launch on Tuesday. (Either way, you can bet all the other major labels will hold out for their cut of Zune profits as well when it comes time for contract renegotiations.)

Based on early reviews of the Zune, such as one by the Wall Street Journal's Walter Mossberg, which indicate that the Zune falls far short of the standards set by the iPod, perhaps Microsoft is willing to risk the Zune's short-term profitability in order to secure its position as a long term player.