Microsoft has agreed to pay Universal Music Group (UMG) a per-device royalty for each of the Redmond company's Zune digital music players the music company sells.
Microsoft will pay UMG around $1 for every $250 Zune sold plus a percentage of download revenue, according to reports.
A Microsoft spokesman said the company is hoping to support artists and ensure they continue to prosper with the emergence of digital music - and to help the music industry through this transitional period.
Universal is reported to have said it was only fair to receive payment on devices that may become repositories for stolen music.
More than 80 per cent of content providers believe piracy to be a threat to their business, research from security firm SafeNet reveals.
Despite this figure 60 per cent of content providers are yet to invest in digital rights Management (DRM), which could alleviate the problem.
SafeNet managing director Simon Blake-Wilson said the demand for online music and television is continuing to grow rapidly and DRM technology is essential to guard all digital content from illegal downloads.