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Microsoft Zune and Radio Broadcasters Team Up

Microsoft is trying to make gains against Apple's iPod, and the radio industry is trying to find new ways to boost listeners to help their bottom line. Voila: Microsoft and major radio broadcasters, including Clear Channel and CBS Radio (still a CBS unit) , are working together to bring listening to the radio into the digital age.

Right now, Microsoft's Zune MP3 player is the only major one in the market which has an FM radio, and now it's giving that radio a whole new capability. Now Zune owners listening to any one of 450 radio stations can tag a song they hear on the radio, then instantly, wirelessly buy the song from Microsoft's music store. (This thanks to a number of major radio broadcasters tagging all the songs their stations play.)

Chris Stephenson, the general manager of global marketing for Zune, tells me that Microsoft sees Zune's radio as a differentiator, and this should add even greater appeal to its gadget. And no surprise, Microsoft expects this to boost sales of songs at its music store.

The radio broadcasters, struggling with declining radio ad revenues, are looking to make the radio-listening experience better. The investment in tagging their songs isn't particularly large, and it'll yield a particularly good return on invesment if other MP3 players -- like the iPod -- start incorporating an FM radio.

Do the radio stations get a cut of the music sales? NO. But the radio broadcasters expect this new capability to keep people listening to the radio longer, and the longer they listen to the radio, the higher their ratings, and the more they can charge for ads.

The bottom line is that this ability to buy something you hear (without waiting to see if the DJ remembers to tell you what it is and then clicking to the iTunes store) helps radio become interactive, which is what it needs to compete now.

Questions? Comments? MediaMoney@cnbc.com

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.