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Microsoft's Dangerous About-Face


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July 26, 2006

Microsoft's Dangerous About-Face

Peter Burrows

The talk of the day is that Microsoft's upcoming Zune music player and a related music service will be proprietary, just like Apple's iPod-iTunes combo. That's the word from a slew of sources I've spoken with yesterday and today. In other words, DRM-protected songs purchased from Microsoft's new music service won't play on devices other than the Zune, and the Zune won't play songs from other services.

If true, this is huge news that could have huge implications. Just to get started, there's the impact on the obvious losers: all those music player makers (Creative, iRiver, SanDisk, Samsung, etc.) and all those music services (Napster, Real, Wal-Mart and most especially MTV--who in recent months has been Microsoft's latest poster-child for partnering, with its URGE music service.) who have based their digital music lives on Microsoft's PlaysForSure Windows Media standard.

Microsoft's defense will likely be that it will continue to support the PlaysForSure effort, alongside this new set of products and services from the Robby Bach gang. But once the Zune ads start plastering the airwaves later this year (something that will drive Microsoft's dissed partners raging mad, since many felt Microsoft never came through with a big-time marketing blitz to help them take a bite out of Apple), momentum for that hurting ecosystem will go from neutral to hard reverse.

Now, I fully understand Microsoft's reasoning. The partnering strategy hasn't worked, and it's time to try something new. And who knows, Microsoft may well have dreamed up a winning product. After all, it's giving Sony fits with its Xbox. But that's a big if. Apple has a gargantuan lead and isn't sitting still--as the world will likely find out during Steve Jobs' keynote at the Worldwide Developers Conference on Aug. 8. What's more, not all music fans feel comfortable buying into a closed system--and most of those that do have probably already begun building their iTunes collections.

There's potential collateral damage from Microsoft's change in strategy, too. Some think it could impact the development of the overall digital music world. ??his will confuse consumers, and limit their choices," says David Pakman, head of eMusic, which sells music from indie labels in the MP3 format. "The more that happens, the less music gets sold."

The confusion could also slow the pace of music-related innovation. Currently, anyone that wants to create a slick new device or service and have access to the major labels' catalogs has little choice but to partner with Microsoft (since Apple isn't much interested, and no other DRM-protected platform really matters). If entrepreneurs have to worry about competing with Microsoft from the outset, they'll likely opt to find more promising things to do.

Stepping even further back, how will Microsoft's Apple imitation impact its broader Windows Media strategy? Currently, Microsoft represents the "open" option to counter Apple's "closed" approach. A primary plank of Microsoft's pitch to Hollywood, the music labels and other content owners is that using Windows Media enables them to get their bits onto a vast slew of devices. I'm sure Microsoft has thought this through, so it's not such a simple either/or choice. But if Microsoft ends up essentially offering an open and a closed option on its menu, media execs may question its real intentions. Is it more interested in hawking its own devices and services, or in creating that rich ecosystem that results in countless ways for consumers to buy content.

Indeed, I want to hear Microsoft explain what they hope to achieve with Zune. If my hunch is right and the Windows Media message gets clouded, it would have to be helluva hit to be worth it. I can even imagine how all this could end up strengthing the hand of the man Microsoft set out to weaken, Steve Jobs. After all, if Jobs' media titan friends decide they face a choice between Apple's closed system and Microsoft's closed system, it's not a tough call. The folks at Apple have a lot more experience--and a lot more success--at that game.

11:59 AM

Apple and Microsoft

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Given MS's more pressing problems (Vista!), I seriously doubt we'll see Zune any time this year... IF ever.

Posted by: ronn at July 26, 2006 10:20 PM

It hardly matters as in 6 months, MS will fold this up in some face saving gesture. They cannot design an OS for their core business in 5 years, after 9 years, they can't top treo or palm, how are they going to top the ipod in 4 months? (other than ripping off the ipod but even then, it'll be a bad rip off - just look at the design - it looks like a walmart case for the ipod).

They have designed 11 WMP versions - has anyone praised any of them - they going to top itunes in 4 months?

Plus, it will have no video store and apparently the price is $399 for 30 GB ... it's got wifi ... yea, MS cannot get plays4sure which plugs in directly to work, how are they going to get wifi working? Plus when not at home - what is it - $15.99 a month?

They will be viciously attacked by other WMA players (you know, MS WMA, not MS Zune WMA).

It's also branded XBox but will play no games - how many xboxers will pay $399 for a game saving device (shades of Dreamcast's game saver) and consumers will wonder why they want an Xbox mp3 player.

All and all, MS should just stick to spending 440 BILLION to prop up Steve Ballmer's stock holdings - no wonder BG is getting out.

Posted by: jbelkin at July 26, 2006 11:21 PM

First off we have to wait until it is being sold, or at least credibly leaked, to know exactly what impact it will have, what the limitations are and so on. Understand that I don't think much of MicroSoft's products, including the sainted Office, but sooner or later they have to get something right. It might be a very fine system or it might be one of their typical clunky and hard to use designs.

Can we burn purchased music to CD like we do with iTunes? If so then can it then be ripped into MP3 files or will they have some sort of protection scheme?

it is supposed to have WiFi capability. Will that be as secure as Windows or will someone be able to upload a virus to it just by being within range.

And of course Apple is probably not sitting still. Wanna bet that when the same time that Zume is released that Apple will have an iCell pod-phone combination that will sync with the OSX address book as well as iTunes. It will also have WiFi or BlueTooth and other features.

Posted by: Perry Clease at July 27, 2006 12:09 AM

BOTH companies may be stinking rich but have the collective intelligence of a rotted out tree-stump.

Posted by: Gimmeabreak at July 27, 2006 09:56 PM

Remember the MP3 market is huge! Last year there were 140 million players sold worldwide and only about 25% were Apple. This year there will be close to 180 million players sold and less than 1/3 will be Apple.

Microsft Zune does not need to "crush" Apple in order to do very well in the MMP market.

Posted by: Josh at July 27, 2006 09:57 PM

This may seem like a strange thing to say, but I would imagine that the timing of "leaking" and then announcing this product probably has to to with what Microsoft thinks Apple has in the pipeline. It's all very peculiar, why are we talking about this vapour product right now? Why are we being encouraged to? If it were truly going to be the next greatest thing, it would be secret. They'd want to blindside the industry with a product no one could claim an equal to. Instead they're showing us their cards and telling us in a bunch of months it will be great, and how it will be great. This seems like a desperate act to generate hype around a product they fear may appear as second rate once their competitors offerings show up in peoples hands. I'm not claiming to know the quality of this upcoming product, I'm claiming that the handling shows how MIcrosoft percieves it.

Posted by: Adam at July 27, 2006 10:20 PM

What a load of rubbish!

The whole article is based on fake demands, "What Ifs", and 3rd Party speculation.

"... potential collateral damage from Microsoft's..."

- What? -

"But if Microsoft ends up"

- What? -

"I want to hear Microsoft explain.."

- What?-

NO MORE what if's Mr Peter Burrows.

I rest my case!

Thats right folk, all this text is about, it to confuse the public with a whole lot of made up guess work! The author using simple tricks to create none issues, then at the same time makes or gives Apple all the +++ and then gives all the --- to Microsoft.

Sad to say, just another 'Applefites'' MOANnnnnnnnn.

Posted by: GHart at July 27, 2006 10:40 PM

Keep in mind the ugly photos floating around the net are not the real zune.

Posted by: zune at July 27, 2006 11:14 PM

Wow, you could say Burrows is naive but given the history of the company, statements like this are just willful ignorance:

"Now, I fully understand Microsoft's reasoning. The partnering strategy hasn't worked, and it's time to try something new."

The partnering strategy was never ever meant to work in the first place. MS sucked in the poor clowns that the company recruited as "partners", learned enough about the business to come up with a workable plan for Zune and its proprietary product and then jettison them. And to help the company cover its tracks, MS somehow finds credulous journalists to write, oh, yes, it's clear those relationships weren't working out. . .

When MS is done laughing itself sick for making fools of another mob of dimwitted 'partners' that helped the company try to enter a new industry, it can get a chuckle out of the latest Businessweek.

Posted by: Roberto Sumatra-Bosch at July 27, 2006 11:30 PM

This is just another example of Microsoft's lack of focus. They are so obsessesd & jealous with any other tech companies success, that they feel they must try & compete, even when it outside their area of expertise.

If they put half as much effort into their OS, Browser, & Office Suite, they would be world class products, instead of products we use because we have no choice.

I?? Guessing

Posted by: I'm Guessing at July 27, 2006 11:39 PM

Im glad all the Mac fan-boys chirped in on this one.

jbelkin: the reason windows takes longer to develop is for compatibility. Windows has default drivers loaded for a slew of anything you could ever want on it. Mac, not so much... Drivers are imo the bigest cause of problems, and since windows has more then mac, logicaly one understands why more problems can be expected.

As far as i know, most of the info on the zune is from 'sources' so the size, price, and features, and hell maybe even the design... might change.

Im not sure what you refer to as the monthly charge, but i find that a bit ludicrous... i cant imagine how using a coffee shop's wifi is any different than your home wifi...

perry: im glad your not as bitter and MS hating as jbelkin, and i agree that we have to wait to find out the exact details, as he said she said isnt that reliable..

I cant think of any way to burn a cd that would prevent rippage short of rootkits, but i doubt MS would be stupid enough to do that...

And as for the wifi security, i imagine the Zune will have its own OS, so unless viri are targeted at it, then it should be safe... (even windows CE doesnt have viri to my knowledge)

But, as it stands, now is just a bunch of fanboys arguing their sides, at least until solid info is released :)

Posted by: scifi3018 at July 27, 2006 11:51 PM

You have no idea what you are writing about. Microsoft's Windows Media platform is not an "open" system. Apple utilizes MPEG-4 AAC audio and for it's video solution, MPEG-4 AVC. Both open standards that are fully specified in public documents. Microsoft's Windows Media is a proprietary technology that is broadly licensed to Microsoft's numerous unimaginative and weak "partners."

Posted by: n/a at July 28, 2006 12:07 AM

First of all this is a rumor - and if you think about it, not a very credible one.

Closed system music stores are already illegal in France (such as iTunes-iPod). So MS will be starting this whole new line of products in a manner that is illegal in France, with chances of the same to happen in other countries?

And oh, yes, the Zune exterior design is deplorable indeed. What's "Zune" supposed to make you think of anyway?

Posted by: Cristian at July 28, 2006 12:48 AM

The Pocket PC is a much better form factor for use as a music player. It does a whole lot more. The ipod does not have a great interface (controls) or the capabilities of the Pocket PC. The Pocket PC just needs a much better input method.

Posted by: Wil George at July 28, 2006 03:26 AM

Can we get a handle on what proprietary means? PlaysForSure is proprietary, as is WMA, as is the Apple DRM they wrap iTunes in. AAC isn't proprietary. If you want DRM, you need a proprietary system, and the record companies sure as hell want DRM, though they blather on about lock-in on the iPod (mostly because they love the line MS sold them about rentals and expiring music in a world where everyone licenses the proprietary PFS architecture). There's nothing open about the current MS music system, and nothing more closed about Zune. MS have just figured (as Apple did a long time ago) that their 'licensed platform' model (a la PC Windows) won't cut it in a market where consumers want simplicity and reliability (two things that PlaysForSure has failed utterly to deliver). Imagining that this same consumer wants geek features complicating things is perverse, but strangely in character.

Posted by: Robert Sharl at July 28, 2006 05:11 AM

If only Microsoft spent all that money on improving their OS and business software instead of crashing late into every money-making party they see, maybe they'd have a decent (and maybe even an innovative) product. Right now they're just spending a ridiculous amount of money and resources playing catch-up with Sony, Google and Apple just because they can. Ignoring that people are actually fine with Sony, Google and Apple and just want Microsoft to do their damn software right.

Posted by: Anonymous at July 28, 2006 09:01 AM

We can never tell if this is a good direction to take, but more power to Micro-soft. They have enought money to spend ...about time they spend some of those big bucks. Hope it does not end like Sony's venture on the VHS VS ... you know what! The spending would be able to generate what they call the "multiplier" effect in Keynes economic model.

Posted by: Bren at July 28, 2006 09:47 AM

Leaving Zune! I was waiting to buy and now I'm off to Creative or iRiver. I refuse to participate in monopolies - ergo no iPod, and now, I gather, no Zune either. Shortsighted, sad MS choice (if it's so)!

Posted by: Lily Nera at July 28, 2006 11:06 AM

Duh, this is *Microsoft* we are talking about. Of course it will be proprietary.

Posted by: gf at July 28, 2006 11:31 AM

I think lots of people are underestimating Microsoft here. Microsoft went head to head with Sony AND Nintendo (Console Giants) in the console wars and may soon come out on top. We know this company has no problem with losing money on hardware if it can make it up somewhere else. The Xbox and Xbox 360 are both being sold at a loss yet Microsoft is still turning a profit in the end.

Apple is making the bulk of its money in the multimedia player market right now and any chunk Microsoft can take out of that ultimately weakens Apple. All Microsoft needs to do is put out a comparable product with a lower price and they will get an easy foothold in the market. After that Microsoft can just spend, spend, spend until they have a better product and can still sell it cheaper than Apple who may have to start raising prices to combat there loss of market shares

Microsoft has the ability to buy its way into a market it has no experience in and do quite well. I may be wrong but I wouldn?? write the Zune off just yet.

Posted by: Jimbo at July 28, 2006 11:47 AM

Zune, XBOX, everything still depends on Windows Vista which will be either the most colassal mistake in Microsoft history, or the future of the desktop itself......and while the media loves to tells us that Apple, Google, and the rest are formidable, the fact is that they are nothing more than pesky little mites surviving in the wake of the Microsoft monstor that could choose to brush them aside with the flick of a fly swatter. Watch out for Vista.....I have it running on an old HP laptop and even in its present state it blows any other operating system away......never, ever, count Microsoft out.

Posted by: treeorc at July 28, 2006 12:08 PM

Since when has microsoft been giving sony fits with their xbox? Just answer that for me first off.

Posted by: Germaine O'Oneal at July 28, 2006 12:09 PM

What does Microsoft expect to achieve with Zune?

Well, hasn't anyone noticed? Microsoft, if it were a person, would be diagnosed as paranoid schitzophrenic. They believe iTunes+iPod to be a serious threat to their dominance on the desktop. While Apple would like to believe that iTunes+iPod will help them sell more Macs (and it might), it's a long shot to believe that people will move away from Windows in droves to OS X just because of iTunes+iPod.

With Zunes, Microsoft hopes to knock Apple out of the media business. If they play fair, nothing of the sort will happen. But Microsoft isn't just a paranoid schitzophrenic, it's sociopathic paranoid schitzophrenic. They have no intentions of playing fair. Maybe they'll be successful, maybe not, but you can take it to the bank when I say that Microsoft intends to challenge Apple's dominance in the e-music business and they intend to win. For Microsoft to win, everyone else has to lose ... hence, the drive to knock Apple out of business.

Posted by: Rob Shinn at July 28, 2006 12:28 PM

It needs to be cheap, elegant, and backwards compliant with all previous formats. They need to do what printer manufacturers did.... sell the hardware really cheap and make money on the ink (tunes). Maybe even buy $500 worth of "ZUNE TUNES" and get a free player!! Also... a simple device that can plug into my DVD/surround system jacks and receive Zune tunes. It also nees to include one of the sattelite radio connections.

Posted by: Bob at July 28, 2006 12:31 PM

Given that the latest rumors have the Zune as being part of a closed system, I think it'll just tank.

The iPod WILL someday die, like the Walkman did. It'll be a natural death, though, because somebody'll come out with a better technological alternative. Until then, I and everybody else that now has an extensive iTunes library, will just keep buyin' iPods, cause what I have will work with 'em.

Nobody wants to change platforms and lose the DRM'd music we own. I've spent at least a couple hundred bucks over the last few years buying music from iTunes - what makes M$ think I'd consider buyin' their POC and having to buy it all again?

Idiots.

Posted by: rahrens at July 28, 2006 02:04 PM

Of all the things I've read about Zune, the one thing that I've not seen is why MS revealed it now. It is obvious that they were anticipating a next gen iPod possibly at Apple's WWDC.

As usual Microsoft's strongest (nee only) suit being immitation, they need to see what they need to copy. It makes up for a lack of innovation and originality.

Posted by: R. S. at July 28, 2006 02:40 PM

It's a normal Microsoft tactic -- run over the competition with money.

But, remember how many years it's taken Microsoft to get Word past the point that you don't want to throw your PC off the highest peak you can find? Quality just isn't in their playbook.

Posted by: Angela Ross at July 28, 2006 03:20 PM

You keep on pulling your hair out!

I just keep on downloading music without paying for it.

Oh, thanks, my Creative Zen works fine. 15,000 songs capacity.

Let the artists make money from real work (perfomances).

Posted by: PETER FREDERIKS at July 28, 2006 10:17 PM

Let me get this straight: the Windows/Office line makes money hand over fist. Meanwhile, 5 years until the Zune line earns a profit, while the Xbox continues to lose money? About all I'm seeing here is MS spending the shareholders' money to make sure nobody makes a profit on either consoles OR mp3 players. All on the assumption that they'll clean up during the following 10 to 15 years. Ballmer is being paid to think up grand strategies like this?

Posted by: Carl at July 29, 2006 04:54 AM

What about MusicGremlin (www.musicgremlin.com)? Looks like a more robust offering than MSFT is offering and costs less too.

Posted by: scott at July 29, 2006 05:28 AM

Badly written, no real info in this article, and above all: who cares? MS is years behind in this market segment, and any users buying into a closed music system lock themselves up, and they know it.

totally open and free mp3's still rule!

Posted by: m at July 29, 2006 06:15 AM

Apple is going to develop A revolutionary new ipod changer for car audio, doing away with cd changers..

How do I know this? Because when I think things up they happen about a year later.

Microsoft is playin the tough guy trying to steal market ,but they can?? seem to develop these products first. They're behind and they know it and trying to puff up to the demands that they wish they could of met with their ego pumping operating systems that took the market by surprise years ago.

take that, and rewind it back

your greatest enememy -kilra

Posted by: kilra at July 29, 2006 06:23 AM

What's up with all these posts about Microsoft trying to take down Apple and, nearly, vice versa? Do we not remember Microsoft dished out money to keep Apple in business? If it wasn't for Microsoft's (well, bill's) generosity there would be no Apple and no iPod (which there unfortunately is).

Posted by: Clayton at July 29, 2006 08:00 AM

Is there a reset switch on the Zune when it freezes up or reboots after a patch.

Legitimate questions.

Posted by: Troy Banther at July 29, 2006 09:35 AM

If ZOOOOOON is anything like the other products and services that Microsoft sells, it will fail in short order. Even if it proves to be solid, it will face a long uphill route against the iPod and iTunes. I've been using Microsoft stuff since the very early days of DOS, and have been less-than-impressed, with good reason, all along the way. Simply put, you can always count on loads of problems ("undocumented features") in the betaware that they sell, and poor support for it. Boy, I sure can't wait for VISTA! Yeah, right! Microsoft, its stockholders, and the entire industry that evolved from the first DOS-based PCs can thank their lucky stars that Microsoft was closely tied to IBM in the early days, and that Apple chose to pursue academia rather than business, the reasoning being that sharp graduates moving into the business world would result in an allegiance to Apple. It was too late by the time that they entered the workforce...too bad! If we're lucky, perhaps Microsoft will get their act together and focus on quality and service, but I think that they are too big to do so. I'd prefer that they focus on getting stable and secure operating system and application software with excellent support services than on multimedia and games. ZOOOON...what next???

Posted by: Tom at July 29, 2006 10:12 AM

How is Windows Media more open than Apple's FairPlay? FairPlay works on Macs and Windows. Windows Media? Only Windows. Windows Media has DRM. Fairplay has DRM. FairPlay DRM is more easily worked around. FairPlay is based on an open standard, AAC, part of mpeg4 I believe, while Windows media is fully Microsoft proprietary. That means that music you rip yourself in iTunes in AAC format will play in all sorts of players. iPod and iTunes on Mac and Windows, various Linux players, palm, etc. You cannot say the same for Windows Media. Let alone this Zune baloney.

Posted by: Chad Leigh at July 29, 2006 11:01 AM

A comment on Peter Frederiks' post:

Peter,

Do you think composing a song, rehearsing the band, recording it, paying for studio time, hiring the engineer, and paying to have the music mastered and manufactured is not work? (not to mention the years of music study it took to get to the point of being able to even produce a good song)

What do you do for a living? Perhaps we should just cut your salary in half, because according to you about half of everything a musician does is not work, so we might as well apply the same standard to you.

Quoting: PETER FREDERIKS at July 28, 2006 10:17 PM

"You keep on pulling your hair out!

I just keep on downloading music without paying for it.

Oh, thanks, my Creative Zen works fine. 15,000 songs capacity.

Let the artists make money from real work (perfomances)."

Posted by: jeffm at July 29, 2006 11:08 AM

For now, "Its the buzz, stupid."

My thinking is this is a first relatively harmless test foray into the realm of integrated hardware and software. MS is looking for a cash cow to replace 25 years of OS dominance which will wane down as web and open source OS's take hold.

Look for a bundled PC with OS, Hardware and Support in about three years. Probably will be in the form of a thin client.

Posted by: mike at July 29, 2006 11:43 AM

Ya' know, with all this talk about Zune, iPod/iTunes, DRM, windows-bashing and talking about Mac OSX like an irrelevant "niche" OS, has anyone considered the implications of Apple's Bootcamp beta coupled with their Intel chips?

I mean, my God, it's a beta and it runs XP better and faster than the vista beta runs in native. I'd even go as far as to say that it runs XP better and faster than XP runs in it's native environment!

The media player debate is a dodge, a diversion. The real action is quietly being fine-tuned in Palo Alto and will be a standard component in OS X Leopard when it is released later this year. A year from now, people aren't going to be debating Mac vs PC or iPod vs well, anything, because they won't have to.

They'll simply buy a Mac and a full version of XP to install on it. Dell, HP/Compaq, Gateway/E-Machine, Sony, Toshiba, Acer - ALL OF 'EM - will simply not be able to compete with Apple. I know it sound bizarre but ask youself this question;

Why would you buy a machine that can only run Windows when you can buy a machine that will run Windows, Mac OS, run as a Unix shell, probably Linux as well AND it will do so with authority!

I dunno, kinda sounds like a no-brainer to me...

Who cares what Microsoft is trying to do to compete with the iPod. You seriously think they do?? Apple is gonna be a breath of fresh air to Microsofts's bottom line in the 4th qtr and they know it. That why they're in no rush to get Vista on the shelves. ESPECIALLY around the holidays when Leopard is set to go.

They're just gonna hold tight with XP for now, let Apple do the heavy lifting later this year with the release of Leopard and then sit back and watch the sales of XP full go thru the roof. When the numbers for XP level off sometime in '07 or maybe even '08, THEN they'll release Vista.

The only threat to apple is going to be if the current PC hardware big dogs are able to get their hands on the Intel architecture that is now being used in the new Macs.

Frankly, I just don't see Jobs ever letting that happen.

Posted by: ronzo at July 29, 2006 12:55 PM

Microsoft is the number 1 used OS in the world for desktops right?

They make Billions off this market. They are trying to expand into an emerging market. How can someone tell Microsoft to focus more like Apple,when last time I checked, Microsoft ran on alot more computers than Apple. Microsoft has the lead in desktop and laptop os's.

They have Billions in cash... They have repeated that they WERE NOT TRYING TO KILL THE IPOD. They're trying to tap a differnt market of people. They're trying to get what Apple would have if Microsoft does nothing. How is this hard to understand. All these reports about "Microsoft is gonna fail" ...Before the Zune is even out....stop speculating and wait.

Microsoft is pouring hundreds of millions into this... Besides this is the FIRST GEN ZUN!! Even if its a fluke ...there will be more...

my 2 cents

Posted by: Jonathan at July 29, 2006 01:25 PM

1. In reply to an earlier post, Windows may have more driver support than MAC. However MS only write class drivers, ie. USB mass storage device class driver. Other than class drivers 3rd parties write the drivers for their hardware. The fact that MS OS's support a broader array of hardware than Apple's probably doesn't have a significant affect on their ability to release an OS on time.

2. It seems Apple & MS marketing is working. Everyone here is defending their favourite brand. In this forum it doesn't really matter which music service is better. It isn't being evaluated based on merit. Everyone here is playing favourites, including the author. Maybe once more information is known another aticle could be written based on, I don't know. "FACTS"??

Posted by: casey at July 29, 2006 01:39 PM

Microsoft becomes more pathetic with each new product idea. They came out with an upgraded search engine to rival google .. no luck, google's market share has only gotten bigger. Since the anti-trust trial, Microsoft can no longer engage in their one true forte - criminal product sabotage. They can't innovate so they simple look to copy someone else's successful product. XBOX continues to lose $1 billion a year. Now zune. How pathetic.

Posted by: Skip Petersen at July 29, 2006 01:48 PM

I think many of the postings miss the point. We are currently at a stage in content publishing where integration and ease of use are critical variables.

What Apple has demonstrated is that customers are seeking integration because usage is a barrier to adoption.

So, if one were to do a comparative analysis of an ecosystem (i.e. Microsoft) vs. Apple's more closed ecosystem, the Apple or integrated strategy has been more successful in encouraging adoption of digital technology among the less technically adept (the majority of the known universe).

The larger competitive issues revolve around who will control the digital living room. Integrating a computer, a DVR, an HDTV, a wireless network, a stereo and an MP3 player is a task currently beyond the abilities of the average consumer.

We can therefore anticipate that competition in this space from Sony, Microsoft, Apple and Cisco/Linksys will focus on ease of use and the ability to move content around between devices.

Initially the emphasis will be on facilitating adoption of the integrated living room. Over time, the digital living room expands into the management of digital content into additional networked and mobile devices.

In my view, while personally I too dislike DRM, the truth is that competition will exist between types of DRM and the various kinds of rights that you can purchase. Consumers will as in most markets be prepared to tradeoff no DRM for a lower price.

By way of proof consider the following question, if you can purchase a CD for $20 with unlimited personal reproduction rights, would you consider buying it for $2 if you could only use on e.g. five devices. (What likely happens in this case is the emergence of staged buying where you pick a low price access method to listen first and purchase only when you are sure you really like the music.)

In my own case, I subscribe to Rhapsody and use the service to preview music. What I have eliminated is the purchase of music I previously bought on speculation, which pays for the monthly Rhapsody fee.

In the current environment, you can see a movie for a one time fee at a movie theater, download a video on demand movie as part of a subscription, rent a movie for a fee, rent a movie as part of a subscription, purchase a move in various formats (used VHS, DVD and in the future HDTV) and in some cases download the movie.

We can expect to see innovation and competition in music just as we do in movies. My personal prediction is that because we have reached a sea change in the ease of copying content, DRM is here to stay. Competition for Apple is good whomever it comes from. And I suspect that existing players in the market WILL be forced to react to the entry of Microsoft, but if they are smart, they will choose to compete in different ways with different value configurations.

Posted by: Alistair Davidson at July 29, 2006 02:36 PM

The only good thing about this article is that it spawned an unusual number of articulate posts in response. I hope that the ache of Mr. Burrows' deservedly bruised ego will not prevent him from learning from the comments which are far better informed than his original spew.

Posted by: Roger at July 29, 2006 02:50 PM

"It's all about the real world..."

Posted by: Bob at July 29, 2006 02:55 PM

jeffm,

Thanks you for saying what I was thinking and spanking that idiot Peter Frederiks. It reminds me of when my son was 10 years old and was whining about CD's costing $15 when all they were was a piece of plastic that cost maybe a dollar to physically make.

I told him I had a lot of similar pieces of plastic in a dusty box downstairs, and I'd be happy to trade him 2 pieces of my plastic for every one of his pieces. Deal?

...Suddenly they weren't just pieces of plastic any more.

Posted by: pdq at July 29, 2006 03:27 PM

I can't believe I just read all those comments! What a waste of time.

Posted by: juju at July 30, 2006 01:14 AM

Itunes vs Urge is irrelevant. If you want to download the Beatles, for the most part they don't have it. Freely downloaded music (which is academic sharing and not piracy) has a better variety, better quality, is less restrictive, and better music all-around than any paid music site. Paid music sites simply don't deliver value -- even at 79 cents a song.

The music corporations have really annoyed me by destroying such sites as mp3.com, netradio.com, and various music community sites where you could actually learn something about music. I support file sharing as a way for lovers of music to get revenge on the music corporations. I like the new tactic of people anonymously depositing CDs of compressed music in free newspaper dispensers. Try to stop that RIAA!

Forget the BS about "how hard the artists worked." I worked pretty darn hard on my MS thesis, PhD dissertation, and my various scientific papers, without making any money off their sale. Why shouldn't it be that way for music too, especially when so many technical jobs are being outsourced?

Posted by: Music_Lover at July 30, 2006 01:59 AM

OMG... now to get the latest in hypermarketed crap I will have to get another device...

Posted by: jazzology101 at July 30, 2006 03:58 AM

One question: What operating system are you using?

Stop whinning about MS even before the product is out!! You dont know what the product is like. Half you are just being wishful and hoping that your Ipod remains the "cool" product that it seems to be now. Regardless of how the Zune really is, the customer wins. It will create more competetion, probably bring down player prices and MAYBE the world will not seem like a cult of white heaphone wearing clones. Btw, in the meantime, Apple is probably planning a better rivaling product. Eitherways the customer wins.

Posted by: Mark at July 30, 2006 06:10 AM

With Apple & Microsoft competing, it will be time for Archos, Creative, Samsung, Sony, ZVUE, et al to R.I.P.!

Posted by: Bill at July 30, 2006 08:32 AM

The real threat to MS and Apple hasn't happened yet, but it will, because they will create it for themeselves through DRM. Microsoft's release of Zune will help accelerate that process.

We're in a transitional time where the technology and the open source / creative-commons philosophies exist, but the music we're all listening to is still under old copyright laws. More and more new music is released under Creative Commons licenses. More and more artists embrace the open remix culture.

It will take a while, but we will see people getting their music and media from entirely different sources than before, essentially ignoring the media giants' walled-off systems and letting them asphyxiate themselves.

You can help accelerate this process yourself by listening to Creative Commons licensed music and sharing it on BitTorrent and other file-sharing systems. If you are a musician, it won't take much searching to find many successful artists embracing this new paradigm.

DRM + Copyright = Death of an era.

Posted by: Michael Martine at July 30, 2006 10:35 AM

The Zune will have huge financial backing as it is the key product in the Live Anywhere Initiative. Give them enough time and they are bound to find a solution that will allow them to take over the portable device market.

http://www.zunemax.com

Posted by: Zune MAX at July 30, 2006 11:33 AM

The Zune will have huge financial backing as it is the key product in the Live Anywhere Initiative. Give them enough time and they are bound to find a solution that will allow them to take over the portable device market.

http://www.zunemax.com

Posted by: Zune MAX at July 30, 2006 11:36 AM

Job?? gadgets as we like to call them are an insurance policy against a possible slowdown on big ticket items for Q2 and Q3 in 2007. The long term prospects for the PC market are intact. As expressed in a Barron?? article, Apple?? PC market share has no where to go except up. The iPod provides half of the $17.3 billion annual revenue. The gadgets lure new customers to the Apple computer segment.

The primary ??hip?barrier has been partially removed. With the introduction of an expanded Intel chip based product line, Apple might be able to increase its computer sales beyond our current estimates. Leave it to Jobs to figure out the right hardware/price combination. Needless to say, never underestimate Job’s gimmicky marketing capabilities.

Don’t worry too much about Zune. People love Apple especially the younger first time computer buyers. Microsoft has an image problem to deal with before succeeding with the end consumer. Selling to PC manufacturers is a totally different ball game than selling to a computer geek that cringes every time your name is mentioned. Anyone at MSFT reading this…?

By the way, has anyone noticed how many comments this article attracted?

Disclosure: This comment was written by a CrossProfit analyst and does reflect the official opinion of CrossProfit.com.http://www.crossprofit.com

Posted by: CrossProfit at August 7, 2006 05:42 PM


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