Zune: are we looking in the right place?

I’ve been spending a lot of time with Windows Vista recently and I’m eating a large slice of humble pie: like many people, I was looking in the wrong place. Yes, it borrows a lot of ideas from OS X; sure, in some respects it’s Windows XP with nicer trousers; absolutely, the User Account Control feature is insanely annoying. But when you get stuck into the guts of it, Vista’s brilliant – and if we’re going to stick with the Apple versus Microsoft thing, the Vista browsing experience with its searching, tagging, grouping and stacking features kicks the OS X Finder’s sorry arse all over the shop (which shouldn’t be controversial – does anybody think the OS X Finder is great?).

The point, I guess, is that by concentrating on the obvious stuff – gadgets look like widgets! Aero Glass looks like OS X! – it’s easy to miss the important stuff. I’m wondering if I’m doing the same with the Zune.

The more I read about Zune, the more I’m convinced it’s a turkey. While I can understand the reasons for dumping PlaysForSure, I think it’s a kick in the teeth for the customers (and manufacturers) who chose MS over Apple – and dumping the MSN music store was a second kick. I don’t understand the benefits of crippled wireless access over open Wi-Fi; I think the Zune marketplace points system is overly complicated; I think the “you can share songs and other people get three plays over three days” song sharing is daft; and most of all, I wonder how anyone trying to make a cool product can come up with a brown and green colour scheme.

When you look at the bigger picture, it’s just as bad. Microsoft is – rightly – attempting to mimic the iPod ecosystem by making FM transmitters, hi-fis and other doohickeys, but the world of iPod connectivity is huge. For example, I just replaced my car stereo with an MP3-aware one, and the connector’s for an iPod and nothing else; most car manufacturers who offer MP3 player integration (as opposed to an Aux plug on the front of the stereo) are again, in the iPod camp. Zune isn’t the first attempt to offer a full range of iPod alternatives, either: Creative Labs tried it, with limited success.

But are we looking in the wrong place? Is Microsoft playing a different game to the one we think it’s playing?

Here’s what we think Microsoft is up to: it’s trying to kill the iPod. To do that, it needs to make a product that’s cooler than Apple’s, and I don’t think it’s succeeded. But what if that isn’t the plan at all?

According to Business Week, Microsoft is playing another game altogether. The clue is in the much-mocked deal with Universal, who will apparently get a royalty on every Zune sale. If Business Week is correct, Microsoft is running around the various entertainment firms with a pretty compelling pitch: “We know, Apple are being bastards to you. It’s all about them, isn’t it? They set the price, they make the rules, and you have to put up with it because they’re the only game in town. But look! Here’s an alternative! And we love you very much! Come, let us touch you in your special places!”

BW puts it like this:

Close ties to the music industry could pay off for Microsoft in the short term with exclusive record industry deals. Companies such as Universal, for example, may grant Microsoft the rights to offer new releases earlier than rival services, says Gartenberg. Such deals would give Zune players an edge, which could translate into more money for the record and film companies.

There’s also the issue of subscriptions to think about. By booting everyone bar Microsoft out of the Zune experience, it’s in the perfect position to offer a subscription service that doesn’t suck. So far, the pay-per-track model is the clear winner, but subscriptions work with other media. There’s no reason why they won’t work with music, provided the service is good enough.

One thing Business Week doesn’t mention, but which I think might be relevant, is that in other industries subscriptions subsidise hardware. When you subscribe to Sky, you get the Sky box for a nominal fee; when you subscribe to a mobile network, you get the phone for free (or at least, for a price that doesn’t come close to the retail price). Microsoft isn’t adverse to losing money on hardware sales in order to build market share – hello, original Xbox! – and I wonder, could it do the same with Zune? Napster’s already tried something similar without much success, but then Napster doesn’t have the marketing muscle, deep pockets or willingness to lose massive amounts of money that Microsoft has.

Is Zune an iPod killer? Not from where I’m sitting. Is Zune part of a bigger play, designed to outflank Apple altogether? Could be!

[BW link via Digg]






0 responses to “Zune: are we looking in the right place?”

  1. Gary

    Over at Daring Fireball, John Gruber has a very different perspective: he sees the Universal deal as a “shit sandwich” Microsoft has been forced to eat.

  2. I think the key bit of Gruber’s analysis is the market force one. It doesn’t matter how nice Microsoft is to the labels, if nobody buys the Zune then the labels will have to continue to do things Steve’s way if they want access to the iPod consumer’s buying power. And if the labels release music earlier on the Zune store, iPod owners will just buy and rip the CD (hard to see them delaying the launch of the CD just to please Microsoft): they won’t buy a Zune.

    You’re right about Sky and mobile phones but the key difference is that Sky and the mobile phone companies get both the upfront cost and the downstream revenue, so it’s much easier to play around with the split. In the music biz, the labels only get the downstream revenue, and they’re greedy when it comes to negotiating. So I think Steve’s plan of using the music as a way to sell the hardware is the best: he basically gives all the money to the labels. This makes it hard to offer the labels a better deal.

  3. Gary

    Good points, well made. I did slap my head when I read Gruber’s piece.

  4. The Gruber thing kinda covered my instant thoughts on this. ie. does this mean I can stock up on bootleg Universal content and not have to worry about the RIAA stormtroopers kicking down my door?

    Although, it did cross my mind that there’s nothing on there that they actually have any claim on. so, how does that work? They get money because I want to listen to obscure 60’s Japanese surf bands that are only available to us in this day and age because of the wonder of the interweb?

  5. I’ve got a portable CD player. I really like it.

  6. Gary

    Meanwhile, back in Cupertino: iPods on a plane!

  7. Ah. In one fell swoop, the Video iPod is transformed from pointless gimmick into rather useful thing.

  8. Gary

    It’s a genius move – and a major setback for Microsoft.

  9. Gary

    does this mean I can stock up on bootleg Universal content and not have to worry about the RIAA stormtroopers kicking down my door?

    Yeah, it’s a really weird arrangement. It’s not a royalty as far as I can see – it’s more like protection money.

    I know I’ve said it before, once or twice, but you could solve the piracy problem in one fell swoop by going for radio-style blanket licences, charged at the ISP level. Customers have two levels of service, then: one level is just yer email, web etc; the other, more expensive one allows file sharing. ISPs then have a powerful financial incentive to stop their customers sharing illegally, and rights holders get paid for the stuff being shared.

    I don’t see the labels ever going for it, though.