Microsoft May Be Able to Halt Apple's Music Monopoly

Microsoft (MSFT) is running a new TV ad with “Certified Financial Planner” Wes Moss, promoting the $15/month Zune Pass as being cheaper than buying thousands of songs at $1/each from the iTunes Store.

As Ars Technica writes:

Moss compares $30,000 for iTunes to $15 for the Zune Pass. So where does Microsoft get the $30,000 number? Well, seeing as the 120GB iPod appears in the ad, I'm thinking the company is estimating each song at about 4MB, which really isn't much of an exaggeration. Of course, it's not exactly $15 versus $30,000. The $15 is a monthly fee, so you're likely going to be paying more if you plan on playing music for more than a month. That said, it would take you 166 years and 8 months to shell out $30,000 for the Zune Pass; many of us won't be living that long.

As of November 2008, the Zune Pass allows its users to keep any 10 songs per month. In other words, if you wanted 30,000 songs for keeps, just like the iTunes Store, you would have to wait 250 years. The cost would be a whopping $45,000, however. In other words, it's only really worth it if you're OK with the fact that you have to keep paying the monthly fee to keep access to the songs that you don't yet own. Otherwise, iTunes (or any other à la carte model) is the way to go.

Good Morning Silicon Valley (the Merc) observes:

The commercial doesn’t even mention the Zune itself; a non-techie viewer could be forgiven for thinking that the Zune Pass was an alternative service for iPod users. But going head to head on hardware probably isn’t the best play for the Zune anyway. The first step is to try to introduce doubt about committing to the Apple (AAPL) ecosystem by arguing the benefits of subscription over ownership. It’s a legitimate argument, depending on your needs, but one that hasn’t helped other subscription services like Real’s Rhapsody slow down the iTunes juggernaut. There’s no particular reason to think that Microsoft’s attempt to make the case will fare any better.

Whether I agree with their conclusions or slant, Microsoft is making legitimate comparisons between its offerings and Apple’s. That’s competition, and if it starts to have an impact, Apple will have to stop acting like a music monopolist.

[click to enlarge]

What I found remarkable is that the Beast of Redmond is being more honest in its attack on Apple than is Sony (SNE).

In an interview posted this month by Nikkei Electronics Asia, Sony CEO Howard Stringer has suddenly become a convert to open standards. Stringer laments the failure of Sony’s late proprietary efforts to control consumer music libraries:

Q: In your keynote speech at the 2009 International Consumer Electronics Show (CES), you said that open technology is important today. Is that feeling based on the needs of customers?

A: That's right. Customers will refuse to accept it unless the technology is open. Youth in particular really dislikes closed technologies, closed systems and the like. …

Sony hasn't taken open technology very seriously in the past. Its CONNECT music download service was a failure. It was based on OpenMG, a proprietary digital rights management (DRM) technology. At the time, we thought we would make more money that way than with open technology, because we could manage the customers and their downloads.

This approach, however, created a problem: customers couldn't download music from any websites except those that contracted with Sony. If we had gone with open technology from the start, I think we probably would have beaten Apple Inc. of the US.

There was a time when it made sense to divide the market with closed technology, and monopolize a divided market, but that's just not an effective strategy any more. In the Internet universe, there are millions of stars - millions of options that have been created through open technology.

Every CEO is entitled to his woulda, coulda, shouldas. However, after years of being Sony going its own way on proprietary standards, I will believe Stringer’s deathbed conversion to open standards when the Memory Stick in every Sony camera is replaced by the de facto industry standard, Secure Digital.

However, Stringer was seriously misinformed in his next paragraph:

Apple's iTunes Store uses its own proprietary DRM called FairPlay. I think this gives Sony a chance to provide something that Apple can't. And we have to move ahead and grab that opportunity before Apple begins to provide support for other hardware and blocks us out.

Apple announced four months ago that it was going DRM-free. Today, the FAQs on the iTunes Store are very clear:

iTunes Plus Frequently Asked Questions

What is iTunes Plus?
Now all songs on the iTunes Store are iTunes Plus songs. That means every song is available in our highest-quality 256 kbps AAC encoding (twice the former bit rate of 128 kbps), making for a sound that's virtually distinguishable from the original recordings. Plus, All music on iTunes is available without digital rights management (DRM). There are no burn limits and iTunes Plus music will play on all iPods, Mac or Windows computers, Apple TVs and many other digital music players.
…
Can I still buy music encoded at 128 Kbps with Digital Rights Management (DRM)?
All songs on the Store are now available in iTunes Plus, so tracks are no longer available as 128 kbps and with DRM.

Steve Ballmer, the honest competitor? I guess that goes with him being the nice one too.

Graphic credit: Joy of Tech.

Disclosure: Author owns Microsoft shares.

Comments

[J Raymond:]

Napster has tried this advertising tack before, and during the Superbowl, as I recall... Didn't get them very far then and I doubt that Microsoft will make much headway here unless they can shake off the stigma associated with the Zune.... good luck with that...

May 14 08:20 AM

[digivision:]

when I pay $.99 for a song I own it ..
I'd rather pay and own than rent my music it's a stupid concept and it's not going to work

May 14 08:27 AM

[Timeline St...:]

The device is the key to the content, but you have to have the content before people will buy the devices. That's the rub.

Even in a post-holiday quarter, Apple sells 10-12 million iPods, and one-third of them are now iPod Touch, which offer much more than music. If you count the iPhone as an iPod, fully half of iPods sold are now wireless or WiFi devices than have infinitely more capability than music. Plus, you buy one of those slightly more expensive devices and you have the capability to stream Pandora, every NPR station in the U.S., and another, what, 20,000 radio stations for FREE.

Hmmm.....let's think about what you are proposing. Will iPod users just abandon their devices and go through the trouble of switching due to this supposed cost savings?

Or do you think that Microsoft is skating to where the puck was in 2003?

I don't think that you really put much thought into this one.

May 14 08:41 AM

[vassar:]

With iTunes selling songs without DRM, I really don't see people going to a subscription model. If you want a 'subscription' just use Pandora or similar service. Works great on the iPhone or computer and it is free (so why pay Microsoft).

Next topic please.

May 14 09:30 AM

[brewer:]

Sony is as clueless and Microsoft, probably even moreso. But they are both in for 'epic failure' (as the kids say). How can you even have an article about Sony and not mention their root kit fiasco? Come on...

If Microsoft doesn't get moving fast, and I mean more than Windoze (Vista) '7' (how original) then it could be over for them in more than just the music media space.

New Apple ads are extremely effective, they have painted Microsoft in a corner whining that they are 'cheap' and willing to pay people to buy lousy PC hardware. The problem is, 'cheap' never really sells, because 'cheap' without any quality is just a losing proposition. People don't want cheap they want quality and they really want affordable quality (which is exactly what Apple delivers so well).

May 14 09:55 AM

[Wil:]

There are approximately 44,000 minutes in a month.

30,000 4 minute songs would take 120,000 minutes to listen to. And that is if you listen to music the entire month with now repeats.

When people pay $15 a month, how many songs are they really listening to, on average, over the course of a year? 20? 50? 100?

In any case, the iPod Touch w/streaming Pandora is a superior option to the Zune Pass, as mentioned above.

May 14 09:56 AM

[seasickdarwin:]

It seems that Microsoft and Steve Balmer continue to alienate their consumer base. Honestly, I can't understand what Balmer's vision is for Microsoft. PC's had a niche. Mac's carved out a unique niche. Now PC is moving away from being utilitarian and functional. The ultimate reason to purchase a Mac is that, for now, Mac takes advantage of Microsoft's penchant to protect and side with large corporations who collectively act like monopolies themselves. The difference is, Microsoft's "game changer" of an idea, the 15$ a month subscription service, means that if you want to listen to more than one record, play music for a party longer than a 1/2 hour, or just listen to a few albums from yesteryear - you can't (at least not with great ease). The monopoly like music industry sees this subscription as advantageous because it functions more like Microsoft as pimp, whoring out music. As much money as you spend, she ain't going home with you to stay. How does this differ from Apple? Well, their monopoly on music - the 99 cent -1.29$ drm free kind - sides with the consumer. Steve Jobs IS responsible for setting a fair price for downloadable music. In fact, the whole DRM - free is a direct result of Steve Jobs' and Apple's effort. If Microsoft was in charge, well, you would never really own your own music. You will never be able to transfer your wonderful music collection, or share it with your people. Apple is the right kind of monopoly. One that benefits by siding with the consumer. Until Balmer gets that through his shiny dome shaped head, he gives me less reason to stay with PC. (the only one at this point is STILL Windows XP) For now, I run Windows on my Mac, but the reasons for that is quickly fading like keeping that dopey old VHS tapes.

May 14 10:00 AM

[brewer:]

Joel, your assertion that Apple has a music monopoly is nonsense. They merely have the best devices and service. You can get your music anywhere you like, that has ALWAYS been the case. And honestly, you are not going to find any player at any cost that is better than the FREE iTunes software.

The whole idea of the iPod is that you are in control. Like it's your own radio station. Pandora, podcasting works in that model because you chose that service for a time. Renting content??? That is worse than radio--far worse as there is no immediacy to it, there is cost, and there is no ownership.

Steve Jobs was correct on one thing, people want to own the music they listen to and be able to listen anytime.

Besides which, you can't blame people for not trusting Microsoft, look at what happened to everyone in the 'Playsforsure' mess. Look at the monopoly convictions they have (and even were prosecuted in other countries.) They lost everything because Microsoft decided they weren't making enough money. Same thing happens as soon as you decide you don't wanna pay $15 a month.

May 14 10:02 AM

[iJah420:]

OMG!!! What RUBISH!!!

West would not know good technology if it hit him the head with a 2x4.

This guys is just another typical schlep ANAList trying to drive MSFT up and AAPL down.

Apple has the others running around like the movie It's A MAD MAD MAD World.....

At least he had the common sense to use the phrase "MAY" be able to..... MSFT is a has been company with a monkey for a CEO.

May 14 10:49 AM

[BobD:]

Why would anyone want to purchase electronics or music from a company that consistently sells junk. Can you imagine downloading music from MSFT's music store with your Vista OS to your Zune???? The real reason Apple is so successful in the music industry is that their products are the best, end of story!

May 14 10:50 AM

[Mr C:]

I'm sorry but there just aren't 15 new songs out there every month that I want to download to make a monthly fee advantageous.

May 14 11:26 AM

[frankz00:]

The iPod/iTunes was released in 2001. Since then Microsoft has gone through no less than 7 iterations of it's strategy to kill the iPod and all of them failed. But somehow I'm supposed to believe this time it's for real? Come on!

May 14 11:43 AM

[peter02l:]

Microsoft's estimate of $30000 or 30000 songs that they say it takes to fill the 120 GB iPod is wrong. Those numbers are based on pre-iTunes Plus music. It should be $15000 or 15000 songs. Now, does that mean that Zune music is 128 bit?

May 14 11:44 AM

[Roger Knights:]

The ability to retain ten songs per month will be attractive -- and ought to be, since the cost is only $1.50 per song, and the subscription service allows the user to sample everything before making his pick. It's too late to dislodge iPod users from their gadget, but MSFT ought to (finally) get a decent share of the new-buyer market.

May 14 12:01 PM

[mathue:]

It always puzzles me when the spectre of Monopoly is marched out, especially since it appears the great majority of people have very little understanding of it's concepts.

May 14 12:07 PM

[Constable Odo:]

I'd rather own a little bit of music than rent a lot of music. That's how it works for me. I'll probably listen to the same songs over and over because that's how I like to listen to music. I've got an iPod music library of over 3,000 songs and I basically listen to about 30 to 50 songs over and over. These are extended and club mixes that can last for as much as eight or nine minutes. Occasionally, I'll swap a song out and replace it with another. I listen about an hour of music daily.

I've no use for a subscription model. Most of my music I listen to is from over 20 years ago. 70's disco and 80's old school stuff from my old vinyl collections I bought and paid for.
Neither Apple or Microsoft music sales models are for me since I've already got my own music library.

May 14 12:21 PM

[jack dee:]

Well the apple fanbois are out in strength yet again , instead of looking at investing they are concerned with hate and bile.

anyway, the real point is this service has been going for a very long time and is a huge hit with Zune users.

for $15 a month you get to use it on up to THREE Zunes, and THREE PCs that is an all you can eat buffet for $5 a head.

Thats right $5 a head. 3 users for $15 a month. And you get to share your songs or not families who try it love and come back for more.

Now should MSFT be in the music biz? thats another question.

May 14 12:36 PM

[SKR MBA:]

Ah, I see the folks at Seeking Alpha are shorting APPL again; or, they are the willing sycophants for those who are....I wouldn't be surprised if they were in for a point.

This article, like all those when it comes to AAPL, is just pure garbage... and I can smell the stink all the way over here in Spain.

Look, get with the program, and just go long. I've made 40% ROI since January ... you morons.

May 14 12:38 PM

[Oh Blah Dee...:]

RE: "... if you wanted 30,000 songs for keeps, just like the iTunes Store, you would have to wait 250 years. The cost would be a whopping $45,000,.. "

======================...
People don't want to spend three lifetimes looking for music. They want to replay what they like and keep what they like. If they do this, iTunes can be cheaper, and songs are always available as a download on the iPod, without needing a WiFi connection.

Napster, Real, etc. failed because People WANT to own their music. If subscription is what the market wants, Apple can still deliver it as good or better than anyone else.

Nothing new in your report.

May 14 01:00 PM

[krenshaw:]

with zunepass I get the 10 songs I paid for, the millions that comes with the subscription is just a pirk I really like. I easily connect my zune in my car or home sterio and blast my music with no problem at all.
about 3 weeks ago my friend was DJing at a house party and couldn't find a song that was requested, it was a 1, 2, 3 step to get the song on my zune and blast the tract. that was a fun night.

that night I didn't really have to buy the song, it just came with my subscription. this is why i have netflix becuase its great, I don't have to buy the dvds unless i really liked it after i wachted it. its the same with zunepass I don't have to buy all the songs I listened to, because the fact of the matter is, the next 6 months I'm not going to be listening to those songs, the ones I will be listening to for a long time is the ones I will use my zunepass credits to get.

May 14 02:21 PM

[jsk:]

@jack dee:

iTunes store lets each purchase be used on 5 computers (Mac AND Windows - Zune is Windows and Windows ONLY - now who's being monopolistic) and an unlimited number of iPods.

@the article's author:

So, what monopolistic behavior is Apple engaging in?!? Prices and usage terms are set buy the music industry, NOT Apple. DRM (for music) has been dropped. Other music stores are around and flourishing (perhaps you've never heard of a little company called Amazon?), without ANY interference from Apple. Mp3s and mp4s (aka AAC files) from other sources are perfectly playable in iTunes and on iPods. Apple does not censor or modify content. Access to free content (i.e. podcasts, playlists, promotional materials, etc.) requires no payments to Apple on either end. The only "interference" Apple engages in is NOT paying to license M$'s WM format (M$'s DRM access isn't available on any platform but Windows, Silverlight only allows access up to the now ancient version 9, "plays for sure" was Window ONLY, direct support for WM on platforms other than Windows has been dropped - again, look who's being monopolistic).

Again, just what monopolistic behavior is Apple engaging in?

May 14 02:25 PM

[PCLemmings:]

More of this Zune crap. I take issue with all of these Microsoft zombies defending this garbage. Oh, and by the way losers, remember you willfully gave money to Universal Records by buying a Zune, just to support M$'s desperate attempt to make a profit. Bend over and take it, but you M$ sheep are so used to that.

May 14 02:57 PM

[jack dee:]

I will restate,

The $15 dollar sub covers 3 USERS on 3 Zunes using 3 machines.

That is millions of songs for $5 per user...... do the mathes kids, MSFT is giving you much much more for much much less.

May 14 03:14 PM

[krenshaw:]

all the others see is that subscription is evil, so I don't think they use Netflix at all...or maybe because its coming from msft they regard it as evil. I don't know, but I'm more than happy with my zunepass. I get more than what I paid for.

@PClemmings: I'm not bending over and taking anything. your hate seems baseless because you gave no reason that backs up your assertion/claim.....you just seem like another dumbass on the internet.


On May 14 03:14 PM jack dee wrote:

> I will restate,
>
> The $15 dollar sub covers 3 USERS on 3 Zunes using 3 machines.<br/>
>
> That is millions of songs for $5 per user...... do the mathes kids,
> MSFT is giving you much much more for much much less.

May 14 03:36 PM

[thebaas1:]

What bothers me about both the ipod and zune is neither is stereo bluetooth capable. I ended up using Verizon's Rhapsody service for $15 a month and my phone is stereo bluetooth. The Zune and Ipod's necessity of having a cord run from the device to my ears was a deal breaker. It seems like Apple and Microsoft were so intent of fighting each other, they didn't see the forest within the trees.

May 14 03:53 PM

[SteveJobs:]

This is priceless... And so is the music these days. Just ask any kid with an MP3 player how much he/she has paid for the gigabytes downloaded from limewire and what have you. I'm afraid the meteor has crashed and the plumes of dust are enveloping the earth.

AAPL's advantage is that they make money selling the hardware. If I recall correctly, the iTunes store was only a break even proposition cleverly designed to sell more gadgets.

May 14 04:04 PM

[Bastian:]

MS should stick to its core OS and Office products. Maybe if they stuck to that we wouldn’t get things like Zune and Vista.

May 14 04:39 PM

[another.ana...:]

jack dee,

"....anyway, the real point is this service has been going for a very long time and is a huge hit with Zune users."

All 12 of them?

Ayuh

May 14 05:27 PM

[bricki:]

If Microsoft actually makes any headway with this subscription plan Apple will simply offer their own plan.

Only they will do it better, and people will still be able to use there iPods to listen to music.

Which is the point in the first place. The main reason Apple sells music is to sell iPods.

As a basis to make investment decisions this makes no sense at all.

May 14 05:30 PM

[cretin snif...:]

I like GOOG because it has a good search engine for porn. Then I download the porn to my MSFT Vista system. I own both of the stocks vbecause they are leaders in porn and porn will continue to lead the internet higher.

May 14 08:02 PM

[I am NOT Ned!!:]

You too?!?

On May 14 08:02 PM cretin sniffsglue wrote:

> I like GOOG because it has a good search engine for porn. Then I
> download the porn to my MSFT Vista system. I own both of the stocks
> vbecause they are leaders in porn and porn will continue to lead
> the internet higher.

May 14 08:11 PM

[Neil Anderson:]

Check out the Internet radio station included for free with iTunes. Hear any songs you like? Buy them for about a buck apiece.

May 14 09:44 PM

[GoldMoney:]

I can't wait for the ZunePhone! Just like the iPhone except it sucks and has no apps! It's cheaper, too, since you'll only be able to use it for about 23 minutes before it breaks. Go go Ballmer!

May 15 01:03 AM

[daniel3582:]

Before I even opened this article, I laughed, simply because of the title.

Then my preconceived notions were proven to be true.

How has Microsoft turned from brilliant company, to evil empire, to marketplace joke in the space of 15 years? It is astounding.

May 15 07:39 AM

[Jon T:]

Never in the history of the English language has one three letter word been pushed to such extremes.

MAY

...in this case, it means never.

May 15 10:06 AM

[Doug, Mtn. ...:]

How's that Plays For Sure library coming along, Jack Dee?


On May 14 03:14 PM jack dee wrote:

> I will restate,
>
> The $15 dollar sub covers 3 USERS on 3 Zunes using 3 machines.
>
>
> That is millions of songs for $5 per user...... do the mathes kids,
> MSFT is giving you much much more for much much less.

May 15 12:23 PM