Ah...the joys of being right once and a while. Remember my post from a few days ago where I said that the real iPod killer will simply be Microsoft throwing gobs of money away to gain marketshare? Well with today's announcement on the Zune pricing, it would seem to be exactly Microsoft's strategy.
The Redmond, Washington-based software giant has said it plans to invest hundreds of millions of dollars to develop and market the Zune, and acknowledged the investment may take years to bear fruit.
You can read in the announcement that Microsoft doesn't plan to make any money on the Zune this holiday season - they are fully prepared to sell it at a lose. This is where it becomes tricky and dangerous for Apple. They can't really afford to take "years of loses" like Microsoft. I repeat my mantra from before. This is the time, now that the Zune features and pricing have all been announced, that Apple should strike fast with their next generation iPod to put real distance between themselves and Microsoft. Failure to do so will see market erosion, reduced revenue and perhaps a spectacular stumble as Sony did with the Playstation products.
Too many are focused on technology, price and Microsoft's reputation as a predator. The problem is that:
a) the box isn't disruptive. Zune isn't sufficiently better or different to cause significant switching behavior to kick in.
b) price is irrelevant. The main issue is iTunes lock in, not the price of the device. If I already have purchased hundreds of songs on iTunes, then a $20 or even $50 price advantage isn't going to matter since the DRM technology retricts portability. If I'm a first time mp3 buyer, I'm much more likely to go with the safety of the leader and the de facto standard in music download.
c) this isn't the PC market. Or even the PDA market. Zune is not driven by business users or an open architecture which is what enabled Microsoft to establish a lead in PC software that it never gave up. It isn't even like the gaming market where new games and cooler graphics drive constant technology switching. Being a predator will have no effect in the mp3 player market -- it's a different type of consumer, and I don't throw away my old music to get incremental tech improvements. In the mp3 player market, being a reputed predator and offering a music download solution that is incompatible with the de facto standard will hurt them, and no amount of aggressive pricing or years of dogged attacking from the fringes is going to help them. They are a non-factor in this market. Sure, they'll win some sales, but they'll be a nuisance, not a leader and not a challenger to Apple's dominance. Ever.
Even if they were willing to give the players away for free, it wouldn't matter because there is still the iTunes lock-in. No matter how determined Microsoft is, there is only one factor that could disrupt this market in their favor that would be so compelling that consumers would switch en mass and pose a threat to Apple.
It's quite a simple idea really. Just give consumers what they want. Abandon the silly restrictions on how I can use my music imposed by DRM. Dump it. Strip it from the machines. Make a big deal about challenging RIAA and MPAA and about the consumer's right to play his music where they want to play it rather than where the DRM technology lets me.
Imagine it. Buy a song. Play it in your car. Write it to your own compilation CD. Keep a collection on your PC. Load up your mp3 player. Back up your library for safekeeping. Play it wirelessly from a media center through your stereo or tv speakers. Despite all the industry squawking about lost sales due to piracy, the truth is quite the opposite. There is huge latent demand for fairly priced non-restricted music. What there is not huge demand for is overpriced CDs for the sake of enjoying one or two songs, or music that I have to pay for every time I want to hear it on a different device. Supply and demand and the price of music, not the price of the player, is what drives sales. Oh, and interoperability.
Since Microsoft doesn't have the balls or vision to do anything this bold (heck, Zune isn't even compatible with their own prior ironically-named PlaysForSure DRM technology -- with that kind of screw-the-customer strategy why would you trust Microsoft again?), Zune is going to go nowhere fast. Microsoft's Zune sales and pricing strategy is irrelevant.
Posted by: Paul | October 03, 2006 at 05:19 AM
Paul,
Awesome comments! Wow! I had to re-read it twice to absorb it all. And I agree totally. The Zune is nothing special, just a me-too product. Alas the iPod will still rule the roost. I agree with you as well, regarding dumping DRM. The company that does that first with regard to their mp3 player and online music offering will really have an iPod killer on their hands.
Posted by: Sams | October 27, 2006 at 04:56 PM
my zune will not turn on
Posted by: frank payne | September 20, 2008 at 09:24 PM