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Microsoft Considering Subsidizing Zune Sales

Posted by Zonk on Fri Apr 06, 2007 03:01 PM
from the nothing-else-has-worked-why-not dept.
Microsoft Media Music Technology
grouchomarxist writes "Microsoft is considering selling the Zune subsidized like a cellphone, according to an excerpt on MarketWatch from a PC World magazine interview with Microsoft's Zune marketing director, Jason Reindorp. According to the article: 'The spokesman said that Microsoft first considered the cellphone-like distribution plan after seeing interest in its Zune Pass subscription service, which offers monthly paid access to songs on the Zune Marketplace, a competitor to Apple's iTunes store. Though he declined to say how many subscribers currently use Zune Pass, the spokesman said subscriptions rose 65% during January.'"
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  • So... (Score:5, Funny)

    by Anonymous Coward on Friday April 06 2007, @03:04PM (#18638963)
    "the spokesman said subscriptions rose 65% during January."

    So... that's 165 people?

    • Re:So... (Score:5, Informative)

      by peragrin (659227) on Friday April 06 2007, @03:13PM (#18639119)
      Even if it is 165,000 people it's not that big of a deal. Apple is selling millions of ipods.

      The fact is the subscription music plan just sucks. It's like paying for radio. XM and sirus have a good idea, but very few people are willing to shell out money for music that stops playing when they stop paying.

      It is a nice market, and always will be.

      The best part of itunes is that it has more than just songs. I don't own an ipod. I just don't like any of the models and I am not impressed with any other music player either. But I still shop at iTunes. I grab the Battlestar galactica or Hero's episodes I missed and forgot to tivo.

      I then unplug my monitor's dvi connector, and plug in my tv's dvi cable.

      Even the simple 640x480 resolution they sell looks good on a 23" HDTV. not spectacular but better than the regular tv reception I get.

      • Re:So... (Score:5, Insightful)

        by encoderer (1060616) on Friday April 06 2007, @03:52PM (#18639681)
        1. Music subscription services are pretty popular. Perhaps you don't like it, but I've turned many people on to it and I've gotten a lot of positive feedback from friends and family. You're not paying for music thats stops playing when you stop paying. You're paying to listen to HUGE, GIGANTIC libraries of ANY SONG YOU WANT, whenever you want, wherever you want.

        Your comment like saying "Nobody would PAY for Cable Television. It makes no sense. Few people are willing to shell out money for television that stops playing when they stop paying"

        2. Your comment about iTMS having TV & movies is funny. Are you actually suggesting that a subscription model wouldn't work well for TV shows? I mean, what makes you think that MSFT couldn't offer TV as part of their subscription price in the future? When iTMS launched they didn't have TV in the beginning, either. You do realize that people have been buying into the subscription-model for TV for, oh, 30 years now?

        3. I love my iPod and I love iTMS. But as soon as I realized that I couldn't burn my TV purchases and that there was no "PlayFair" for video DRM I refused to give them another cent. Their video DRM is hideous and unacceptable. Imagine if FairPlay refused to let you burn them to CD. Well, THATS the kind of service you're paying for. $2 for 22 minutes of video that is crippled beyond all usefulness.

        • Re:So... (Score:5, Interesting)

          by R3d M3rcury (871886) on Friday April 06 2007, @05:04PM (#18640599) Journal

          You're paying to listen to HUGE, GIGANTIC libraries of ANY SONG YOU WANT, whenever you want, wherever you want.
          Agreed. And one of the biggest mistakes is that it hasn't been marketed that way.

          Subscription services are trying to compete with stores. Stores basically say, "Come here and buy your favorite music." That's great. I want to buy my favorite music. But how do I know if I like a song?

          So how do you sell a subscription service? To me, the answer is the second part of the name: Service

          Suppose I pay $15 per month to have access to any songs I want. But what songs do I want? I'm not going to go through a catalog of 2 or 3 million songs and figure out what's good and what sucks! I have better things to do with my day! And I already own my favorite songs on CD, so I'm certainly not going to rent them again. So what do I get from the subscription model? Absolutely nothing. I still have to do all the work.

          So make it a real service. Do some research. Use other people's research. Come up with genre playlists and let people subscribe to them. Find worthwhile podcasts and hire/pay people to make them daily/weekly and let people subscribe to them. Promote hot DJs at hot clubs by letting them come up with weekly playlists and let people subscribe to them. Build playlists from Billboard, Radio & Records, etc. and let people subscribe to them. And, of course, let "regular people" build lists of music and let people subscribe to them. Heck, build playlists based upon my ripped CDs and let me subscribe to them.

          Then let me build my own playlists of music and playlists. I might want to build a playlist of Billboard's Top 40 along with this song from your collection, this song from my CD, and Club DJ Wugmeister's mix. I might build another playlist of Radio & Record's Adult Contemporary listings, along with my Barry Manilow collection (from CD), the latest ABC News podcast, and WJAZ's Smooth Jazz playlist.

          The "Here's our whole catalog--you figure it out" model isn't bringing them in droves because it's too much work. I'm not going to pay $15 per month for access to a mind-numbingly large collection of music. But I might pay that much if the subscription service actually provides a service where I automatically get new music that I might actually want to listen to!

          • Re:So... (Score:5, Insightful)

            by CodeBuster (516420) on Friday April 06 2007, @05:19PM (#18640785)
            So make it a real service. Do some research. Use other people's research. Come up with genre playlists and let people subscribe to them. Find worthwhile podcasts and hire/pay people to make them daily/weekly and let people subscribe to them. Promote hot DJs at hot clubs by letting them come up with weekly playlists and let people subscribe to them. Build playlists from Billboard, Radio & Records, etc. and let people subscribe to them. And, of course, let "regular people" build lists of music and let people subscribe to them. Heck, build playlists based upon my ripped CDs and let me subscribe to them.

            This is so right that I just want to scream at the morons in the music business for not getting a system like this set up. The really revolutionary part is that each user can manage sets of subscriptions on their own personal device and they are not limited by a fixed number of "channels" or any other holdovers from the radio days and since each user is paying the same subscriber fee there is more of an incentive to cater to all of the various niches out there since the real cost is in setting up and running the service, but once it is all set up and going there is almost no cost to add additional niche programs, eclectic playlists, and off-beat selections ala the Amazon.com com and Craigslist list based systems. The system would not even need to have only human DJs, it could use AI and have intelligent agent programs making playlists and selections based upon live user feedback, random, shuffle, etc...it is really wide open possibilities. The only explanation that I can think of is that the music execs are either too greedy, too stupid, or both to get this type of system up and running.

            In the meantime you might want to check out Digitally Imported [www.di.fm] and A State of Trance w/Armin Van Buuren [www.di.fm]for some of the features that I have described above.

            The "Here's our whole catalog--you figure it out" model isn't bringing them in droves because it's too much work. I'm not going to pay $15 per month for access to a mind-numbingly large collection of music. But I might pay that much if the subscription service actually provides a service where I automatically get new music that I might actually want to listen to!

            Yes, Yes, Yes! If there are any music industry people reading this then PAY ATTENTION...THIS IS WHAT WE WANT. Sigh, they just don't get it.
          • A very good idea IMHO would be something like Pandora (http://pandora.com/), which classifies music using a wide range of parameters, and uses those to suggest other songs you might like. I've found hundreds of songs I would otherwise (likely) wouldn't have found at all.
          • This really is one of the best ideas I have heard for subscription music in a really long time.

            Actually it's one of the best ideas I have heard on slashdot in a while.

            Somebody mod these two up and somebody in the music industry please listen.
        • Good points. Still, you can tell me any kind of marketing speak, but it really does stop playing when you stop paying. You are aware of that, right? The comparison with TV is moot because I hardly ever rewatch anything on tv, but I do relisten most every CD I have.
      • The fact is the subscription music plan just sucks. It's like paying for radio. XM and sirus have a good idea, but very few people are willing to shell out money for music that stops playing when they stop paying.

        I agree with you that people are not willing to pay, but what I am wondering is, why? "It's like paying for radio." Yeah, but it's also like paying for television. It comes for free over the airwaves. Millions pay for cable, even though when you stop paying, the cable stops working. You pay $100 a
        • Maybe satellite radio has a shot--they have live things that you can't preload onto an iPod--but the music rental business will go nowhere.

          I don't know if I would go that far, imagine an XM radio attachment for your iPod that would allow you access to any of the XM streams from your iPod just about anywhere in the United States (or even the world if their satellite coverage is good enough) combined with the expertise of competent DJs selecting tracks with intelligent commentary, there are still a few st

        • Re: (Score:3, Insightful)

          by Pollardito (781263)

          The fact is the subscription music plan just sucks. It's like paying for radio. XM and sirus have a good idea, but very few people are willing to shell out money for music that stops playing when they stop paying.

          I agree with you that people are not willing to pay, but what I am wondering is, why?

          i don't think you guys are fair in comparing this to radio. with radio you can't control when/if the song you like plays, how often it plays, or how long it stays in the rotation. all of those are part of the reason that people buy albums to begin with, so obviously people were willing to pay to control when music plays before there was an internet. the only question is whether having music for a limited amount of time is worth the price relative to buying the CD or track where you get it forever, and t

        • Re:So... (Score:4, Insightful)

          by UncleTogie (1004853) * on Friday April 06 2007, @05:30PM (#18640907) Homepage Journal

          You could have taken that $100 a month and bought DVDs (and nowadays much stuff on TV is now available on DVD) but instead people are RENTING TV. Why?

          Because I can RECORD the rented TV shows so I *can* view them if I stop paying. Next question?
  • As predicted in October, 2006, based on keyword rate-of-change, Zune is a flop.

    http://www.realmeme.com/roller/page/realmeme/?entr y=zune_meme_rerun [realmeme.com]

    I believe the Microsoft attempted a viral marketing / meme manipulation scheme over the Internet, but I can't prove it. It's getting harder and harder to "advertise", partly because of the flood of information from the IT age, partly due to increasing resistence to memetic propagation.

    http://www.realmeme.com/roller/page/realmeme/?entr y=zune_meme_successful_prediction_so [realmeme.com]

  • Subsidizing probably won't help (Score:3, Insightful)

    by postbigbang (761081) on Friday April 06 2007, @03:06PM (#18639001)
    Enough marketshare has been lost that reducing the base price isn't likely to spawn more sales. The music will still cost about the same, the DRM is about the same, and the feature comparison is about the same.

    In this case, Microsoft's just admitting that it has an unsuccessful, come-lately design that isn't taking the market by storm. In the mobile/cell business, you sell hardware differently, based on features, pizzaz, functionality, and rate plans that suit an audience. Only the rate plan might change, but the RIAA is going to charge Microsoft what it charges Real and Apple; they're unlikely to discount the 'minutes'.

    Bad move: it cheapens the product rather than advancing it.

    • On the contrary! (Score:5, Funny)

      by parvenu74 (310712) on Friday April 06 2007, @03:13PM (#18639107)
      With MS dropping the price, and with Apple/EMI selling non-DRM AAC tracks (which the Zune supports), MS should be able to sell literally DOZENS more of these bad boys!

      • Re: (Score:3, Insightful)

        by jcr (53032)
        Maybe even dozens of dozens!

        The Zune is interesting primarily as a demonstration of MS's inability to grab a market where they don't have the monopoly leverage, and aren't willing to sell the product at a loss for several years. For the zune to make a dent in iPod sales, it needed a compelling advantage, and "squirting" songs that expire after three days sure wasn't it.

        -jcr
    • In particular, Quicken OWNED the money market. They lost to MS money because it was subsidized by being included for free on Windows. Likewise, XBox when it first came out got nowhere. When MS cut the prices WELL below the costs, then it started to pick up. Even now, they are still not at a break-even and the xbox division is still a major money loser. But I would be willing to bet that 1 or more of the competitors will be wiped out shortly and then MS will own the market.
      • When you sell below cost, it can be viewed as predatory pricing, something Microsoft knows well. But the 'carriers' in this case aren't willing to discount their price- unless there's a 'sweetheart' deal. In the mobiles/cell markets, the carriers subsidize the cost, not Samsung, Nokia, Motorola, etc.

        And while many companies try to 'buy' market share, they do so with eventual business models in mind. Microsoft doesn't own the software, like they do with the Xbox, and don't control how the software is used--
        • Doesn't matter what the model is. MS has LOST money on everything except for their OS and Office. They are using this to undercut all else. They believe that once they have the competitor out of the industry, then they will make it back. Considering that they did it to Dr.Dos, Stacker, etc, they appear to have the most profitable business model going (not necessarily the best, just most profitable).
      • Which competitor do you expect to be wiped out? Nintendo is making money hand-over-fist and Sony has enough cash to sell PS3s at a loss for years...

        (And Quicken never lost to MS Money...it outsells MS Money by a very large margin.)

    • New paradigm for portable music (Score:4, Interesting)

      by Overzeetop (214511) on Friday April 06 2007, @03:37PM (#18639475) Journal
      I'm going to agree with your detractors.

      A zune, even with it's questionable attributes, is going to be quite attractive at a $49 or $99 pricepoint - even if you get stuck with a year or two of $16.95/mo service. Americans will delay any capital investment - especially for entertainment - even if they pay through the nose on a regular basis. Cell phones, cableTV, satTV have far and away proven this to be true.

      I hate to admit it, but MS might - I say might - be on to something here. Something bad, imho, but I'm pretty far outside of the mainstream when it comes to this stuff.

      Now, they could end up being the first mouse instead of the early bird - I'm thinking prodigy and pop-up ads at the moment - but this could herald the beginning of a new paradigm in portable music. (Man, that's a lot of marketingspeak - I feel slimy just typing it).
      • My other comments stand: Microsoft is subsidizing the Zune, but can't control the costs of the 'minutes'-- the music. This is lipstick on a pig, and no, I'm not an AppleFanBoi. Apple got a whopping headstart that SanDisk, and a raft of others haven't been able to touch. I'm reminded of paraphrasing a Stones lyric: they can't give away on Seventh Avenue.

  • Worked great for the XBox (Score:5, Insightful)

    by ObligatoryUserName (126027) on Friday April 06 2007, @03:10PM (#18639045) Journal
    Subsidising the cost of hardware in the hopes of making up the money on content has worked wonders for the profits of the XBox division...

    I know, this is a different business model, but it looks like J Allard just trying to do what's "worked" in the past.

    • Re: (Score:3, Insightful)

      by Jason Earl (1894)

      What are you talking about. Microsoft lost billions on the original XBox. In fact, the reason that Microsoft came out with the 360 early was that it wanted to get the original XBox off of shelves as soon as possible. Microsoft is doing much better in this particular iteration, but that's mostly because it moved away from subsidizing the hardware to such a ridiculous extent. The XBox is still a long way from being profitable. Right now the best you can say about the XBox is that it is losing money at a

        • Sony's wildly popular and very profitable PS2 is still outselling the Xbox 360 in all three regions while production of the PS3 is ramping up to full capacity. The 360 is completely dead in Japan. Floundering in Europe. And selling to the very same people as the first Xbox.

          The real story is that Sony didn't have to be tricked into anything, they shot their own foot. You think the 360 is floundering in europe? The PS3 sales numbers dropped over 80% in the second week there. If the 360 is dead and rotting, t

    • No it has not! (Score:4, Informative)

      by EmbeddedJanitor (597831) on Friday April 06 2007, @04:01PM (#18639811)
      Read http://www.microsoft.com/msft/reports/ar06/staticv ersion/10k_fr_dis.html [microsoft.com]

      Home and Entertainment division lost $1.2billion dollars in 2006. If that is "worked", then I have a bridge to sell you.

    • This is different. This is the new MS strategy known as "pay people to use your products". They are doing it with their search engine too. They are offering to pay corporations money to make their employees use the live search engine.

      They have more money then they have interesting and compelling products so it may work for them although it's an oddball tactic. Paying people to use your products I think I missed that on econ 101.

  • I wonder how many 65% actually is. (Score:3, Funny)

    by smellsofbikes (890263) on Friday April 06 2007, @03:16PM (#18639147) Journal
    MS: We have a 65% increase in subscriptions! WOO HOO!
    interviewer: and how many people is that, exactly?
    MS: well, 13, actually...

    (dunno if my math is right...)
    • I actually saw a guy with a Zune yesterday on the subway. So far: Number of Zunes seen - one. Number of Creative Zens and other off-brands seen - a few. Number of ipods seen: About 10,000.
      • I have an ipod, that my company *gave* me. My gf has a Zen Nomad 30g. Her sister has a Zen mini (dunno the model). My brother has a Zen Nomad 30g. My mom has a Zen Nomad 30g. Oh, and besides the ipod, I also have a PJRC [pjrc.com] that currently has a 20 gig drive, because it gets unhappy with the 160 gig that I strapped on there, and the 80 I had on there died recently. That one gets by far the most comments. ("That's a WHAT?" "A ten year old MP3 player." "They *had* those back then?" "Yeah, they looked lik

  • Check out Google Trends for "zune" (Score:4, Interesting)

    by Anonymous Coward on Friday April 06 2007, @03:18PM (#18639189)
    http://www.google.com/trends?q=zune&ctab=0&geo=all &date=all [google.com]

    The news items that have been picked out are priceless (in chronological order):
            -Microsoft Confirms Zune
            -Microsoft Unveils Zune
            -Microsoft launches Zune
            -Zune misses top-10 sales list
            -Zune Executive to Leave Microsoft
  • I don't think they can subsidize Zune player. If they want to subsidize, they must have some way of recovering money. What model do they have to recover money? According to Apple, only 22 songs are being purchased for every player. If the figure for Zune is similar, there is no way they can recover any significant amount. Other model would be for them to sign up contract like cell phone providers do. But wait, cell phones are useless without service and hence the service providers can force contract. MP3 pl
  • MS last best hope for the Zune is to promote it as a continuously updated Top 40 player. Always have the music that your friends are listening to.

    The only problem is that I don't see how they could make more than $100, even on a two year contract. which is half the retail cost. I suppose if they are willing to lose money on the Xbox, then they can do the same thing on the Zune.

    BTW, when I checked on google, it appeared no one has paid for the sponsored on the keyword zune, just the side ads. It is i

    • That is because no one cool uses Google for searching anymore! MSN search is the new Google just as the Zune is the new IPod. You are like so out if it. So sell off your Wii and Nintendo DS and get a cool PSP and PS3 like the rest of us.

      • Re: (Score:3, Insightful)

        by kalidasa (577403)
        Don't you think this would be somewhat funnier (not quite funny, mind you, just less "unfunny") if you had said "get a cool XBox 360 like the rest of us"?
  • From the article: "The spokesman said a subsidized Zune is only one of a series of "wild ideas" being considered by the company's entertainment and devices division..." How about making the device more useful as a wild idea? Microsoft's ultimate sin is that they're lazy and cheap. They'd rather loose the franchise then spend the time and programmer resources to add features that people would find compelling. For starters, how about wireless syncing, web browsing, having an Outlook client, and being able
  • You can't get it in the UK yet, you insensitive clod!
  • for Zune Pass subscription service. No one knows what Zune Pass subscription service is and have interest but it changes by this article.
  • I guess the E.T. cartridge solution [snopes.com] was ruled out on environmental grounds?
  • I dunno about what everyone else thinks, but I don't really believe that price is the major reason that the Zune is an apparent 'flop'. Sure it has interesting features, but in my opinion (any my wifes), the thing is too-big, and too-ugly. The market is so fashion concious (hence the color options appearing, just like cell phone covers) I don't think the Zune would do much better if it was priced $100 less than an iPod. Now add in the easy in-car integration and home-audio integration available for the u
    • Your not talking about the 'ipod connector' I know a number of UK car adds are mentioning as a iPod integration are you? Those adverts annoy me so much then again I suppose saying a Line In Jack connector would be to confusing for most people. I'n not seen any 'iPod connectors' which wern't a standard input jack port much to a friends dismay after she paid £50 for it and I showed her how a £10 tape did EXACTLY the same thing and further more my phone could work it as well.
      Gotta love marketing

  • Just like PocketPC/WinCE, got $10B to spare do ya (Score:3, Insightful)

    by Locutus (9039) on Friday April 06 2007, @04:23PM (#18640101)
    pretty predictable considering WindowsCE/PocketPC/PocketMobile/etc is a blistering success and it only cost Microsoft over $10 billion and 10 years to purchase this success. But hey, they were only fighting Palm for that market and now they actually have to purchase marketshare from not only a consistently good design house but also one that captured the minds/hearts of non-geeks.

    I predict it'll take another 10 years but this time, it's gonna cost Microsoft atleast $20 billion in losses to do it. And, in 10 years, Microsoft will not be the same company it is now or was in the past. So, in about 5 years, you'll want to watch out for people driving their cars while attempting to reboot the Zune music player system.

    Microsoft; the maker of innovative products businesses must be paid to sell and customers must be paid to use.

    LoB
  • welcome to the social!
    sign up for a zune pass!
    welcome to the social!
    sign up for a passport account
    welcome to the social!
    provide name, address, telephone number, age and credit card number to complete registration!
    skip ... *crash*

    welcome to the social!
    sign up for a zune pass!
    welcome to the social!
    sign up for a passport account
    welcome to the social!
    provide name, address, telephone number, age and credit card number to complete registration!
    skip ... *crash*

    welcome to the social!
    sign up for a zune pass!
    welcome

  • Isn't this illegal? (Score:5, Insightful)

    by Fross (83754) on Friday April 06 2007, @05:57PM (#18641141) Homepage
    A company using money gained from another field in order to price something artificially low so as to stifle competition - i thought that was monopolistic and anti-competitive. Certainly supermarkets (here in the Uk at least) are prohibited from selling things artificially lower than cost in order to force out small businesses - why doesn't the same apply here?

    If Apple happened to ONLY make iPods, and Microsoft subsidised the Zune's sales, wouldn't they be trying to force Apple out of the market, by using their huge capital gained from software? That sounds illegal to me.

  • I fully expect them to subsidize it! (Score:3, Interesting)

    by codepunk (167897) on Friday April 06 2007, @07:40PM (#18642007) Homepage
    This has little to do with what they make on zune players the money is in the media. If they can over
    take Apple in the format war then they own the media and the only means by which to play it.

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