Microsoft Considering Subsidizing Zune Sales

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.'"

Subsidizing probably won't help

[postbigbang]

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.

Worked great for the XBox

[ObligatoryUserName]

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.

Comment removed

[account_deleted]

Comment removed based on user account deletion

Re:Worked great for the XBox

[Jason Earl]

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 slower pace.

Microsoft has been able to buy a lot of friends by giving away hardware, and it tricked Sony into following a similar ruinous path, so it is not all bad news for the boys in Redmond, but Microsoft's investors are likely to jump ship if every single new venture involves flushing billions of dollars down the crapper.

Re:So...

[encoderer]

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:Absolutely

[kalidasa]

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"?

Just like PocketPC/WinCE, got $10B to spare do ya

[Locutus]

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

Re:So...

[Pollardito]

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 that probably has more to do with:

A. do you tend to listen to a lot of new music and then move on to the next thing?
B. do you already own most of what you listen to in formats like CDs?
C. do you listen to music from a deep catalog or do you listen to things a smaller catalog a lot?

what strikes me about those things is nearly every one of them favors younger listeners as someone that would get more use out of renting music. A) they quickly move onto the next top 40 song, so they care very little that a year from now if they quit this service they can't listen to the stuff they would buy now; B) they don't already own most of what they listen to already, they're young and just starting to build their collection; and C) they probably listen to a few songs off tons of albums and are always adding new things into their list, so buying the equivalent catalog is prohibitive compared to subscribing to a service.

since most of Slashdot's readers are older than this audience and we probably don't even regularly talk music with people in that audience, it doesn't surprise me at all that we don't understand it's attractiveness

Re:So...

[CodeBuster]

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.

Re:So...

[UncleTogie]

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?

Isn't this illegal?

[Fross]

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.

Re:So...

[letxa2000]

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.

I think the difference is that TV programs, most of the time, are something you probably only watch once. Sure, if you see an old movie on HBO you might tune in if there's nothing else to watch; and some TV programs might be worth buying the DVD later. But, for the most part, TV broadcasts are usually something that are usually consumed and then you're done. A few TV programs I really liked I did buy on DVD... only to only watch them one more time.

Music, on the other hand, I will listen to time and time again. I might go 10 or 15 years without listening to a given song, but when I want to hear it again, I don't want to have to be paying for some service to do it. Especially since most of the music I listen to is NOT new so there's no reason to pay for something that brings me new stuff I don't like. I'd rather have the stuff I want and not have to pay for it over and over.