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.'"

Zune Meme Prediction (From October)

[broward]

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]

I suspect that you are wrong.

[WindBourne]

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.

Check out Google Trends for "zune"

[Anonymous Coward]

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

New paradigm for portable music

[Overzeetop]

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).

Wild Ideas being considered by the company

[rancher dan 3]

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 to read Hotmail mail? Removing a ton of the DRM crap would also be nice. What? the music companies won't play ball? &*(%ing buy one of them and throw management out on its ear. You've got more cash than most 3rd world nations. /grump off

Re:Worked great for the XBox

[Anonymous Coward]

Don't be absurd.

You had better check out the losses at similar points in time between the first Xbox and the 360 before making any claims about progress. So far Microsoft is roughly generating the same amount of red ink and Microsoft has gotten better at hiding the losses this time around. Even the claims of breaking even are almost exactly the same with the break even point supposedly being 'about a year to two away'. Ballmer had publicly stated that 2008 was their target for 360 breaking even but that was before the true extent of the hardware defect fiasco had become apparent.

And I don't what the hell you are claiming about Microsoft 'tricking' Sony into anything. Sony has been on their same hardware design and release schedule everyone has known about for the past five years. 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. Just check the worldwide installed base numbers at similar points in time. The 360 is selling at a slightly worse rate compared to the first Xbox.

So, no, Microsoft is irrelevant to Sony's or Nintendo's plans. The 360 is selling to the very same ~20 million US fans while bleeding similar amounts of cash. After five years and many billions wasted, Microsoft has made absolutely zero progress in the console market.

Yeah, 'the boys in Redmond' are loving the Xbox...

Release it first!

[Threni]

You can't get it in the UK yet, you insensitive clod!

Re:So...

[R3d M3rcury]

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!

Subscriptions only make a $3.00/month profit

[Karlt1]

This article was written by a member of the Microsoft Zune team. It basically says that the music industry charges $11.95/per user for subscription music on portable devices. Microsoft and most of the other subscription services charge $14.95/mo. That's only a $3.00/mo profit. Even if they give away a $60 1GB flash player. It still would take them 20 months just to break even.

http://www.zunester.com/2007/01/subscription-servi ce-finance-101.html [zunester.com]

I fully expect them to subsidize it!

[codepunk]

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.