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Warner Music, innovation and Zune

Wmg_1 All of the major record labels claim to be the alpha dog when it comes to new technology, but Warner Music Group is clearly a leader in one important arena: parties thrown during mobile-phone trade shows. Granted, I don't get out much, but I give WMG points for wanting to hang out with the cellular geeks. Anyway, at the latest such event (held Sept. 13 during CTIA Wireless I.T. & Entertainment 2006), I asked Alex Zubillaga, WMG's head of digital strategy and biz-dev, when he thought the price of downloads would drop. I've wondered for a long time why the labels haven't really tested the price elasticity of their digital products, given retailers' ability to set prices dynamically online. And as iTunes' phenomenal growth slows -- it took Apple the same amount of time to sell the latest 500 million tracks (seven months) as it did the previous 500 million tracks, despite Apple's expanding presence overseas -- at some point the industry will want to try to attract more customers by cutting prices, right? Isn't that what consumer-products companies do? Zubillaga's response: the digital era is just beginning, and the right way to promote growth is through innovative ways to experience music.

Regardless of how you feel about the labels' pricing strategy -- I'd rather see a low-price, high-volume approach, but then, I buy a lot of music -- I think you have to agree with Zubillaga that the digital era still in its infancy. There's been some great innovation in digital music, from the late lamented Uplister to Rhapsody to Pandora and Last.fm. But we've barely scratched the surface of what's possible, particularly when it comes to introducing music fans to new bands and blending music into other experiences. I was reminded of this when Microsoft finally made its Zune announcement. Putting wireless networking into a portable device opens up a world of opportunities, and those opportunities will expand exponentially once broadband WiFi coverage or similar connectivity becomes ubiquitous. You know the day is coming when you'll be able to connect to the Internet wherever you may be (the mobile phone companies argue that it's already here, but their services are too rich for my blood).

Zune itself is a baby step along that path, and given Microsoft's record with consumer devices, chances are pretty good that it'll trip. The only thing Zune will allow you do to wirelessly, at least initially, is push songs from your player to a friend's player. If he/she accepts, the songs can be played up to three times in the subsequent 72 hours before being locked out. And they can't be unlocked the songs wirelessly; to do that, your pal will have to buy the tracks on a PC. It's not nearly as intriguing as MusicGremlin, which (in theory) enables you to copy songs from any nearby MusicGremlin subscribers who aren't keeping their collection private. But Microsoft wants to get the basics right first, and hope those features will be enough to get the product off the ground. Like I said, I'm skeptical, but I hope Microsoft gets far enough along with Zune to take its networking capabilities to the next level.

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Times editorial writer Jon Healey pens opinion pieces about a variety of business issues, and blogs about technologies that are changing the entertainment industry's business model.

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