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How to Kill the iPod

Zune_logo Reports circulated widely today that Microsoft was readying a slate of products designed to compete with Apple's market-stomping iPod/iTunes combo. Specifically, there's a new version of MSFT's online music store (anybody remember the original?), a new subscription music service and a pocket-sized device that plays music and video.

Personally, I don't think MSFT understands consumer products. But prospects for this venture are better than, say, UltimateTV or MSFT's last online music store (anybody remember... oh, never mind), simply because the effort is being led by Robbie Bach - the guy who led development of MSFT's only previous consumer-product winner, the Xbox. Well, OK, the Xbox still runs a distant second behind the PlayStation, but at least it wasn't laughably bad.

The problems for MSFT are multiple. For starters, it would be competing with its partners, such as MTV, which just rolled out an online music service to great fanfare. Not that MSFT ever worried about competing with former partners, but still.... Second, Apple has set an extremely high bar when it comes to usability. Third, subscription services are forced to wrap music in an even more complex version of DRM than stores like iTunes use. I can't tell you how many times I've had to reformat the hard drive on my little iRiver player because of problems caused by Microsoft's DRM, Yahoo! Unlimited music service or some combination thereof. Although I don't have much patience for that kind of thing, I probably have way more tolerance than the average person does.

But I think there's a chance for the Redmondites here, provided the labels and music publishers play ball. At the right price - no more than $10 a month - a music subscription service absolutely kills. So far, though, no one's been able to sell subscriptions to the masses. Compared to the growth of iTunes sales, the subscription guys have been stuck in first gear.

The problem hasn't been the services themselves, I don't think, but the marketing. Consumers have been put off by the prattling (occasionally by the King of All Digital Media) about being left with nothing when their subscriptions lapse. This is an entertainment service, just like cable TV (and who complains about not owning all the shows you watch on cable?), and being able to play an unlimited number of songs from a 2-million-track library for $10 a month* is a really good value. So MSFT, come up with a snappy, easy-to-use device and combine it with the right message about the value proposition, which you need to sell with the kind of gusto Apple has put into its products. Then maybe, just maybe, you've got a chance.

*I know the labels want extra dough for portability, but they're misreading what that feature is worth to consumers. It's both an essential feature and an afterthought. Subscription services have to offer portability to make themselves seem worthwhile, but I don't think people use it that much. Instead, they use the services to provide a soundtrack to their lives in front of a computer, as well as to sample artists and albums they're curious about. When they find something that really speaks to them, simply being able to put it on a portable player won't be enough. They'll spend the extra money for the version on CD (or whatever format they'll use for permanent copies). So portability won't make much of a dent into permanent downloads, IMHO. I also think that pricing the service above $10 craters the demand.


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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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