The Online Music Report: How to Double-Cross Your Partners

September 6th, 2006

A lot of people have complained that Apple’s go-it-alone stance is bad for online music sales. Of course, the stellar sales picture shows the reverse, that having a relatively simple, unified method to buy and store your tunes is actually a good idea.

Of course, Microsoft thought otherwise, and for the longest time, as most of you know, tried to handle its music business in the same fashion as its operating system business. And that’s to develop the software and license its DRM, known by the clumsy name of “PlaysForSure,” to third-party companies to build the players, and, perhaps, to run the music stores that’ll incorporate the technology.

That idea, of course, went absolutely nowhere, although some tech writers kept regurgitating “iPod killer” articles, perhaps in the hope that if they repeated that silliness enough times, it might even come true.

In any case, Microsoft, after trying MSN Music (do you even remember that one?) and various other schemes without notable success, eventually decided that maybe Apple’s vertical integration scheme wasn’t so outrageous after all. Thus begat Zune, which, in fact, appears to be nothing more than a rebadged Toshiba music player. Well, at least that’s what has been shown so far, and I see little reason to doubt it.

Whether or not Zune will succeed is another matter entirely. The real issue here is what’s going to happen to Microsoft’s partners, who signed up for “PlaysForSure”, which uses the Windows (not the now-deceased Mac) version of Windows Media Player. Supposedly Microsoft will continue to develop the product. Supposedly. No doubt there are contracts in place that’ll prevent them from doing anything else, and there’s always the specter of the Department of Justice and the European Union to keep them honest.

On the other hand, if I ran one of those other companies, I’d be mad as hell right now over the turn of events. Basically, Microsoft is telling its partners they did a bad job, and now the mother ship has to go it alone. Forgetting the egos involved, do they just take it on the chin and hope Zune has the same fate as Dell’s music players, and just stick it out, or consider some new marketing strategies?

Samsung, for example, is providing its own music download service, but I can see where the landscape can get awfully crowded if other companies decide that’s the best solution.

Creative, at least, flush with its patent rights victory over Apple, has some new options. One is to earn a profit from licensing its interface to other companies, and suing the companies that don’t fall in line right away. And, of course, there are those iPod accessories it’ll be building, and that might deliver the biggest profits of all.

But what about the other companies who were left holding the bag as Microsoft vows to spend hundreds of millions of dollars to buy market share? Would they consider pooling their legal resources and see if they could sue Microsoft for its bad faith, even if the contracts may not have been actually violated in terms of the substance?

I don’t really see that happening, unless Microsoft’s own legal eagles screwed up royally and left enough wiggle room to keep the courts happy for a few years. Even then, it’s not going to help much with the bottom line now, and while they fight among themselves, Apple’s market leadership will be maintained or even increase.

Forgetting how it screwed its partners, the question you might still ask is whether Microsoft is really going to spend enough dollars and empower enough raw talent to build a product that is a compelling alternative to the iPod, along with an ecosystem that will build a loyal customer base. To be sure, it’s clear Microsoft is determined to make a big dent in this business, and there’s plenty of room to grow, so maybe two companies can sit at the top of the music player universe and survive.

But while I wouldn’t count Microsoft out given its history of perseverance and its huge war chest, what I’ve seen about Zune so far doesn’t really light my fire.

And if, some day, Microsoft wants to go back to its partners for more help, what do you think they’ll say? Will they just surrender and agree to an all-new marketing plan, or just tell Microsoft where to go and how to get there?

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3 Responses to “The Online Music Report: How to Double-Cross Your Partners”

  1. Cairn says:

    If Micrsoft is to compete in the music market, it has no choice but to do this. They gave huge opportunities for companies to build music players and music services. But it really didnt pan out. Although all the pieces “worked”, this is a patchworked system. Microsoft isnt really going at this alone (at least not yet). You can bet all non-iPod music players will still play WMA files. When they create an exclusive DRM, then you can cry foul (on Apple as well). At least Microsoft has a DRM that is licensed to many others.

    If I was one of those other music companies, I’d be embarrassed (not mad) and then create a better music player. That’s what competition is all about. Did you really expect these guys to just sit still?

  2. BDenver says:

    I don’t get it. If Microsoft did nothing, then you’d complain. Now they are actually doing something. The result… you complain. They are doing the right thing in order to compete with the iPod. What would you do to compete with the iPod? Surrender? no, that’s for weenies. The big boys in Redmond will fight and continue to allow users to switch to whatever music player they want, unlike Apple who locks you into one music store forever.

    I wouldnt say that the Plays-For-Sure thing went nowhere. Collectively, the non-iPod music players and music services are a threat to iPod.

  3. Mark says:

    Microsoft has to take action because this music thing is just the tip of the multimedia/entertainment content iceberg. The iPod/iTunes has gone from music to audiobooks to photos to podcasts to TV shows/music videos, and soon to movies, and possibly as rumored to books (not audio, but readable content). That’s the content side that Apple is tying to their own store (for commercial sales) and to their own creation tools (for personal/free distribution).

    Microsoft sees this evolution happening from the text/numbers world of MS Office to this other artsy world of iLife (which Apple highlights in their ads). If Microsoft doesn’t act quickly, Apple could sew up this world the same way that Microsoft dominated the Office world.

    So it’s finally recognized that it’s strategy of a distributed pieces which worked so well monetarily for Windows/Office won’t work for consumer electronics. Because the distributed pieces just don’t work simply enough or well enough together. (This includes Windows Media Center Edition too.) By the way, it should’ve seen this earlier as a result of its Xbox experience. In computing, there is an IT department and when there isn’t, people just put up with it because they have always done so and refused to recognize that it could be better. But in content consuming, people haven’t had to have this experience in the analog world and won’t suffer it now just because it’s going digital. (People who bought lots of individual audio/video components do have this experience and they might be willing to put up with it to get component freedom and performance. But not the mainstream consumer. )

    So the distributed model is dead for consumer electronics. There’s no going back. And Microsoft may already be too late with the Zune (crappy name). They may have to regroup and attack from still another angle of phones and PDAs.

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