Microsoft's Zune finds an Apple's iPod killer

Yea, nice work people...how much money have you already spent on iTunes songs that you don't listen to anymore? Try a subscription service and tell me you don't like getting the latest music and taking it with you...and if you don't like it, no problem, you don't have to keep it. Anyone wonder why every music service (that I know of) besides iTunes offers a subscription plan in addition to purchasing the songs?

I own a creative player and my wife owns an iPod. She NEVER listens to it and always uses my player. She doesn't want to listen to her ripped CD's from 5 years ago...she wants to listen to the new music that I downloaded a few minutes ago and not have to buy it and be stuck with it.

Those of you who are bashing the Zune should seriously consider your motives. Why are you bashing it if you love the iPod and iTunes so much. Go buy some more music you won't be listening to in two weeks. If the Zune sucks so bad, you have nothing to worry about right?

I have not seen or played with this new device, so I can't give my 2 cents about whether it's good or not, but I hope it's awesome.

"Yea, nice work people...how much money have you already spent on iTunes songs that you don't listen to anymore?" - Jon

Easy. $0.00. I have more than 15k songs in my library. My 80gb iPod is almost full. A 30gb zune would be absolutely useless to an audiophile like myself.

Casual listeners such as yourself may only listen to what's on the radio, but if that's the case get a WALKMAN circa 1980, save some cash and rock out!

I have no animosity toward Zune or MS. I am a PC user. But I assure you, this will be a bigger flop than "BOB."

Isn't this argument surprisingly similar to the Blackberry market? I see the consumer being extremely brand loyal until technelogical advances antiquate the IPod. Remember Nokia phones in the late 90's... When was your last Nokia purchase? Until MSFT comes up with a delivery device which separates and differentiates itself from the IPod, the consumer will dictate what music format will be presented. Keep in mind, name a music artist willing to risk their future against 70% market share?

Isn't Nokia still the largest company in it field?

Doug McIntyre

mensrea...so you are bashing me now? Good music does exist (new and otherwise) other than what's on the radio, as it sounds like you can appreciate, but thanks for thinking of me. It's good you are content with your existing music collection and I'm so glad you didn't have to buy 15k songs on iTunes!

My point is the Zune supports an all you can listen to and take with you model, which iTunes does not. Just curious, but what do you do when you hear some music from a friend or on the Internet or go to a live show or heaven forbid the radio? I sign on to my service and start listening or download and take with me. I have to admit Apple did get one thing right...software / hardware interaction…if they would just add a subscription service. Wait a minute...isn't that what Microsoft is doing with the Zune?

Jon, I've neither bashed you nor Microsoft. I didn't realize identifying you, based on your statements as a "casual user" was considered to be an insult. Nor was I aware that offering a well reasoned and honest opinion about how the Zune will be a huge failure is necessarily bashing. My position is that the model is half baked and focuses on the music distributors rather than customers and as a result it will fail.

As Donald Rumsfeld recently quipped, "Write it down. You can bank it."

As to your query; as an audiophile, I find out about new music from all various podcasts, All Songs Considered, I also subscribe to Rhapsody primarily for the purpose of listening to new albums in determining whether I want to buy them, after that I have a number of choices in terms of how to obtain and music and get it onto my iPod.

I can buy the music on Rhapsody or a CD and rip it into iTunes, I can simply buy it at iTunes, and there are other options.

I don't lease cars and I don't lease music. I like to own it.

And yes apparently Zune has tried to replicate Apple's integration, however according to every review I've read they failed to make it simple and accessible. 79 credits per dollar? What kind of nonsense is that?

As far as the radio, I detest it, I can only quote Art Brut and say that, "Popular culture, no longer applies to me."

This article is a perfect example of why the financial industry consistently fails to understand the tech industry and routinely fails to accurately predict market direction. It was only a few years ago that similar articles were being written about Apple going out of business based on a COMPLETE lack of understanding of Apple's market dynamic (as well as misinformation about Apple's financial position.)
More importantly, this particular article seems to be written from the perspective of someone who quite simply has NO understanding of the basic mechanisms of capitalism.

"Count on Microsoft Corp. (NASDAQ:MSFT) to be as clever as the devil. The new Zune business model will turn Apple Computer, Inc. (NASDAQ:AAPL) on its ear. Microsoft will give Universal Music a cut of the sales price of each Zune sold. Apple only gives content providers a piece of the downloaded music or video."

So what? While this may blunt the calls from the music industry to federally mandate another payola scheme similar to the one they have with cassette tape manufacturers, this will have no effect on the industry at large, and will result in zero pressure on Apple. Basic capitalistic theory dictates that Apple, being the middle link in a supply and demand chain, should feel the greatest pressure from the demand side, the side that is actually doing the pulling. With 70% of the market, this will overwhelm ANY effect caused by disgruntled music industry players. The fact that Zune's presence in the market will be miniscule certainly does not help alleviate this obvious condition.

"One of the reasons this model is attractive to music companies is that much of the content on most iPods comes from ripped CDs, which means that the music publisher gets nothing. Now comes Microsoft with a way to that assures the music firm revenue from the Zune."

Likewise, the music industry is NOT in a place where they can afford to put significant pressure on Apple. Who cares if it is attractive to them?!? They can tug on the chain all they want. With no legs to stand on, they will only succeed in pulling themselves off balance. The music industry is in the business of making money, and they are NOT in a position to put ANY pressure on the holder of 70% of the market.
The author's reasoning is backward. The only way that Zune will be in any position to put pressure on Apple is if they take market share, and that is dictated by consumers, NOT the record industry. There is no evidence that a significant portion of the consumer base is even interested in the Zune, let alone thinking of buying one, so it makes no difference how attractive their model is to the industry. The only thing that matters is how attractive the Zune is to consumers, and all indications are that consumers consider it a joke.

"The ball now goes to Apple's court. The iPod maker does have over 70% of the share in portable multimedia devices, but music companies are somewhat ambivalent about the device. While iPod gives them huge distribution, Apple keeps most of the revenue pie."

Again, so what? The music industry is in no position to do anything but sit in a corner and grumble to themselves.

"Apple will probably see no need to counter Microsoft's move immediately, but if the music industry warms to it, MSFT may find itself in the role of preferred provider to entertainment companies that think its revenue model is more attractive."

What a load of bull. This statement is made as if it should be accepted at face value, with absolutely NO supporting evidence. Besides the fact that this is decidedly NOT how capitalism works, the author has given NO justification for this unwarranted conclusion. Again, whatever impetus the industry wants to give to another player, they are not stupid (well, not THAT stupid.) Their preferred provider will be the one selling the most songs. Since the is essentially no materials cost for them per unit, the one selling the most songs generates the most profits, period.

In addition, if you believe for even a second that the music industry wants MS in a position to control even a small but significant section of the market you are insane. They have seen how MS operates and while they may be willing to climb into bed with them, they are certainly keeping one eye open and a foot planted firmly on the floor.

"And that could be tough for Apple."

Yeah, don't hold your breath.

You sound like someone who owned shares in Ford the year that Toyota shipped its first car to the US.

Doug McIntyre

Precisely DeusExMachina.

Apple makes not one red cent off of sales of songs from itunes. All of their ipod/itunes related revenue comes from the sale of ipods only. Artists and record labels get all of the itunes sales dollars. I do not wish Microsoft any ill-will, but there's no more streamlined, efficient and intuative marriage then the ipod and itunes. Simple simple simple. My ipod has broken down a time or two, but...credit where credit is due.

Something I've not seen anyone comment on is that the profit from the zune hardware is a finite pie. As more and more music distributors sign on to get their share of the Zune pie, who is going to give up some of their share? Will it be microsoft? Or will Universal give up some of their share? It seems to me that both hardware manufacturers and music distributors win with the current model.

It's really hard to see how the "business model" pressures Apple. Apple has 80%+ share in online music sales. 70% of that cash goes to labels. They are not going to walk away from that kind of cash ($100s of millions collectively) with zero incremental expense. Conversely, online music is breakeven for Apple--it can walk away. Ipod sales benefit from the vast music availble from Apple online, but it's just a small part of the ipods appeal.

The whining of the record industry shows its weakness. Apple is a lot stronger than when these arrangements and splits were negotiated. Renegotiation could easily mean Apple gets more. All the whining is posturing to make sure that doesn't happen.

Walking away from Apple is enough of a cash flow hit to mean immediately going back to headquarters and cutting budges/projects/staff.

But please everyone, believe this pressures Apple's margins. Sell/short your Apple now so I can pick some more up cheap. =)

Aw, Dougie found a Microsoft-worshipping friend in Gene, whose opinion certainly has nothing to do with the fact that he's so far up Bill Gates' arse that he's running ZuneChannel.com. Oh, goody, the ridiculously wealthy Microsoft is bribing Universal to play along. If Zune will not allow folks to burn their own CDs onto it, which it seems is some kind of suggestion that is not quite being denied, who is going to buy the glossy poop-colored (Al Gore natural-color approved?) thing?

This is a lame, copy-Apple item, with a twist; just as Windows was, and still is, really, a lame imitation of Macintosh OS. Yes, yes, yes, the overwhelming majority of people work on Win-PCs, of course. I do too. I have no idea why "most-used" equals best in some people's minds. I'm not fooled.

Have a nice day.

Your view is based on the content suppliers being eunichs. They have leverage based on the fact that there are only a few of them. Only one needs to do an exclusive deal with Zune and Apple will have a problem. Microsoft can drive that kind of leverage. They have the money.

Doug McIntyre

No, my view is based on capitalist theory. Ever heard of it? Apparently not.
The major labels have NO leverage at all. Far from needing to be eunichs [sic] any attempt to bully Apple would be suicide. It is not a question of testicular fortitude, to continue your eunuch (dump IE and use firefox, it has a built in spell-checker!) reference, or the lack thereof, it is pure economics. There is not a single major label supplier of content that is in a position to pull content from ITMS. Apple, however, is in a perfectly fine position to tell them to go screw themselves. At this point, since the do NOT make a revenue stream from ITMS, they could sever ALL ties with the labels and continue to sell iPods.and not take any financial hit. The only result would be that iPod numbers would remain about the same, and piracy rates would go back up. You think that because some kid can't get the new 50cent track from ITMS that he will decide to get a zune instead? No, he will get an iPod and d/l it from eDonkey. Jobs was successful in converting copyright violators into paying customers. It will only take an idiot following your sage advice at the major labels to convert them right back to criminals.

What a bunch of crap. They got my oney when I bought the darn CD i ripped onto my machine. Now they want to double-dip...

Video didn't kill the radio star. The music labels did...

RIP...

1. "Count on Microsoft Corp. (NASDAQ:MSFT) to be as clever as the devil."

2. "The new Zune business model will turn Apple Computer, Inc. (NASDAQ:AAPL) on its ear."

I think it's well past time to stick a fork in theses baseless suppositions.