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Microsoft Considering Subsidizing Zune Sales

Posted by Zonk on from the nothing-else-has-worked-why-not dept.

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.'"

28 of 141 comments (clear)

  1. So... by Anonymous Coward · · Score: 5, Funny
    "the spokesman said subscriptions rose 65% during January."

    So... that's 165 people?

    1. Re:So... by peragrin · · Score: 4, Informative

      Even if it is 165,000 people it's not that big of a deal. Apple is selling millions of ipods.

      The fact is the subscription music plan just sucks. It's like paying for radio. XM and sirus have a good idea, but very few people are willing to shell out money for music that stops playing when they stop paying.

      It is a nice market, and always will be.

      The best part of itunes is that it has more than just songs. I don't own an ipod. I just don't like any of the models and I am not impressed with any other music player either. But I still shop at iTunes. I grab the Battlestar galactica or Hero's episodes I missed and forgot to tivo.

      I then unplug my monitor's dvi connector, and plug in my tv's dvi cable.

      Even the simple 640x480 resolution they sell looks good on a 23" HDTV. not spectacular but better than the regular tv reception I get.

      --
      i thought once I was found, but it was only a dream.
    2. Re:So... by encoderer · · Score: 5, Insightful

      1. Music subscription services are pretty popular. Perhaps you don't like it, but I've turned many people on to it and I've gotten a lot of positive feedback from friends and family. You're not paying for music thats stops playing when you stop paying. You're paying to listen to HUGE, GIGANTIC libraries of ANY SONG YOU WANT, whenever you want, wherever you want.

      Your comment like saying "Nobody would PAY for Cable Television. It makes no sense. Few people are willing to shell out money for television that stops playing when they stop paying"

      2. Your comment about iTMS having TV & movies is funny. Are you actually suggesting that a subscription model wouldn't work well for TV shows? I mean, what makes you think that MSFT couldn't offer TV as part of their subscription price in the future? When iTMS launched they didn't have TV in the beginning, either. You do realize that people have been buying into the subscription-model for TV for, oh, 30 years now?

      3. I love my iPod and I love iTMS. But as soon as I realized that I couldn't burn my TV purchases and that there was no "PlayFair" for video DRM I refused to give them another cent. Their video DRM is hideous and unacceptable. Imagine if FairPlay refused to let you burn them to CD. Well, THATS the kind of service you're paying for. $2 for 22 minutes of video that is crippled beyond all usefulness.

    3. Re:So... by R3d+M3rcury · · Score: 5, Interesting

      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!
    4. Re:So... by Pollardito · · Score: 2, Insightful

      The fact is the subscription music plan just sucks. It's like paying for radio. XM and sirus have a good idea, but very few people are willing to shell out money for music that stops playing when they stop paying.

      I agree with you that people are not willing to pay, but what I am wondering is, why? i don't think you guys are fair in comparing this to radio. with radio you can't control when/if the song you like plays, how often it plays, or how long it stays in the rotation. all of those are part of the reason that people buy albums to begin with, so obviously people were willing to pay to control when music plays before there was an internet. the only question is whether having music for a limited amount of time is worth the price relative to buying the CD or track where you get it forever, and that probably has more to do with:

      A. do you tend to listen to a lot of new music and then move on to the next thing?
      B. do you already own most of what you listen to in formats like CDs?
      C. do you listen to music from a deep catalog or do you listen to things a smaller catalog a lot?

      what strikes me about those things is nearly every one of them favors younger listeners as someone that would get more use out of renting music. A) they quickly move onto the next top 40 song, so they care very little that a year from now if they quit this service they can't listen to the stuff they would buy now; B) they don't already own most of what they listen to already, they're young and just starting to build their collection; and C) they probably listen to a few songs off tons of albums and are always adding new things into their list, so buying the equivalent catalog is prohibitive compared to subscribing to a service.

      since most of Slashdot's readers are older than this audience and we probably don't even regularly talk music with people in that audience, it doesn't surprise me at all that we don't understand it's attractiveness
    5. Re:So... by CodeBuster · · Score: 4, Insightful

      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.

      This is so right that I just want to scream at the morons in the music business for not getting a system like this set up. The really revolutionary part is that each user can manage sets of subscriptions on their own personal device and they are not limited by a fixed number of "channels" or any other holdovers from the radio days and since each user is paying the same subscriber fee there is more of an incentive to cater to all of the various niches out there since the real cost is in setting up and running the service, but once it is all set up and going there is almost no cost to add additional niche programs, eclectic playlists, and off-beat selections ala the Amazon.com com and Craigslist list based systems. The system would not even need to have only human DJs, it could use AI and have intelligent agent programs making playlists and selections based upon live user feedback, random, shuffle, etc...it is really wide open possibilities. The only explanation that I can think of is that the music execs are either too greedy, too stupid, or both to get this type of system up and running.

      In the meantime you might want to check out Digitally Imported and A State of Trance w/Armin Van Buurenfor some of the features that I have described above.

      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!

      Yes, Yes, Yes! If there are any music industry people reading this then PAY ATTENTION...THIS IS WHAT WE WANT. Sigh, they just don't get it.

    6. Re:So... by UncleTogie · · Score: 3, Insightful

      You could have taken that $100 a month and bought DVDs (and nowadays much stuff on TV is now available on DVD) but instead people are RENTING TV. Why?
      Because I can RECORD the rented TV shows so I *can* view them if I stop paying. Next question?
      --
      Don't tell me to get a life. I'm a gamer; I have LOTS of lives!
    7. Re:So... by letxa2000 · · Score: 2, Insightful

      I agree with you that people are not willing to pay, but what I am wondering is, why? "It's like paying for radio." Yeah, but it's also like paying for television. It comes for free over the airwaves. Millions pay for cable, even though when you stop paying, the cable stops working.

      I think the difference is that TV programs, most of the time, are something you probably only watch once. Sure, if you see an old movie on HBO you might tune in if there's nothing else to watch; and some TV programs might be worth buying the DVD later. But, for the most part, TV broadcasts are usually something that are usually consumed and then you're done. A few TV programs I really liked I did buy on DVD... only to only watch them one more time.

      Music, on the other hand, I will listen to time and time again. I might go 10 or 15 years without listening to a given song, but when I want to hear it again, I don't want to have to be paying for some service to do it. Especially since most of the music I listen to is NOT new so there's no reason to pay for something that brings me new stuff I don't like. I'd rather have the stuff I want and not have to pay for it over and over.

  2. Zune Meme Prediction (From October) by broward · · Score: 5, Interesting

    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

    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

    1. Re:Zune Meme Prediction (From October) by PitaBred · · Score: 3, Funny

      That's only if you have Google's SafeSearch enabled...

      (no, I haven't tested it. It's a joke, damnit)

      --
      My blog. Good stuff (when I remember to update it). Read it.
  3. Subsidizing probably won't help by postbigbang · · Score: 2, Insightful

    Enough marketshare has been lost that reducing the base price isn't likely to spawn more sales. The music will still cost about the same, the DRM is about the same, and the feature comparison is about the same.

    In this case, Microsoft's just admitting that it has an unsuccessful, come-lately design that isn't taking the market by storm. In the mobile/cell business, you sell hardware differently, based on features, pizzaz, functionality, and rate plans that suit an audience. Only the rate plan might change, but the RIAA is going to charge Microsoft what it charges Real and Apple; they're unlikely to discount the 'minutes'.

    Bad move: it cheapens the product rather than advancing it.

    --
    ---- Teach Peace. It's Cheaper Than War.
  4. Worked great for the XBox by ObligatoryUserName · · Score: 5, Insightful

    Subsidising the cost of hardware in the hopes of making up the money on content has worked wonders for the profits of the XBox division...

    I know, this is a different business model, but it looks like J Allard just trying to do what's "worked" in the past.

    1. Re:Worked great for the XBox by Jason+Earl · · Score: 3, Insightful

      What are you talking about. Microsoft lost billions on the original XBox. In fact, the reason that Microsoft came out with the 360 early was that it wanted to get the original XBox off of shelves as soon as possible. Microsoft is doing much better in this particular iteration, but that's mostly because it moved away from subsidizing the hardware to such a ridiculous extent. The XBox is still a long way from being profitable. Right now the best you can say about the XBox is that it is losing money at a slower pace.

      Microsoft has been able to buy a lot of friends by giving away hardware, and it tricked Sony into following a similar ruinous path, so it is not all bad news for the boys in Redmond, but Microsoft's investors are likely to jump ship if every single new venture involves flushing billions of dollars down the crapper.

  5. On the contrary! by parvenu74 · · Score: 4, Funny

    With MS dropping the price, and with Apple/EMI selling non-DRM AAC tracks (which the Zune supports), MS should be able to sell literally DOZENS more of these bad boys!

    1. Re:On the contrary! by jcr · · Score: 2, Insightful

      Maybe even dozens of dozens!

      The Zune is interesting primarily as a demonstration of MS's inability to grab a market where they don't have the monopoly leverage, and aren't willing to sell the product at a loss for several years. For the zune to make a dent in iPod sales, it needed a compelling advantage, and "squirting" songs that expire after three days sure wasn't it.

      -jcr

      --
      The only title of honor that a tyrant can grant is "Enemy of the State."
  6. I wonder how many 65% actually is. by smellsofbikes · · Score: 2, Funny

    MS: We have a 65% increase in subscriptions! WOO HOO!
    interviewer: and how many people is that, exactly?
    MS: well, 13, actually...

    (dunno if my math is right...)

    --
    Nostalgia's not what it used to be.
  7. I suspect that you are wrong. by WindBourne · · Score: 2, Interesting

    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.

    --
    I prefer the "u" in honour as it seems to be missing these days.
  8. Check out Google Trends for "zune" by Anonymous Coward · · Score: 4, Interesting

    http://www.google.com/trends?q=zune&ctab=0&geo=all &date=all

    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

    1. Re:Check out Google Trends for "zune" by Steve--Balllmer · · Score: 4, Funny
      you forgot the last one...

      -Zune Executive found dead due to acute "deceleration of chair to head"

  9. New paradigm for portable music by Overzeetop · · Score: 3, Interesting

    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).

    --
    Is it just my observation, or are there way too many stupid people in the world?
  10. Wild Ideas being considered by the company by rancher+dan+3 · · Score: 2, Interesting

    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

  11. No it has not! by EmbeddedJanitor · · Score: 3, Informative
    Read http://www.microsoft.com/msft/reports/ar06/staticv ersion/10k_fr_dis.html

    Home and Entertainment division lost $1.2billion dollars in 2006. If that is "worked", then I have a bridge to sell you.

    --
    Engineering is the art of compromise.
  12. Release it first! by Threni · · Score: 2, Interesting

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

  13. Re:Absolutely by kalidasa · · Score: 2, Insightful

    Don't you think this would be somewhat funnier (not quite funny, mind you, just less "unfunny") if you had said "get a cool XBox 360 like the rest of us"?

  14. Just like PocketPC/WinCE, got $10B to spare do ya by Locutus · · Score: 2, Insightful

    pretty predictable considering WindowsCE/PocketPC/PocketMobile/etc is a blistering success and it only cost Microsoft over $10 billion and 10 years to purchase this success. But hey, they were only fighting Palm for that market and now they actually have to purchase marketshare from not only a consistently good design house but also one that captured the minds/hearts of non-geeks.

    I predict it'll take another 10 years but this time, it's gonna cost Microsoft atleast $20 billion in losses to do it. And, in 10 years, Microsoft will not be the same company it is now or was in the past. So, in about 5 years, you'll want to watch out for people driving their cars while attempting to reboot the Zune music player system.

    Microsoft; the maker of innovative products businesses must be paid to sell and customers must be paid to use.

    LoB

    --
    "Anyone who stands out in the middle of a road looks like roadkill to me." --Linus
  15. Isn't this illegal? by Fross · · Score: 4, Insightful

    A company using money gained from another field in order to price something artificially low so as to stifle competition - i thought that was monopolistic and anti-competitive. Certainly supermarkets (here in the Uk at least) are prohibited from selling things artificially lower than cost in order to force out small businesses - why doesn't the same apply here?

    If Apple happened to ONLY make iPods, and Microsoft subsidised the Zune's sales, wouldn't they be trying to force Apple out of the market, by using their huge capital gained from software? That sounds illegal to me.

  16. Subscriptions only make a $3.00/month profit by Karlt1 · · Score: 2, Interesting

    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

  17. I fully expect them to subsidize it! by codepunk · · Score: 2, Interesting

    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.

    --


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