While you're right that this strategy may be nothing new, I dont think the rest is as you describe it. Microsoft is discounting the hardware to spur use of their store. They aren't discounting anything. The fact that they generally sell hardware at a loss is due to their inefficiency in design and production. And the purpose of this particular strategy has nothing to do with their online store, and everything to do with Apple's. Microsoft's primary focus is to strengthen the bargaining power of the music labels in their dealings with Apple. Once the labels are empowered, they can begin to fight harder for the pricing, distribution and profit margins they want from the iTS. This isn't price as a barrier to entry, it's back room bargaining power of suppliers.
And as for just leaving the early adopter phase......I was an early adopter in 2001. 5 years and millions upon millions of ipods later, for this to be the infancy of the digital music market, you must be expecting every person in china and india to own on when it really catches on.
Slashdot Mirror
So 1% of people surveyed essentially said they'd buy an expensive phone.... Apple is targeting 1% of the market..... DOOMED
While you're right that this strategy may be nothing new, I dont think the rest is as you describe it. Microsoft is discounting the hardware to spur use of their store. They aren't discounting anything. The fact that they generally sell hardware at a loss is due to their inefficiency in design and production. And the purpose of this particular strategy has nothing to do with their online store, and everything to do with Apple's. Microsoft's primary focus is to strengthen the bargaining power of the music labels in their dealings with Apple. Once the labels are empowered, they can begin to fight harder for the pricing, distribution and profit margins they want from the iTS. This isn't price as a barrier to entry, it's back room bargaining power of suppliers. And as for just leaving the early adopter phase......I was an early adopter in 2001. 5 years and millions upon millions of ipods later, for this to be the infancy of the digital music market, you must be expecting every person in china and india to own on when it really catches on.