So. This is how Microsoft could take over the digital music market, and create a whole new revenue stream in the process:
Before any of this starts, I love Apple to the point where it makes my significant other jealous from time to time. Steve Jobs is one of my heroes, slightly outranked by Fake Steve Jobs. I've bought three iPods, and am planning on a fourth already. My Macbook is necessary in the same way food and oxygen are.
But the approach they've taken to music is hilariously dependent on the labels they are fighting with over control. Luckily, I think Apple considers iTunes a means to the end of selling iPods the world over. This is, mainly, what it does in a manner that is above reproach.
Microsoft has several major advantages that have gone unused, or underused. 1) They are selling a player that has the ability to trade music built in to every unit. 2) Every major music label is looking for a credible place to turn that isn't Apple, and that is more willing to negotiate terms. 3) Microsoft is sitting on a massive user-base who trusts (or at least tolerates) their products. 4) Microsoft is Microsoft.
The music sharing functions on the Zune are crippled by DRM. This is inarguable, and definitely had to be thrust upon the company by the music industry partners they needed to launch the accompanying music service. Still, this is the game changing tool that is needed. Music is social. Music is supposed to be shared, and learned about through social connection, and that requires sharing. There was a time when that meant inviting someone over and playing it for them, but now it involves copies.
This is the main issue that isn't discussed. Music is not what it was. This is no longer a market defined by selling slabs of plastic. It's about offering context and convenience, because the competition is the now normalized act of online piracy. This is the basis of subscription models, which, if memory serves, is what Gates and Co are trying to push.
The first thing Microsoft would have to do is unlock the sharing function. Make it so that any song traded from Zune to Zune is traded permanently. This, obviously, will be a hard sell to anyone in the music industry. So, there's a simple solution. Make one of the requirements of the sharing function is that anyone who is not signed up with the Zune marketplace, or social, or whatever it's called this week, gets files wrapped in timed-delete DRM. Everyone subscribed, go nuts. Free and easy trading to anyone with a subscription, because in a sub-based service, they're getting the music anyways.
However, this is all useless unless you get people to try the damn thing, first. Which is why you need to bundle a year's subscription to every new Zune unit.
Unfettered sharing is a useful thing. So, it has the potential to become addictive. Let it do so. This will require concessions to the labels (as everything does) so offer them, at first, a percentage of the price of each new Zune. That might not be enough, but there are still two things up your sleeve at this point.
Firstly, you're Microsoft. The biggest, strongest, most willing to take a loss in the short term, most likely to break into a market already won and take over company in memory. Honestly, the major battle-cry here should be 'Apple dominates the market, and has defined the category? Well, we've never won in THAT situation before...' Play hardball. Make concessions, but make it clear that this is a no-holds-barred fight for control of the market, and not siding with you is like deciding in advance not to succeed. Artists with clout are already leaving labels and creating their own distribution channels. If a major one takes off, and a label has locked itself out of it for no good reason, well, you end up in the situation the music labels are now, with execs approaching senility wondering if that Fanning boy can still get them a dominant position in the market, like he was talking about back in the day.
Be Microsoft. Make it work, because crossing you is generally idiotic.
Secondly, and most importantly, offer them a whole new revenue stream.
In allowing open sharing between any Zune subscriber, which, at first, means any Zune user, you gain access to data. In something as simple as getting users to give you an email address, and A/S/L info, you gain access to a horrendous amount of information. Not only do you get demographic breakdown of who likes what music, and how it spreads among ages and locations, but you get something truly unprecedented. By tracking sharing, you get an epidemiology of music, information on who the influencers are, who shares music, who is the first in an area or social circle to discover it, and how many people they send it to. You get real time information on the popularity of an artist - not through plays, which though useful are misleading, but through exposure, who is downloading, who is sharing, and who is re-sharing.
This information alone is worth losing money for a few years for. Not just to target advertising, but from a logistics perspective. Imagine the ability to plan a tour to maximize attendance, and therefore profit, at every stop - every single show in a place where the artist is at the peak of popularity. Imagine creating a market for selling this information to touring bands, imagine offering it to managers, to labels, etc, for either money or cooperation. This works for indie acts, as well. They more than anyone need a good turnout at shows, just to make money - price it on a sliding scale, and this information suddenly gets indie acts working with majors on a regular basis, for survival.
Imagine targeting advertising for an artist, or similar artists, to areas where they are right near a breaking point. Imagine trackable word of mouth.
This is ignoring completely random ideas, such as taking the influencers identified for this information, and slipping them preview tracks for new albums or artists. If they like, it, it gets distributed and re-distributed. Completely organic buzz and anticipation, kicked off from a concrete, calculated standpoint.
I've worked out further uses, and further details to make the plan work smoothly, but it's a moot point, as I don't run the Zune division of Microsoft. Other companies could technically do the same thing, but they either lack the software influence, the compatible hardware, or the influence to do it in a game-changing way. This is a method of offering something superior in user experience to a generation used to free music with minor hassle. They need something to play it on. And if Microsoft has taught us anything from the Xbox, it's that taking a loss in the short term, or even the shorter long term, is worth having serious sway in the market.
This is one way to do it.
