Microsoft enhances the Zune service with MP3s
Subscription music services -- the kind that let you hear an unlimited amount of music per month for a flat fee -- made their debut almost seven years ago, and yet the public remains stubbornly cool to the idea of paying for music you don't get to keep. Now, Microsoft is offering the first significant sweetener to the deal since the services added portability by letting subscribers to the Zune Pass service keep some of the songs they play. Ten, to be precise, and the songs will be in the DRM-free MP3 format.
The point, said Chris Stephenson, general manager of global marketing for Microsoft's Zune product line, is to make the concept of music subscription services more alluring to average consumers who still think of music as a product (like CDs) and not a service (like cable TV). The new Zune offer is a halfway house for recovering music collectors. The standard Zune offer had been $14.99 per month just to play songs freely from Zune's 4.4-million track library. The new offer carries the same price, but the inclusion of roughly $10 worth of MP3s means that subscribers pay a little more than $5 for unlimited access to the online tracks. For consumers, $5 a month for music you can't keep is a considerably smaller leap than $15.
Is it small enough for the masses? I'm guessing no. Zune's main problem is that, like every other subscription music service, it doesn't work with the world's most popular portable music player. I say that even though I really like the latest line of flash-based Zunes. They sound great, work snappily and have one magical (to me, at least) feature that iPods can't replicate: They can connect wirelessly to the Net and play tracks from the Zune library (provided, of course, that the owner subscribes to the Zune Pass service). They're not just MP3 players, they're high-tech radios capable of tuning in just about any song on demand, anywhere you can log in wirelessly to the Net. For someone with a voracious appetite for new music, the possibilities are intoxicating. But the vast majority of music fans already have an MP3 player, and it's not a Zune. Even if they own something other than an iPod, it still won't work with the Zune Pass service unless it's an actual Zune. (An exception may be in mobile phones, a variety of which are powered by Microsoft's mobile operating system. Stephenson said mobiles were "definitely part of the future platform strategy for the Zune," but he declined to be more specific.)
Beyond that, the average consumer doesn't have a voracious appetite for new music, at least not the kind he or she has to pay for. Anyone who spends less than $60 a year on CDs and 99-cent downloads -- in other words, most consumers -- might find it hard to see the benefit of a vast music library that costs $180 a year to use. And no matter how many MP3s you bundle with the service, $14.99 a month still adds up to a heck of a lot more than most people spend on music annually.
All the same, Microsoft believes the inclusion of 10 MP3s will finally make the subscription model appealing to a wide spectrum of music fans. Its label partners evidently agree; they were so eager to try the new tactic, Stephenson said, "we ended up getting these deals done in the shortest possible time." Now that's something you rarely hear about when dealing with major record companies. The software giant also has updated the Zune PC software, adding several intriguing music-discovery features (for example, personalized playlists that are pushed to subscribers). It has cut the price of Zunes, with the entry-level, 4-GB model now selling for $99. And it recently launched an advertising campaign on prime-time television -- the kind of promotion Apple has lavished on its products, but subscription-music services have avoided.
All-you-can-eat subscriptions were supposed to be the future of the music business, and the model was once promising enough to attract such heavyweight brands as MTV and Yahoo. Today, however, only three services are still standing: Rhapsody (now a joint venture between RealNetworks and MTV), Napster (which Best Buy recently acquired) and Zune Pass. According to Stephenson, his company is the only one that's growing, but neither Microsoft nor RealNetworks discloses how many customers they actually have. *For its part, Napster has reported dwindling subscriber counts. Stephenson did say that half a million subscribers was "in the same ballpark as where we're headed." For the sake of the subscription-music business model, I hope they get there.
* RealNetworks reported an increase of 125,000 subscribers for its paid music services last quarter, pushing it back above the level it had reached a year ago. But it didn't say how many of those were Rhapsody users and how many were merely customers of Real's premium radio service. Nor did it say how much of the growth came from Yahoo folding its failed subscription-music service into Rhapsody.
-- Jon Healey