Microsoft's Attention Defecit Disorder & The Music Industry

by Alan Graham

*At the end of this piece you'll find an exciting game. Stick with me and play along!



I'm a strange duck in the Apple space. I'm one of a minority of Mac users who don't think that Microsoft is actually evil. That doesn't mean I don't have a bone or two to pick with them. For one thing I think their hyper-competitive nature has been detrimental to several markeplaces on the whole. They are like Donald Trump without personal charm and panache. When Trump beats you, he does it with a good suit, a smile, and a tan. When he wins, it's not personal, it's business. When I think of Microsoft winning, my perception is that the geek mafia just paid you a visit and you're sleeping with the fishes.



Well MS is at it again. This time, the Godfather of Code, is entering the music business.



An Offer You REALLY Cannot Refuse

Before I became I writer, I was an executive during the dot-com boom, doing evangelism, business development and marketing. I made my decision to get out of the industry when I saw companies getting millions of dollars in VC money to sell pet food over the Internet.



"Uh yeah...ship me the 60 pound bag of dog food..and can you overnight that? The dog is really hungry."


The madness I saw back then is the same madness I see in the current online music store craze. Every idiot around fancies themselves an online music retailer and a revolutionary, as if wide and ever expanding variety in this space will be compelling instead of confusing to consumers.



A partial list of playas on the scene (or coming) so far includes:


Apple iTunes

Wal*Mart

Sony

Coca-Cola (yes Coca-Cola)

Dell

Napster

BuyMusic.com

Real Networks

Virgin

MTV


Enter Microsoft...



Not satisfied with dominating the operating system, the web browser, cell phones, PDAs, game machines, streaming video, television, networking, and your wristwatch, they are now entering from behind the wizard's curtain into the online music game. Their strategy to date (similar to all of their strategies) is very interesting.



Let's look at it:



1. License the Windows Media format to almost every online music vendor (except perhaps two).

2. Wait until all those checks have cleared.

3. Open our own competing store and piss all over those vendors.

4. Get them to take it with a smile while saying things like:



"We have known for some time that they were considering this, specifically the MSN group," said Greg Rudin, vice president of marketing for FullAudio's MusicNow service, which is carried as a link inside Microsoft's Windows Media Player. "We are strongly partnered with the Windows Media division, and...they have given us assurances that they will be fair and equitable with their partners."



Heh heh...sure they will Greg, sure they will. I've heard that one before. Does anyone else here, other than me, think Greg Rudin may be looking for a new job six months after the release of Microsoft's online music store?


So what altruistic motive now drives Microsoft into a market they once preferred to leave to their vendors? Get ready for this (I am not responsible for any damage caused to your computer via a spit take):


"CHOICE"


I kid you not.


In a recent "Q&A" posted on Microsoft's PressPass website (their propaganda site for journalists), Dave Fester, General Manager of Microsoft's Windows Digital Media Division, was asked all sorts of questions (by their PR department masked as journalists) about choosing the right media player for the Windows user.


Dave used the word "choice" eight times in six paragraphs. Five times alone when discussing iTunes for Windows. His argument is simple. Apple iTunes is a poor solution for Windows users because it limits you to Apple's solution. But, what Microsoft wants to offer you, is choice. Choice of player, choice of music store, choice of media file. Oh yeah, as long as you choose their Faustian file format. Now to be fair to Microsoft, Apple's goal to have people use their own proprietary solutions is really no different than Microsoft's, however, the audacity of telling people that their offering is better for you because it is about personal choice is laughable.



Ah, Sweet Freedom of Choice

While no one yet knows how the online music market will shake out, I can tell you that the public isn't going to be able to support an industry driven by choice. Most online music stores (many driven by the same back-end solutions) offer you similar prices, similar content, similar previews, and similar experiences. So like Mr. Fester points out, you're free to have 20 different accounts with 20 different online music stores, using 20 different shopping carts, and perhaps 400 different music players out there. If you ask me, so far "choice" sounds like a real pain in the a$$.



Remember in the "olden days," while it was often difficult for some local music stores to compete for business with the likes of Wal*Mart, they did have some benefits that no superstore could offer. You knew you could go in and see a varied and often eclectic mix of local and international music, plus a knowledgeable staff. Above all you always found a person whom you could establish a personal relationship with, someone whose opinion you valued. And you'd pay a small premium for that level of service. Back then it was conceivable you might shop around when purchasing music. And although some stores fell under the weight of competition from the big chains, some actually thrived.



Not so in the future. Whose got time to visit all these different sites? Sure, people want choice, but they also want ease of use, simplicity, speed, and value. All this comes down to one common denominator - time. With the iTunes music store I have variety, I have simplicity, I have speed, and I have a player that ties it all together. I don't care about the other 40 or 100 or 500 music players out there. I'm looking for a complete seamless solution with zero hassle. So when Dave Fester form MS tells you it's all about choice...



...One store might have a particular CD or single that you're looking for; while you might discover that another store has it at a lower price. Additionally some stores may carry more music than others, or they may run different promotions. The same is true for online music "stores." It's important to be able to shop around to find the best music at the best price and take advantage of any sales or exclusive content that a particular service may have."



...I just have to chuckle to myself.



I'm sorry, but I just don't see this happening. I could be wrong, but we know from the candid information coming from Apple, there isn't much money to be made in the online music game. So I can't see there being much of an opportunity to do any competitive pricing, because quite simply, you can't have a price war without everyone losing their shirts. The only winners in a price war are the record labels.



As for online libraries, I'm sure all of these vendors (with the exception of some exclusive deals and rare material) will offer almost the exact same catalogues. So why would I trudge from site to site, account to account? Makes no sense. Sure, everyone wants to be a bargain shopper, but not when the ultimate cost is their valuable time. If this was all about saving a buck, I guess Apple wouldn't be leading the pack in music players and downloads. Therefore, I don't see Microsoft's offer of choice all that compelling.



Microsoft of course knows this as well, which is why this ruse of offering consumers a choice is so funny to me. I'm sure they will soon help us quiet the din of which music store to buy from by driving their vendors...I mean competitors...out of business.



Speaking of the Competition

I've had a peek at some of the other vendors out there. Their solutions are clunky and feel like they were slapped together by monkeys (no offense to actual monkeys). Remember all the houpla BuyMusic.com made last year when they used the motley Tommy Lee as an anti-establishment icon and positioned themselves as a better solution than the iTunes Music Store? Like using Windows made you a rebel or something? Whatever happened to those guys? I haven't seen a leading story about them since their launch in July. In fact, openly mocking Apple for delivering an excellent solution didn't really carry any weight in the real world. While Apple controls one of the smallest computing market shares, they've certainly left Napster, BuyMusic.com, Wal*Mart, and others scrapping for some of the limelight. I mean talk about being the middle kid in the family. If I were the CEO of BuyMusic.com right now, I'd be about to have a Jan Brady meltdown.



"It's always iTunes, iTunes, iTunes!"



Microsoft's ADD

I'm not a MS bashing zealot. I don't spell Microsoft's name with the dollar sign where the "s" should be. I don't go to Microsoft forums and troll bait MS users with "Apple Rules" postings. I'm using Word right now. Heck, I own an xbox and I love it. However, as one who suffers from ADD, I am able to easily diagnose what the real problem with Microsoft is, and thus my main problem with Microsoft.



Instead of making their current offerings more secure and work properly together (like iLife), they continue to divest into other markets where they see the opportunity to make a buck or seize control. As we speak, they are rolling out a new service that beams data to your wristwatch. And while that's really cool and all, you know what I really want?



I want a computer that doesn't crash everytime a worm makes the rounds. I want you to stop telling us you're doing something about security and do something about security. And finally I want you to stop talking about the future and start delivering it. You know how Apple NEVER discusses what they have in the pipeline before it is done and ready to ship? I want you to do that. I'm tired of hearing about the future. I don't want to hear about satellites or telephones or the next big thing. I don't want to hear some seriously ridiculous vision of how you will defeat spam in two years. What I want is this #$%^&* printer to work when I plug it in.



If Microsoft really wants to offer us a strong competitive choice to Apple's offerings in the music space, they will focus on the technology and stay out of selling music.



Endgame

So while we sit here awaiting the Department of Justice to slap Microsoft's hand for putting FullAudio out of business, I think we should take into consideration that no one yet really knows what will happen in this space. However, in the true nature of commentators and analysts who make predictions that are consistantly wrong (I'm not naming names - you know who you are), I've got a few predictions of my own that I think we can make into a fun little game. I like to call it:



"Whose Already Dead & Doesn't Know It."



Here's how to play. Using my list below...



Apple iTunes

Wal*Mart

Sony

Coca-Cola

Dell

Napster

BuyMusic.com

Real Networks

Virgin

MTV

FullAudio



...take a moment to make your predictions on which online music service is already out of business and doesn't actually know it yet. Pick those you think will fail within 12 months of MS launching their own branded service. Put your choices in order, and if you like, add your reasoning. Post them only in the Talk Back below. The most accurate posting will win a $20 gift certificate for Amazon.com from yours truly. Only one person can win, so if there is a tie, I will pick the winner using a random number generator...or something geeky like that. This is O'Reilly after all.



Here are my picks as an example (although I cannot win):



FullAudio - "they have given us assurances that they will be fair and equitable with their partners." I give these guys 6 months.


Dell - While they like to envision themselves as the "Apple" of the PC world...I think shareholders are gonna question investing company assets into a loss-leading market. They don't need a music store to sell music players. All they need to do is practically give them away like they do their PCs.


BuyMusic.com - The Universe has got a bead on them. If you hold yourself up as a shining example of a better solution to a solution that is better than your own...instant karma is gonna get you. The marketing gods are cruel.


MTV - If their music store turns out anything like their cable channel, it won't have any actual music on it.


Coca-Cola - I'm selling my Coke stock and you should too. While Pepsi got it right...Coke got it wrong. Coke shouldn't be selling anything that doesn't rot your teeth. Music sales won't drive Coke sales...the exact opposite is actually true.


Napster - Too much time lost, too much money invested, and no street cred. Once the rebel and bane of the "establishment," Napster is now, "The Man."


Sony - record labels owning music stores. Um...anyone think their competing labels will want to provide Sony's store with content?


Who Survives:

iTunes - Apple isn't selling music for the sake of selling music. I can't imagine (even if possible) Apple users going far beyond the iTunes service...so at least for their own user base, I see them pulling though.


Real Networks - Since I've privately predicted their downfall for years, I know they'll survive just to tick me off. After they collect their giant settlement check from MS, I'm sure they'll be able to remain in business for at least another 5 years.


Wal*Mart - these guys have never been afraid of a price war, and they certainly have the ability to lose money for years to come. Shopping their online music store is like shopping in any Wal*Mart. It is cold, has no personality, it practically impossible to get in and out of quickly, and is about as hip and cool as a lumber yard. But they'll stick with it! My only concern is that they'll start importing downloads from China to undercut everyone else.



Update: Here's some choice for you. Tell me this isn't confusing.

Let's Play!


5 Comments

kollivier
2004-01-26 09:11:45
Great Message
Ties in with another article I read about sales people running Microsoft. It certainly explains a lot of their business decisions, if not their technical ones.


Let me note before I start, that I think Microsoft will end up becoming both a music vendor and an Amazon-like backend provider for "customized stores". So I think some of the services may not outright fail, but will become basically a front end for Microsoft's music store.


With that out of the way, here's my picks for the down in out category, in order:


- FullAudio: err, I've never even heard of these guys before this message. I think that says something.


- Virgin: I don't think they have a strong enough brand to drive people to their site


- Coca-Cola: Hey, Pepsi's giving away songs for free, why would people go to Coca-Cola to buy them? Plus, who thinks of 'music' when they think Coca-Cola?


- Napster: The name makes the non-rebels among us nervous, considering it got slapped around in the courts before. They'll have to convince everyone that they've 'gone legit' first.


- BuyMusic.com: They'll stick it out for a while, but when MS tags their own solutions, they'll either become an "branded MS music provider" or fall out entirely


- RealNetworks: I don't think they have staying power here. There's too many vendors, and they can't just 'be there', they'd have to stick out and be the best in one way or another.


So, in the winners category, that leaves:


- MTV: This one I'm not totally sure about. It's got access to a critical target audience - teenagers. Even if the MTV store became an "MS branded solution", they'd probably have good sales. Also, they're already in good with the music industry.


- Dell: This one I'm also not sure about, but I think it will hang in there. The justification to stockholders will be - look how good iPod is doing, if we don't integrate our music store, everyone's just going to buy an iPod. And with PC sales not being a hot market anymore, vendors like Dell are being pressured to move into other markets. Eventually I think they will offer a branded solution with MS, as I don't think they want to be in the music-selling business, but they do want an integrated software and player solution.


- Sony: Can you say "Memory-stick will only allow you to store music digitally signed by the Sony music store?" =) They'll do OK because they already have a label and a good portion of the music hardware market.


- Wal*Mart: their pricing and, more importantly, the fact that they are now already a household name, will keep them in business. But I think they're just doing it to maintain a presence and brand name in the 'digital age'.


- Apple: Well, duh! =)


kavka
2004-01-26 10:08:15
My pics
These are the definite 'outs':
FullAudio - No name recognition, no differentiation. Maybe if they did something unique like a partnership w/XM that would allow to to buy stuff you liked off of XM with a press of your car stereo's button and it'd be waiting on your PC... otherwise, not a chance.
BuyMusic.com - the name is even bad for this one. People don't want to 'buy music', they want to hear a cool new song and be able to have it to listen to whenever they want - it's about the experience, not just a sale.
Dell - Aside from screaming 'me too!' at Apple, why does Dell want to bother? Maybe they could focus on the Classical crowd. Otherwise, they'll let it lose money until shareholders axe it.
Real Networks - Real hasn't made a friendly, useable interface or product for ages now. They'd be better partnering up with someone than going it alone.
Coca-Cola - They try to do music from time to time (I still have a mini-CD from the early 90's they gave out with 12-packs) but they lose interest quickly. They have enough cash to keep it around longer than they should, but eventually they'll probably partner with MTV.
Maybe:
Wal*Mart - If they want to do it and throw money at it, they could just keep it around and not lose a ton (but not make a ton either). Might be strong on country sales.
Sony - Could be very strong Classical seller. Otherwise, people will look for sites that represent all labels more often than individual labels. A memory-stick/mini-disc player or some such could keep it more viable, a la iPod.
Napster - the napster-branded player and new media campaign will probably pull them through. If they can buy out a couple of the duds from this list (or of they just die), they'll be fine. After all, unlike anyone else, this is pretty much all they do.
Best bets:
Virgin - cos they could make a cool service to tie in with their cell phones.
MTV- as long as they focus on urban and pop styles the name will keep it afloat. They can offer some really cool promotions to drive sales.
Apple iTunes - cos it works, works well, and enough people already use it to not want to switch. HP will ship systems w/iTunes now.
And who will be around even though they shouldn't be? Microsoft - if they want to do it, they will find a way to...
jimothy
2004-01-26 12:38:06
My picks
Die within 12 months:


BuyMusic.com -- The first to go. Unlike many of the others, this doesn't have a parent company with deep pockets to keep in running.


Full Audio -- All has been said already


MTV -- Drops it's own store in favor of partnering with another (likely Sony, as it's about the only company aside from Apple with the "cool" image that MTV targets).


Coca-Cola -- Would have liked to partner with Apple, but Pepsi beat them to the punch. Turns out to be nothing more than a short marketing campaign, and Coke quietly closes shop on the music store.


Dell -- Survives the longest, but still dies before the year is out. In an uncharacteristic move, Michael Dell's ego gets in the way of the bottom line as he refuses to admit he's been beaten by Apple. Holds out for a while before capticulating and returning the money to the shareholders (just kidding on that last part). The board and the shareholders, however, finally push for its closure.


Survivors:


Sony -- Same strategy as Apple: sell music at a loss or razor-thin margin to sell players. Sells an MTV-branded player.


Wal-Mart -- Unprofitable, but neither a major revenue stream or earnings drain, so Wal-Mart lets their music store limp along in a state of virtual neglect.


Real Networks -- They've made it this far; they'll keep going somehow.

perspeterson
2004-01-28 14:14:39
Its not about Music
Its not about Music with Apple - it never was. They have an excellent streamlined player that integrates with their hardware.


The music store is there to push iPods which will (hopefully) push Macs, OSX, etc.


Apple cannot possibly make a living off this service since the margins are so small.


What do these other guys have to offer? Yes, Pepsi did get it right. Buy a Pepsi and get a chance to download a free tune. Not bad. The others?


Microsoft is getting into it since it is software after all. From the player, to the integration with Hollywood/Record Industry (.Net/Web Services "Seamless Computing" thing) except this time, it will run on different devices?


Perhaps download from your car, or your PocketPC, your xBox, or anywhere MS OS can run. Apple's solution? The Mac/PC or an iPod.


jimothy
2004-01-29 15:35:42
1 down, 4 to go
Looks like I'm right on Coca-Cola. Today, it's been announced they are partnering with MusicMatch. I'll bet they're fuming Pepsi beat them to the Apple punch.