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Brier Dudley's blog

Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

November 19, 2008 at 9:00 PM

Microsoft Zune giving away music, service on phones next?

Microsoft’s Zune still isn’t going to catch Apple’s iPod, but you’ve got to give the group credit for creative approaches to music licensing.

Zune is announcing Thursday that people who subscribe to its $15 per month Zune Pass subscription music service will be able to download and keep 10 songs a month. It also cut device prices earlier this week, with the base 4 gigabyte model falling to $99 from $129.

The Zune Pass “hybrid” model could make its subscription cost more palatable to consumers. Getting $10 worth of songs lowers the perceived cost of the service to $5.

It’s also a good comeback to the 25 free plays a month that RealNetworks began offering this year to propagate its Rhapsody service.

Apple, meanwhile, doesn’t have a subscription service, but then it’s expected to sell around 19 million iPods this quarter alone vs. the 3.5 million Zunes sold to date.

What’s really interesting about the Zune Pass announcement, though, is that it signals Microsoft’s increased emphasis on the service side of the business.

Expect to see Microsoft extend the service beyond Zune players to other Web-connected devices such as phones and set-top boxes, which will give subscribers access to this music collection in the cloud.

This will follow Rhapsody, which is now available on Verizon phones, TiVos and various home audio devices.

Could Microsoft offer the Zune service through a wireless carrier, similar to Rhapsody’s Verizon deal?

“Absolutely,” Zune director Adam Sohn said.

Sprint or T-Mobile USA perhaps? They sell Microsoft-powered phones, Verizon has Rhapsody and AT&T is tight with Apple.

Another logical partner for the Zune service would be Netflix, which has all sorts of ties with Microsoft. Netflix boss Reed Hastings is on the Microsoft board and the company has a distribution deal with Xbox, Zune’s big brother in Redmond.

As Netflix expands its stream-to-TV service, based on Microsoft technology, it could add ZunePass to compete with the video-and-music bundles offered by cable TV services.

Sohn didn’t confirm or deny my Netflix hypothesis.

“Everything’s on the table,” he said.

Set-top boxes could be one of the “tuners” that people use to access their Zune service in the future, he said.

“We actually think there are lots of other places to consume Zune,” he explained. “We call them tuners here but you could call them devices, endpoints, whatever. The mobile phone is a prime example of one of those.”

We started out talking about the downloads, but I think we ended up previewing the Zune strategy we’ll start hearing more about in 2009.

“We start to think about Zune as a service tied to you and less a service tied to a particular mode of consumption,” he said.

In other words, it’s not just about the Zune hardware.

“We do think of Zune as a broader, horizontal entertainment service — that’s the direction we’re going, that’s the service we’re building,” Sohn said.

The big question is whether anyone will be able to afford a $15 month music service by the time Zune’s grand plan emerges.

(A few more details about Zune Pass, for the curious: Zune now has more than 4 million tracks available from the four major labels and independents. Not all will be available for download; Sohn said more than 90 percent of material that people regularly download will be available as ‘keeper’ tracks. The downloads will be “CD quality,” Sohn said — 192 Kbps bit rate or higher. Most Zune content is now in MP3 format, in which case the download won’t have DRM. If it’s available only in Windows Media format; it will have restrictions such as limits on the number of times a backup copy may be burned to disc.)

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