Microsoft's Dangerous About-Face

Peter Burrows

The talk of the day is that Microsoft's upcoming Zune music player and a related music service will be proprietary, just like Apple's iPod-iTunes combo. That's the word from a slew of sources I've spoken with yesterday and today. In other words, DRM-protected songs purchased from Microsoft's new music service won't play on devices other than the Zune, and the Zune won't play songs from other services.

If true, this is huge news that could have huge implications. Just to get started, there's the impact on the obvious losers: all those music player makers (Creative, iRiver, SanDisk, Samsung, etc.) and all those music services (Napster, Real, Wal-Mart and most especially MTV--who in recent months has been Microsoft's latest poster-child for partnering, with its URGE music service.) who have based their digital music lives on Microsoft's PlaysForSure Windows Media standard.

Microsoft's defense will likely be that it will continue to support the PlaysForSure effort, alongside this new set of products and services from the Robby Bach gang. But once the Zune ads start plastering the airwaves later this year (something that will drive Microsoft's dissed partners raging mad, since many felt Microsoft never came through with a big-time marketing blitz to help them take a bite out of Apple), momentum for that hurting ecosystem will go from neutral to hard reverse.

Now, I fully understand Microsoft's reasoning. The partnering strategy hasn't worked, and it's time to try something new. And who knows, Microsoft may well have dreamed up a winning product. After all, it's giving Sony fits with its Xbox. But that's a big if. Apple has a gargantuan lead and isn't sitting still--as the world will likely find out during Steve Jobs' keynote at the Worldwide Developers Conference on Aug. 8. What's more, not all music fans feel comfortable buying into a closed system--and most of those that do have probably already begun building their iTunes collections.

There's potential collateral damage from Microsoft's change in strategy, too. Some think it could impact the development of the overall digital music world. “This will confuse consumers, and limit their choices," says David Pakman, head of eMusic, which sells music from indie labels in the MP3 format. "The more that happens, the less music gets sold."

The confusion could also slow the pace of music-related innovation. Currently, anyone that wants to create a slick new device or service and have access to the major labels' catalogs has little choice but to partner with Microsoft (since Apple isn't much interested, and no other DRM-protected platform really matters). If entrepreneurs have to worry about competing with Microsoft from the outset, they'll likely opt to find more promising things to do.

Stepping even further back, how will Microsoft's Apple imitation impact its broader Windows Media strategy? Currently, Microsoft represents the "open" option to counter Apple's "closed" approach. A primary plank of Microsoft's pitch to Hollywood, the music labels and other content owners is that using Windows Media enables them to get their bits onto a vast slew of devices. I'm sure Microsoft has thought this through, so it's not such a simple either/or choice. But if Microsoft ends up essentially offering an open and a closed option on its menu, media execs may question its real intentions. Is it more interested in hawking its own devices and services, or in creating that rich ecosystem that results in countless ways for consumers to buy content.

Indeed, I want to hear Microsoft explain what they hope to achieve with Zune. If my hunch is right and the Windows Media message gets clouded, it would have to be helluva hit to be worth it. I can even imagine how all this could end up strengthing the hand of the man Microsoft set out to weaken, Steve Jobs. After all, if Jobs' media titan friends decide they face a choice between Apple's closed system and Microsoft's closed system, it's not a tough call. The folks at Apple have a lot more experience--and a lot more success--at that game.

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