Microsoft’s Offer You Can’t Refuse

by on July 24, 2006 · 6 comments

David Robinson, guest blogging at Freedom to Tinker, points out this fascinating preview at Engadget of Zune, Microsoft’s answer to the iPod/iTunes juggernaut. Engadget predicts that Microsoft will “buy out” iTunes switchers, scanning the user’s iTunes library and buying the users those same songs encoded in Zune’s DRM format.

Like Robinson, I hadn’t thought of this possibility. The recording industry almost certainly gave Microsoft a steep discount on song-repurchases. It’s conceivable they even let Microsoft do this for close to nothing, simply to undercut Apple’s market power and (consequently) its negotiating position vis-a-vis the labels. If a substantial fraction of music listeners are using Microsoft’s Zune service, that gives the labels a credible threat to walk away from the bargaining table if Apple plays hardball next time contract renewals come around.

As Robinson said, some of us in the anti-DMCA choir probably underestimated the potential of markets to undercut the monopoly created by the DMCA. The development arguably undermines the argument I made last year that the labels are giving away the store to Apple. However, I don’t think development eliminates the concerns over the DMCA by any means. The barriers to entry into the music business remain extraordinarily high. To do what Microsoft is doing here, you not only have to build an MP3 player and develop jukebox software, but you also have to sign deals with all the major labels. Even if we assume the labels are giving Microsoft the music for free, it’s unlikely that very many other companies have the resources to replicate Microsoft’s feat. A company that wanted to develop a portable music player without also building an online music store and negotiating with the labels is still out of luck.

Here’s another tidbit from the Engadget write-up that I thought was interesting:

The service and device will not be PlaysForSure compliant, meaning you will not be able to use your Zune player with Napster or Vongo, for example. This will be an entirely new system. Microsoft will continue to support and develop for their PlaysForSure initiative, but all things PlaysForSure are handled by two entirely separate division that will not have any crossover.

It would be ironic to say the least for Microsoft’s right hand to be promoting the “Plays for Sure” brand while its left hand is releasing devices on which “Plays for Sure” devices do not, in fact, play. If this report is true, it’s hard to see how Microsoft can maintain the credibility of the “Plays for Sure” brand. It would be especially ironic if Microsoft bought out iTunes users but hung “Plays for Sure” users out to dry.

In any event, it remains true that DRM makes consumers the plaything of large companies. If it serves their interests, the labels and Microsoft can permit you to migrate your music to Microsoft’s music service, undercutting Apple’s monopoly. But if it doesn’t serve their interests to let you migrate your music, they can also just leave you stranded, and there’s nothing you can do about it.

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