Microsoft To Offer Low Priced iPod Killer?

[Kent Pribbernow]

<div class='os_post_top_link'><a href='http://www.denverpost.com/Stories/0,1413,36~33~2174543,00.html' target='_blank'>http://www.denverpost.com/Stories/0,1413,36~33~2174543,00.html</a><br /><br /></div>"Microsoft Corp., the world's largest software maker, will begin selling portable music players for as much as 80 percent less than Apple Computer Inc.'s iPod. The Microsoft-branded devices will "look and feel" as good as the iPod for as little as $50, said Yusuf Mehdi, corporate vice president of MSN at Microsoft Corp., at the Goldman Sachs fifth annual Internet Conference in Las Vegas. The iPod sells for $249 to $499."<br /><br />Every portable audio hardware company has its sights set on the iPod, and now it seems the software giant from Redmond is joining the battle as well. With pricing as low as $50, Microsoft could become a very serious threat. But I wonder<i> how good </i> this product will be? Does Microsoft understand that merely having the cheapest product does not guarantee success? If Apple has taught us anything...it takes great software couple with great hardware to make the end to end experience work. Otherwise its just another product.

[Mojo Jojo]

I am not sure how they could build a comparable model at the $50 dollar price point without selling at a loss. However more power to them if it holds true and their storage solution is in the form of a 5 gig compact flash drive I can remove for my digital camera!

[Felix Torres]

One word: WebTV.

This is unexpected.
But easily doable.

[klinux]

Cheap razors but they don't have any blades to sell!

I usually find MS hardware to be above average though (mouse, for example).

[Kent Pribbernow]

Cheap razors but they don't have any blades to sell!


Yes they will. That would be Microsoft's upcoming music store.

[Felix Torres]

Okay, got a couple minutes to burn so here goes:

Can MS pull this off?
Yes.
The numbers add up, even for a high-end product.
The key is the associated subscription service, ala WEB TV, MSN, or more comparably, Rhapsody.

Consider:
1- You can get a Creative ZEN 30GB for $229
2- You can get a Rio Karma 20 GB for $199
3- The Dell DJ 15 GB has gone on sale as low as $169

Say you go and buy a Zen and sign-up for Rhapsody, at $10 a month.
At the end of say, two years, you will have paid about $480 or so, depending on your sales tax. That's $20 a month.

Now, MS says, "Sign up for MSN Music service at $17.50 a month for two years and you can have the ZEN for $50 and have unlimited music to listen to." Total cost over two years? About $480 and MS is making as much profit as Creative and Rhapsody, combined. Bump it up to $20 a month and MS makes $30 a year per customer *more* than the traditional combo. Get it up to WebTV size, 1 million subscribers, and you're looking at a $240 million a year venture. And that third year starts looking darned profitable.

Now, will the price be $17.50?
Higher?
Lower?
Dunno.
(If I had to guess, I'd say $14.95. Maybe year one gets a discount to build up buzz.)
Cause the surprise here is that while MS has done subsidized hardware three times before (WebTV, MSN free PCs, and XBOX) this is a market where we've been led to believe the hardware subsidizes the music, not vice-versa.
So MS doing subsidized hardware in digital music is selling calzones to a market that has only seen pizza; a classic "zig when they zag".

Thing is, if you start to think of the possibilities, you realize MS is working off a different script here; instead of seeing the digital music player as a virtual cd player, they are seeing cached internet radio, where the hd isn't holding virtual cds, necessarily, but serving as a buffer for personalized music streams.
Instead of competing with the iPOD, they are actually going after Sirius and XM.

Until the details come out there's no telling how aggressive they'll get in pricing and features.
One extreme is that the $50 player will be a 1Gb Cornice-based cplayer of 256 Mb flash player that synchs every night and the bigger-capacity units will be more expensive, with the subscription running anywhere from $50 to $100 per year.

The other extreme would be to go with the higher-end subscription; say $20 a month, but provide a big hd (10Gb+) for the $50 price point.

Since its June already, we won't have more than a couple months to wait, *if* this is true. The timing does suggest they want to go live on this by back-to-school time, which matches the target audience.

As for the service itself, lets say MSN Music lets you, at sign-up, run through a checklist and pick out 100 cds and/or playlists adding up to 1000 songs or so and then mail you a player with those songs pre-installed?
What if you could synch up once a week to get new playlists of the week's top 100 or regular celebrity-suggested playlists? What if it would regularly surprise you by dropping off "recommended-songs" playlists? Of if you could receive archived concert streams? Special mixes and studio cuts? All for the one fixed rate?

What if they *are* thinking radio instead of CD?
After all, the idea behind a digital music player of any type (cd, dvd, flash, hd) is to listen to the music. And the economics of radio are very different from those of the CD business.

(Hmm: would payola laws apply to a subscription music service? Anybody?)

If the music service is good enough and clever enough, maybe the music *can* subsidize the hardware...

Even if it can't, it is a darn clever social experiment.
I can't wait to see if:
1- They really *are* going through with this...
2- If it actually works...
This could be fun.

[Suhit Gupta]

BTW, slightly OT, and I guess this is more of a rhetorical question: why is it that every new device out there is now called the 'next iPod killer'? I mean I know why (as the iPod is the most sold/popular/listened to PMP), but still, isn't the media or each company, when reviewing/releasing a new product basically empowering the iPod even more by claiming that their product is the next iPod killer?

Suhit

[Phoenix]

...As for the service itself, lets say MSN Music lets you, at sign-up, run through a checklist and pick out 100 cds and/or playlists adding up to 1000 songs or so and then mail you a player with those songs pre-installed?

What if you could synch up once a week to get new playlists of the week's top 100 or regular celebrity-suggested playlists? What if it would regularly surprise you by dropping off "recommended-songs" playlists? Of if you could receive archived concert streams? Special mixes and studio cuts? All for the one fixed rate?

Now I would love that. 8)

I had some similar thoughts to the whole subscription based concept, found here (http://www.digitalmediathoughts.com/forums/viewtopic.php?p=39032#post39032).

[Mojo Jojo]

... empowering the iPod even more by claiming that their product is the next iPod killer?

Perhaps if they believe the target audience believes, and has that opinion of the iPod, that by making the claim they can compare their own product and that they will match or exceede it's abilities.

Thus gaining or attributing the strengths of its cempetitor in just four words and diluting the established belief of superiority. Or they actually believe the iPod has the market. But thats a horse of a beaten color. :wink:

I am not so hot on the idea of subscription based media... mostly because I think my tastes are pretty established at this point and new music mostly does not match up. When new bands do come out that I do like it usually equates to only a CD (or a couple of songs purchased seperately) every couple of months. I don't think a subscription based model would make very much sense for me.

Out of curiosity (and perhaps a good poll question!) Would people sign up for a digital music subscription and at what price (20+, 15-20, 10-15, 5-10, or not at all)

[Felix Torres]

Out of curiosity (and perhaps a good poll question!) Would people sign up for a digital music subscription and at what price (20+, 15-20, 10-15, 5-10, or not at all)

Second the motion!
But it might be a good idea to ask the respondent's age group...
(say, 12-18, 18-24, 24-35, 35+)
Think about it.

[Mojo Jojo]

I think that is an excellent addition. Maybe a two part poll? Or one really big one! I can see where age could be a large influence on the decision as I look back at my own purchases and see a trend where in my younger days I was more apt to buy.

Also would be intereseting to see if age effects price point of those willing to part with higher costs as more 'seasoned folk' often have better paying jobs then when they were younger.

[Felix Torres]

I can't wait to see if:
1- They really *are* going through with this...


http://www.winnetmag.com/windowspaulthurrott/Article/ArticleID/42804/windowspaulthurrott_42804.html

Seems the Denver guys misquoted.
When the MSN boss said "we" he was referring to MS and its hardware partners; Creative, iRiver, Rio, etc...

At least that's the current story.
Good thing I sprinkled the weasel words liberally. :-)

[James Fee]

Engadget has an update on the story...

http://www.engadget.com/entry/3463715371535682/