Muve Over Zune Pass, Opportunity's Knocking�

Microsoft's Zune Pass has to be the best kept secret in the digital music business. Anyone I know who has tried the service, which gives you unlimited download or streaming access to virtually the entire music catalog offered by Microsoft's Zune Marketplace for $15/month, has been amazed by it, but no one I know personally had actually heard of it until I showed it to them.

Windows Phone 7 took Zune Pass to the next level, by combining the ubiquity of cellular networks with the service, giving access to its millions of songs virtually anywhere, anytime. This created a truly "on demand" digital music service. If, as they say, imitation is the sincerest form of flattery, Microsoft should be blushing right now.

Cricket Wireless, a "third-tier" prepaid mobile operator in the United States famous for its cheap unlimited service plans and limited coverage areas, recently expanded their "Muve" (pronounced "move") music service from a few test markets to nationwide availability. Like Zune Pass, Muve offers unlimited music downloads to mobile phones from a catalog of a few million tracks for one flat subscription price, in this case, $10/month. (More accurately, it's $55/month for an unlimited talk/text/web/Muve plan, which is only $10 more than their standard $45 unlimited talk/text/web Cricket offering.)

The services are similar but not identical; Muve is a phone-only service. The tracks downloaded can only be played on the subscriber's phone itself, and can't be transferred to other devices or PCs, whereas a single Zune Pass can be used on up to three Windows Phones or Zune players, and three PCs or Xbox consoles. Zune Pass (at least in the US) also lets you keep 10 songs per month as part of the $15 subscription fee - songs that will still play if/when you stop subscribing to the service. However, these services target different demographics. Cricket's customer base is young and lower-income. Half don't own a computer, and about three-quarters pay their monthly bill in cash, making Muve the first digital music service ever available to most of them.

Given the target demographics and service limitations, I don't see Muve as a direct threat to Zune Pass, but I do see an opportunity here for Microsoft and its mobile operator partners to co-opt this idea before it gains much traction. One of the biggest challenges facing Windows Phone 7 in the market is a lack of differentiation compared to the current darling smartphone OSes of the moment, iOS and Android. Or, rather, the perceived lack of differentiation - it's there if you look for it, with features like Live Tiles, Xbox integration, and Zune Pass, but the message hasn't filtered to consumers yet, perhaps due to the lack of enthusiasm from phone salespeople themselves. Even worse, as the advertising for Cricket and Muve expands, consumers might think Muve is the first or only option for unlimited flat-rate, direct-to-phone digital music, just as I'm sure many iPhone users this fall will think Windows Phone's camera-above-lock and WiFi sync are iOS5 exclusives/"inventions."

This presents an opportunity for Microsoft, mobile operators, and retail salespeople to tell the Zune Pass story. Perhaps even package cellular service and Zune Pass into a single offering, or expand Windows Phone 7 into the prepaid arena where flat-rate services tend to do well.

This could be particularly timely for Sprint and T-Mobile, the USA's second-tier operators, who get pressured from both sides- they lack the larger coverage of first-tier operators AT&T and Verizon, so they compensate with lower rates, but are themselves undercut in pricing by third-tier, flat-rate, prepaid operators like Cricket and MetroPCS. This leaves Sprint and T-Mobile in the precarious "always a bridesmaid" position; coverage-sensitive customers eschew them for AT&T and Verizon, while many price-sensitive customers race to the bottom and choose Cricket or Metro. Like Microsoft and Windows Phone, Sprint and T-Mobile currently need some differentiation to attract customers that otherwise might not even consider their offerings.

Right now, with the current rates for T-Mobile or Sprint service and Zune Pass, consumers can get a family plan with three Windows Phones that includes 1000-1500 shared daytime minutes, unlimited nights, weekends, and in-network calling, unlimited messaging, unlimited data, and a Zune Pass all three phones could share for as low as $135/month on T-Mobile or $165 on Sprint. That's $45-55 per month per phone on a "real" cellular network, and the Zune Pass songs would also be available on the family's computers and Xbox.

Now imagine if T-Mobile or Sprint and Microsoft put their heads together and offered some sort of bundling discount or promotion to reduce that price even further? Or threw in a "free" Xbox with a 2+ phone family plan to drive the Zune content into their living rooms? Or tossed out a few television ads touting the service? Or, at the very least, even just mentioned it to somebody!

Microsoft's "Really?" television ad campaign for Windows Phone was very amusing, but it didn't communicate what this platform can do for users that others can't. This differentiation should be the message, and nowhere is that better demonstrated than with the Zune Pass service. The time to get that word out is now, before it's just another Microsoft "first" copied and co-opted by other platforms. My crystal ball sees Amazon as that imminent threat: a subscription music service fueled by Amazon's MP3 store and the Android user base they're attracting like lemmings with daily free apps in the new Amazon app store is a recipe for a déjà-Zune service. Microsoft needs to educate consumers before their VPs are left tweeting how "flattered" they are that someone stole yet another idea from them.

Todd Allcock is a small business owner (small business, that is! At 6' 3" and 300 lbs., I hardly qualify as "small") who has been using Windows-based PDAs and mobile phones since the days they were powered by steam. These tiny, powerful devices have allowed me to get out from behind the desk, operate a business on the go, and spend more time with family.