Wednesday, October 17, 2012

Will Microsoft's Xbox Music Dethrone Apple's iTunes?

"If music makes the people come together, as Madonna says, the new Xbox Music gives people all the music they love, every way they want it."  Microsoft press release - October 14, 2012

Microsoft's introductory statement to their new "all-in-one" music service Xbox Music is at minimum, interesting. The inclusion of a Madonna quote, well at least they are trying. 

Microsoft and Apple have had incredible impact on our lives in the last three decades. They continue to strive for superiority. Current scorecard has Apple stock trading at over $600 per share, Microsoft around $30 per share. Will this new service from Microsoft begin the erosion of market share from Apple to Microsoft?  Is Apple iTunes in danger of being dethroned?

Steve Ballmer CEO of Microsoft sure hopes so. His job may depend on it.  Five years ago Ballmer stated, "There's no chance that the iPhone is going to get any significant market share. No chance. It's a $500 subsidized item. They may make a lot of money. But if you actually take a look at the 1.3 billion phones that get sold, I'd prefer to have our software in 60 percent or 70 percent or 80 percent of them, than I would to have 2 percent or 3 percent, which is what Apple might get". How wrong could a CEO be? Very! iPhone continues to generate more revenue for Apple than all Microsoft revenue. Talk about being taken to the woodshed - Ouch!!

You're still Microsoft though. What to do?  I don't know if it was an engineer, intern or one of Ballmer's kids that might have suggested, "We have Xbox,  why not market it as a content delivery/social platform?" Pretty good idea. Xbox Live was launched. In reality, no Apple market share killer, with it's services. Which brings us to Xbox Music. Will this new service dethrone the king of digital music-iTunes?

iTunes is indeed the King! Apple has 80% market share, with over 16 billion songs downloaded from iTunes. Seriously, does Microsoft's Xbox Music have a chance? Of course, Microsoft says yes! Take a look at this chart Microsoft produced to bolster their case:

On paper, Microsoft's Xbox Music is the winner. Allow me to use a sports expression here (thank you Lee Corso), " Not so fast, my friend."  The chart speaks for itself, but let's take a look behind the chart and see what's really going on. Yes, Xbox Music, as explained by Microsoft, does offer all of the above. The question is at what price and how? Here's where the fun begins.

Xbox Music promises access to 30 million songs, streaming etc. Sounds great, right?  Here's where Microsoft reminds us, they are still Microsoft. In order to access the "free" tunes as an Xbox user, one has to subscribe to Xbox Live Gold at a cost of $60.00 per year. The first 30 days are free (ad-free as well) and then your credit card is charged $9.99 a month.  There is an option to pay for the year upfront for $100.00, allowing one to be a Pass member. Yep-Microsoft being Microsoft. I smile at this next bit of information - Windows 8 users (release date October 26) will be able to have unlimited streaming access for "free"(with ads).

Yes, you read properly. Xbox users have to pay to access "free" Xbox Music. Once again, Microsoft being Microsoft. By the way there's nothing "free" about Windows 8 either. The new Surface tablet, software or mobile phones are not "free". In addition, the complete rollout is going to happen in stages, blah, blah, blah…

Microsoft being Microsoft, in my opinion is why Apple's iTunes has no overwhelming threat here. Until the engineers in Redmond understand, grasp the concept of "consumer experience" - not corporate revenue generating under the guise of "consumer experience" - they will continue to fumble and stumble (yes more sports expressions) at least in the consumer retail market.

Apple and Microsoft on October 23, 2012 and October 26, 2012, will share their latest and greatest with us, the consumer. 

Stay Tuned…..

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