A brief history of Zune economics

Microsoft's latest anti-Apple campaign has set its sights on the iTunes music store. Using a 30-second video and an interactive calculator, Microsoft makes a case that their $15/month subscription music service is an awesome value compared to the $30,000 it would take to fill a 120GB Apple iPod Classic using iTunes.

Microsoft's argument is riddled with fallacies. For starters, it's naive to think that people are filling MP3 players with purchased music. I'm no pirate, but at least half (probably more) of my MP3 music library comes from friends, freebies, CDs, eMusic trials, and God-only-knows--which doesn't account for the movies, photos, and podcasts that make up a healthy chunk of my MP3 players.

Also, how many people completely fill their MP3 player (especially the 120GB iPod Classic used in the example). Or what about the fact that Microsoft's $15 monthly fee adds up to $180 a year? The reality is, the numbers don't matter. History has already played out this fight enough times to show the futility of Microsoft's economic pitch.

To refresh everyone's memory, here's a brief history of products and services that sought to unseat iTunes by appealing to consumers' wallets.

Napster

In a famously bad 2005 Super Bowl ad, Napster pitched their monthly subscription music service using fuzzy math similar to Microsoft's. Granted, 2005 was a different economic environment than the one we find ourselves in today, but the campaign was such a spectacular flop, you'd figure Zune would steer clear of using such a similar approach.

Sirius & XM

Why own your music when you can get over 130 channels of commercial free radio beamed to you from the sky for as little as $12 per month? For years, this has been the argument used by companies like Sirius and XM and portable satellite players/recorders such as the Stiletto. With both companies collapsing into one another and generally retreating from the portable market, Apple won't be losing share to satellite any time soon.

Sansa Connect

iPod-schmipod! For just $14.99 a month the Sansa Connect can use Wi-Fi to download and stream all the music you want directly from Yahoo Music. Hell, you can even use it to check your Yahoo IM and browse through Flickr photo galleries (try doing that with a Zune).

The SanDisk Sansa Connect was the tech journalism toast of 2007, walking away with a four-star CNET rating and a Best of CES award. Unfortunately, in spite of promotion from Yahoo, and a major retail push by SanDisk, no one bought the thing. By the end of 2008, Yahoo pulled the plug on their subscription music service and rolled their customers over to Rhapsody.

URGE

If anyone can take on iTunes and make this subscription music thing work, it's got to be MTV, right? That was the thinking back in 2006, when MTV and Microsoft launched the URGE music service, offering on-the-go subscriptions at... you guessed it, $14.95 per month. A year later, URGE shuttered its virtual doors and MTV took their business to Rhapsody.

eMusic

I still have a soft spot in my heart for eMusic. These guys have been offering inexpensive, DRM-free music downloads years before iTunes was even on the scene. I see eMusic billboards in the subway, on bus benches, and in magazines, and their promotional fliers promising "50 free downloads" seem to litter my desk every time I open a new MP3 player. The problem with eMusic isn't price or promotion. Limited selection and monthly subscription model have probably turned off some users, but in the end, eMusic's biggest problem is the one faced by all the other products and services mentioned above: they're not Apple.

I don't mean that last statement as some kind of Apple fanboy praise. In fact, the Zune and Zune Pass service still power most of my day-to-day listening. But as someone who spends a good deal of time talking with people about MP3 players and music downloads, I've come to realize that the runaway popularity of the iPod and iTunes defies logic. Even Apple has to be a little surprised that they have a product that recently enjoyed a peak market share of 92%. How do you fight a phenomena like that? Where do you begin?

I don't know how to topple Apple's domination over the MP3 player market and music downloads. What I do know is that devices and services offering unlimited music at $15 a month haven't survived on value arguments alone, especially with DRM-free options such as eMusic (or, let's face it--piracy) are out there offering a better deal.

As a Zune user, it's my hope that Microsoft spends less time slinging mud at Apple and more time bringing the quality of the Zune Marketplace experience on par with iTunes.