ITWire seems to have missed something in their recent article “Microsoft Zune rack and ruin” written by Stan Beer.

They discuss how Microsoft’s Zune won’t be able to stack up against Apple’s iPod due to the lack of a store and that the collaboration with MTV won’t benefit MTV in terms of dollars. What seems to be missing from this analysis is the fundamental change in the technology. The WiFi / Xbox extension may prove to be somewhat of a red herring or it might not. However absent the Xbox tie in, the combination of the technology allows Microsoft to move content to eyeballs and inner ears in a fundamentally new way. This puts MTV in viewers hands from new locations, which is good for MTV. More viewers, who’s downloads can be counted is good for advertising revenue for MTV and good for prolonging MTV’s ability to keep up with the times (don’t get me started on all of MTV’s mistakes, but this is a good move for them.)

Similarly, this is just one example where Microsoft can capitalize on the technology and we’ll reveal more information on other areas that they will move in upcoming articles.

Lastly, ITWire dismisses Microsoft’s ability to break the Apple monopoly on proprietary music(itunes). Yahoo this week also released a mechanism not aimed at recapturing existing customers, but offering new customers the option to purchase DRM free (non-protected) MP3 files for download a price premium of $1.99. I do not know if this tact will gain traction, but might have been the silver bullet for Apple’s iTunes if it had been rolled out 4 years ago as iTunes was launching. Today with millions of users already stuck with an Apple monopoly, they need help buying their way out of the Apple protection racket.

Enter big bucks Microsoft. Microsoft has a war chest of cash, and has been spending it all year long. Microsoft might actually be willing to subsidize the buyout of itunes customers from their Apple handcuffs. They could afford it and they might win some converts along the way. Now the reality is that Microsoft is unlikely to get all Apple ipod listeners to switch, even with a Microsoft buy out of the content rights. We all know that some Apple fans are Microsoft haters and no benefit from Microsoft will be accepted, even when its a good benefit.

So if maybe 20-30% of the iTune customer base decides to sample the new Microsoft service over the next 2 years, lets say 10 million people, each owning on average 300 song titles through itunes. Using Yahoo’s DRM free price differential ($1.99 – $.99 apple download) that’s $1 per title to pay for the rights removal. So that’s $3 billion dollars total to free the chains of 10 million users and sway them to the Microsoft camp, and family of products. If those same customers buy 50 more titles, or an xbox 360, or a subscription to napster or anything over the next 2 years, Microsoft’s marketing program (buyout) can be successful.

Afterall, Microsoft has been known to chase after market leaders in technology in the past. Some people might even recall a little known company called Netscape that once held the market share lead for web browsers. Who is to say that Microsoft wouldn’t use its war chest to establish an MP3 beach head here?

(Oh and let’s not think that Microsoft is the only company with their scope pointed at Apple, this isn’t a monopoly fighting a monopoly, its a potential oligopoly fighting a Apple’s Monopoly.)

Tags: Apple Microsoft Zune WiFi MP3 Player

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