I've been thinking about some of the interesting strategic decisions that Microsoft has made lately. I already discussed their curious IP licensing strategy, and their choices with Zune and Windows Media Player have me similarly baffled.

In many ways, these moves have been something I expect more from Apple than Microsoft. Apple has always been known for delivering closed systems, controlling the experience from end to end. Apple software runs on an Apple OS on Apple hardware. Conversely, Microsoft has thrived largely because it has recognized the value in delivering not just products, but platforms. Office and Windows are both successful not just because of what they do as a product, but because they leave room for third party developers. It is those developers, not just Microsoft itself, that really enable a true ecosystem. Even the Xbox 360 has been a platform, not just for the media content providers, but now for the independent game developers.

Given their history, it should come as no surprise that Apple's digital music experience is highly integrated. iTunes works only with iPods, and iPods play only music purchased from iTunes. Of course, part of the reason for this integrated experience was necessity- Apple effectively created the market for both digital music players and for digital downloads. 

With Zune, Microsoft seems to be trying to emulate Apple's closed system. I think this is a very big mistake.  It is battling an already large iPod user base and critical mass without a real strong differentiator. WiFi that I can't use to sync music with my computer or download podcasts on the go? FM radio? No small flash-based model to compete with the nano / shuffle? That's just not going to cut it. It's also worth mentioning that the Zune is somewhat larger than the iPod Video, and as I said size matters.

The subscription model is great, and I think could be the killer part of the Zune equation. Here's the thing - they've already had that ability with the PlaysForSure. The decision not to support PlaysForSure in this device is beyond comprehension, especially when you integrate the Urge music store - a PlaysForSure-based platform - in a newly-released Windows Media Player 11. There's an obvious disconnect here between the different media strategies at Microsoft. Furthmore, the Zune store does not integrate with Windows Media Player 11. Instead, they've delivered a completely separate media player.  (I'm hoping, at least, that the Zune is supported as a device in Windows Media Player, and that you just need the separate player for the Zune subscription).  And how can you expect people to make a commitment to your subscription platform when Microsoft won't do the same? (Derek discussed this poor decision and speculates that PlaysForSure didn't support the Zune's sharing features). You're betting that Microsoft will continue to provide a subscription platform even if the Zune is struggling a year or two from now, which only adds to the switching costs.

Speaking of Windows Media Player, I still don't understand why the iPod is not natively supported. The fact is, Apple is the dominant player in the portable music device space. Most people who own a device own some form of iPod. Since those people can't put music on their iPods with WMP, they're forced to use iTunes instead. In effect, that serves to strengthen their closed system.  Those users are exposed to the iTunes store and download songs, which creates more lock-in. It is better to use Windows Media Player as a trojan horse, as an opportunity to break that cycle.

Apple apparently recognized this opportunity with Boot Camp. If you're doing to run Windows, you might as well be doing it on Apple hardware. After all, they're still selling some hardware. And more importantly, it removes barriers to entry. Instead of having to dive headfirst into the Mac world, prospective customers can test the waters. I can try a Mac without giving up the "safety net" of Windows and the software I'm used to - and once I'm there, I may discover I like the Mac better and stick around.  In that sense, WMP support for the iPod would not undermine the Zune strategy (whatever the hell that may be), but actually serve it. 

In summary, if you're doing battle with the 800 pound gorilla in a market, you have to offer more than an incremental improvement. A slightly better product is not going to cut it when the switching costs are relatively significant. You have to really offer something compelling for them to come to you. If they have a closed system, offer an open one. Offer killer features that they can't or won't offer.  Perhaps the problem is that Microsoft is more used to being the 800 lb gorilla, and not battling it.


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