Friday, September 11, 2009
Posted by Jason Dunn in "Zune Talk" @ 05:00 PM
First, some background on this problem. Here's what I said in my analysis of the iPod announcements:
"iTunes is in 23 countries. The Zune Marketplace is in one. Microsoft's US-centric approach with the Zune is maddening...I thought there was some light at the end of the tunnel when they launched the Zune in Canada last year, but we never got the Zune Marketplace here, and now the devices being sold here are being killed off. "Disaster" is a good word for how well the Zune launch went in Canada. Between the Zune HD being US-only at launch, and all of the IP-based geographic blocking madness that the Zune software and Web site does, it's like the Zune team is doing everything they can to alienate everyone in the world outside the US."
In the resulting discussion from the post, the issue of this US-centric approach to the Zune was brought up several times, and I floated this theory:
"Apple was the first company to negotiate big, international music distribution deals, and way back then most of the music labels probably though Apple would fail, or at best only be mildly successful. So they said "Sure, 99 cents sounds fine as long as the bit rate sucks." Fast-forward, and iTunes is massively successful. We've watched as the record labels pressured Apple for variable pricing year after year, trying to re-assert control over their music. They finally got it. The labels don't like all the power that Apple has, so here's my theory: they're making it very hard, if not impossible, for the Zune guys to get the same sort of deal that Apple has. They're trying to exert control over the Zune deal in a way they wish they could have done with the Apple deal years ago.
Witness the $1 that Universal demanded Microsoft pay them for every Zune sold. We're talking POWER STRUGGLE here people. Maybe that's one reason why Microsoft can't accomplish now what Apple did years ago - the record labels are more aware of what they want to control.
Second reason? Maybe Microsoft feels that the Zune Pass is SO important that they can't/won't launch Zune Marketplace without it. It's quite integral to the Zune experience - many new Zune features rely on the customer having a Zune Pass - so maybe Microsoft isn't launching in new markets unless that market includes the Zune Pass. I think this is a bit silly - not everyone wants a Zune Pass - but maybe it's another reason? These are just my theories."
Over in the anythingbutipod forums though, we have an actual response from Microsoft person talking about this issue - and it's the first time I've seen any Zune team member really talk about the issue. Here's a snippet from his full post:
"So why aren't we shipping in 80 countries worldwide right now even though we'd love to be? Because business hasn't matured to the point where we can support it," Dave explained in an ABi forum thread regarding the recent Zune HD news. "It's as simple as that. There isn't a simple 'more countries, more sales, more $' equation here. The investment required to enter each individual country is substantial (even by Microsoft standards), not to mention the inventory requirements which require spinning up additional capacity in production lines, etc..."
And there you have it: Microsoft isn't going to launch outside the USA unless they believe the product will sell well enough to justify the investment it would take to launch in that country. If ever there was a recipe for failure, this is it. You don't try to take on an 800 pound gorilla like the iPod and still try to cling to traditional business models while doing it. Yes, Microsoft has a responsibility to their shareholders to use company money wisely, but when you're years behind your competition, you can't take a "chicken and egg" approach to your product, hoping that your incremental success will give you the results you need in order to slowly expand. The Zune is in it's fourth generation, and still stuck being a US-only product.
The product needs momentum, and expanding internationally is the way to get that. The US in particular is extremely Apple-friendly, but the rest of the world? Less so. Witness the less-than-impressive debut of the iPhone in some other countries. Microsoft has an opportunity to deliver a great device and ecosystem to markets around the world that aren't as enamoured with the iPod rather than focusing only on slugging it out with Apple on their home turf.
Zune, you need to grow beyond the US, or you'll die.
Jason Dunn owns and operates Thoughts Media Inc., a company dedicated to creating the best in online communities. He enjoys photography, mobile devices, blogging, digital media content creation/editing, and pretty much all technology. He lives in Calgary, Alberta, Canada with his lovely wife, and his sometimes obedient dog. He's still searching for the ultimate netbook.
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