Guillotine

Microsoft has announced that the Zune will take a price cut. While not throwing in the towel in their bid to topple the iPod’s dominance of the portable music market the price drops show that Microsoft realizes it’s going to be a bit more of a challenge than they anticipated. The 8 GB Zune will get a $10 price drop while the 16 GB unit gets a $20 cut.

Not exactly Earth shattering, and I think not enough of a drop to make anyone decide to switch. I don’t think Microsoft understands just yet what they have to do if they really want to compete with the iPod… It’s gonna take more than a device. The draw of the iPod is the device plus the service. Companies like Creative Labs, San Disk, Samsung, and even Sony have realized that the only way they can compete is to keep their prices significantly lower than the iPod (in most cases half the price), but even that hasn’t been enough. The truth is the iTunes service has a very loyal customer base, and thanks to DRM (I can’t believe I’m using thanks and DRM in the same sentence) Apple has a bit of an edge. Let’s face it… In order to change devices you’ll also have to change services. This means creating a new account, getting used to a new interface, and the fun part… You aren’t about to give up all the music you bought on iTunes, but since it won’t work on another player the only choice is to break the DRM. This means burning all tracks to audio CD, ripping them back to the computer, and manually entering the tag information. Not to mention finding album art for each track since all these things are lost as soon as you transfer any track to audio CD.

Who wants to go through all of that??? What is the gain??? So far the only thing Zune seems to offer is wireless syncing. Is that really worth it though? You still have to be fairly close to you computer to sync, and unless you have activated some type of automatic ordering you will still need to be at the computer to purchase tracks, and it’s easy enough to plug in and sync while you are there. Honestly I don’t think $10-$20 price cuts are going to be enough to cause a massive exodus from iTunes either.

So what does Microsoft have to do??? In my opinion there are 4 options. 1) Give up… And honestly have you ever seen Bill Gates give up on anything??? So that one’s unlikely. 2) Drop the Zune’s price significantly, and join the ranks of other manufacturers as just another cheap MP3 player. 3) Come out with some completely revolutionary feature for the Zune. I have no clue what could possibly be that revolutionary though, and 4) This is the biggie and the only real way I see for Zune to compete. To do something revolutionary with their music service. This would have to be more than a bigger library or even a better interface to entice people away from iTunes… Maybe something like 50 cent tracks might work, but Microsoft would either have to eat the loss, or really muscle the music industry to pull something like that off. It could be worth it in the end though.

So at the moment the Zune doesn’t seem to be affecting Apple’s success or coming anywhere near knocking them from the top of the mountain, but if the world has learned anything about Bill Gates over the years is that he’s persistent, and even if he can’t take over the music market he will most certainly figure out a way to garner a significant share of it in the end.