Playing To Their Strengths, Microsoft To Create iPod Competitor (suckPod anyone?)

by James R. Stoup Jan 27, 2006

For the last four years, in the domain of digital music, Microsoft has played the role of pinata to Apple’s drunken frat boys with baseball bats. It has not been pretty. And so, after taking a rather severe beating in this emerging business of digital music, rumors have finally started to abound that Microsoft is now ready to enter the arena. Apparently they wanted to steal the title of “worst designed MP3 player of the year” award away from Sony and their “bean of music”. Or maybe they just have a few million lying around and they don’t know what to do with it. Anything could be possible.

But I think that what most likely occurred was that Gates finally realized that Apple is using the iPod + ITMS combo as a trojan horse to gain access to your living room. The future of computing will be to move your computer into your living room and merge it with your TV. The Xbox 360 is a move in this direction. However, it won’t be enough by itself. And it will ultimately be overshadowed by Apple’s entry into this area. So, this could be why MS wants to create a competitor to the iPod. Either way, here are some observations of mine.

The price (losing money all the way)
I am seeing another Xbox vs PS2 fight where MS loses money on every unit sold in a desperate attempt to win market share. Since they won’t be able to get a deal like Apple’s on memory they won’t be able to match the iPod’s price. This means that they will either have to sell their product at a higher price or risk loosing money to stay competitive with Apple. Also, due to the demand of the iPod, flash memory in large quantities is going to be scarce for a while, so even if MS can release something on time they will have to deal with supply issues.

The impact to the industry
Good bye Creative. Hello Chapter 11. Apple has already put several companies out of the MP3 player business and this trend will get dramatically worse if MS enters the market. When the dust settles there will only be 3 companies standing, Apple, Microsoft and Sony (probably in that order too). No one else has the cash reserves to stick with this market in the face of such competition.

Apple’s response
If MS does indeed come out with its own player this will have some interesting repercussions. For instance, all of the smaller companies will no longer have a reason to support Microsoft’s DRM system. Since they are now all going to be competing in the same space using Microsoft’s standard is no longer an advantage for them. So, one thing Apple could do would be to license FairPlay. This would give the competition access to the ITMS (and potentially hurt iPod sales) but Apple would be in a position to make its brand of DRM the standard. This would become more important as more and more digital media is sold online.

The MSN Music Store, making Wal-Mart look good by comparision
If Microsoft really does release an MP3 player they would be foolish indeed not to release their version of the ITMS. Because without the online aspect their players would have no advantage over Sony’s or Creative’s. So, if one comes out then the other is a given. However, since ease of use hasn’t always been Microsoft’s mantra I expect this venture to be just one giant vortex of suck.

Media Player, because some people like pain
Media Player isn’t the worst MP3 playing software out there, but that doesn’t mean they aren’t continually shooting for that bottom spot. I hate MP with a passion. And as bad as it is on a PC, it is actually worse on the Mac. And so if Microsoft wants its hardware to sell they are going to need some software that will get the job done at least as well as iTunes. Can they do this? Not with Media Player. But maybe with a new piece of software it could be accomplished. I would suggest buying a company that makes what they need and just adapting it. That seems to be a much better solution than forcing Media Player to work well.

Either way, the more I look at Microsoft entering this market the more I think “well, it had to happen eventually, right?”


  • You mean because M$ just has to enter each and every market with balls to squeeze money out? *g*
    Nice article, James.
    M$ demonstrates the systematic flaw in what makes a “successful” company. Market-share makes such a company. It doesn’t matter they are loosing money on every sale, as long as they have market-share. The thought behind it is the same that applies to M$ tactics in the OS market. You don’t get market-share with a superior product. You get market-share by buying market-share, selling your product evermore cheaper, loosing millions because you can afford it, eventually killing off the competition, thereby forcing consumers into your product. Then you start squeezing. Its disgusting, but looking at Windows, Office & X-Box tells us that it works. It won’t work in the living room though, and it won’t work for a music player. Because what Steve criticized about M$ years and years ago is even more true today: They just have no style. And Apple has set the bar for style extremely high. People will notice the contrast.

    Bad Beaver had this to say on Jan 27, 2006 Posts: 371
  • Well I don’t see any evidence that Microsoft ordinarily gains market share by selling products at a loss. I guess you’re using the console market as an example and extrapolating from that. But this is not fair since consoles *have* to be sold at a loss in order for them to represent a robust alternative to pcs. MS’s software generates its vast profits.

    Much as I adore the Mac universe, I have to say that logicaIly Microsoft has the capability to bring about a product as good as the ipod, with as good software/music store integration. Microsoft’s only problem is bad management, and especially management without vision - or ‘taste’ as Jobs would put it. Unfortunately Apple has had, developed and demonstrated the vision for them. And what are microsoft best at? Parasitizing computing concepts, of course!

    Benji had this to say on Jan 27, 2006 Posts: 927
  • Ben, if M$ doesn’t ordinarily gain market-share by selling at a loss or heavily underpricing the competition, how exactly did Office and other M$ “solutions” get sold to all those companies in the 90s, firmly establishing the level of mediocrity we still suffer from up until today? Was it because it was so much *better* than WordPerfect and Lotus Notes?  Or was is because tech-un-savvy managers could not resist the temptation of the price? Yeah right.

    Bad Beaver had this to say on Jan 27, 2006 Posts: 371
  • For the last four years, in the domain of digital music, Microsoft has played the role of pinata to Apple’s drunken frat boys with baseball bats.

    And I guess for the last twenty years, Apple has played the role of pinata to Microsoft’s drunken frat boys with baseball bats in the OS market.

    It’s interesting to me how the Mac drones flip flop on their attitudes toward market share and what it means depending on whether you’re talking about music players or operating systems.

    In music players, the competition are pathetic also-rans who might as well not even bother trying to compete since market share is obviously a sign of superior quality and customer choice.

    But with operating systems, there’s still a “war” in which any day now (for the last couple of decades), computer users are going to realize how bad they have it and switch to the single-digit market share Mac.

    Boy, would I love to have Jobs’s mind-control power over a multitude of minions the way he does.

    Beeblebrox had this to say on Jan 27, 2006 Posts: 2220
  • In terms of a MS music player, they’ve only announced it.  Which is all it takes of course for the labotomized Mac drones to proclaim that it absolutely sucks (just try that with an announced Apple product and watch what happens).

    But the X-box is a viable and competitive gaming console that works well and has a decent marketshare.  A MS music player would probably be something along those lines.

    I like my iPod, but I’d love to see some competition.  If that forces Apple to license Fairplay, then that’s at least one great benefit.

    Personally, I think the biggest mistake that competing music players are making is price.  They’re trying to tout features, but the consumers want a device that’s less expensive.  Perhaps MS would be the one to enter the market and have a feature-for-feature product that costs $50 less.

    Beeblebrox had this to say on Jan 27, 2006 Posts: 2220
  • Beeb, we all have our dreams *g*
    I, I wish I was an analyst.

    Bad Beaver had this to say on Jan 27, 2006 Posts: 371
  • The common mistake that everyone seems to make is that people seem to care about a product because it is labelled ‘Microsoft’ or ‘Apple’.

    The only reason people use Windows or Office is the fact it is so prolific. People want at home what they are used to work with or have learned to work with and which is easily available: Windows and Office. (we’re talking consumer market here before someone starts to talk about the bundle of software available on Windows).

    I don’t see why people would start to buy Microsoft labelled MP3-players all of a sudden and abandon the iPod. I even talked to someone who had an iPod and thought that ‘iPod’ was the company selling the MP3-player grin iPods integrate nicely in the user experience on a Windows machine, you just install iTunes and you’re ready to go.

    iPods happen to be the thing that people know or have heared of, so they just buy iPod, like they buy Office.

    Martijn ten Napel had this to say on Jan 27, 2006 Posts: 6
  • The problem with getting into the content downloading game so late is that everyone out there is using their own proprietary DRM. Once I have a huge stockpile of music, movies, TV show etc I will have absolutely zero incentive to switch to anything that won’t play what I already have.

    I think Microsoft will find that the only people that they can get as an audience will be the few people that are not currently using the services and a few MS evangelists/nuts that really love their products (the same thing I would do if Apple got into something I wanted). The problem with that is that it will only be a slow trickle of business and that won’t be enough to sustain them. Maybe. They do have pretty deep pockets and can afford to be patient.

    One positive I do see is that with Microsoft entering the arena it will keep Apple from committing the same sin as MS, i.e. becoming comfortable in their overwhelming lead over everyone that it slows or stops innovating.

    Gabe H had this to say on Jan 27, 2006 Posts: 40
  • I think this is definitely possible for MS to do. But only with Vista.

    The only way I can see this working is, like how James mentions, if they bundle the player with a music player/store application similar to iTunes.

    But that won’t work unless people have a reason to download that over iTunes. Which they won’t.

    So MS will bundle the player with Vista and make it the default music player (tightly integrated into the OS probably.)

    If that happens, then I think it’s even likely that iPod could lose market share compared to the “X-player.”
    But it all depends on how well -or badly- Microsoft go in the direction. And likewise in regard to Apple.

    Luke Mildenhall-Ward had this to say on Jan 27, 2006 Posts: 299
  • Bad Beaver: I don’t get why you’re espousing this view in the first place. Do you have any evidence? I’d really like to know if so.

    “or heavily underpricing the competition…”
    This is not what you said…

    This article:
    has a very interesting theory on the history of microsoft office that is actually supported by facts.

    Benji had this to say on Jan 27, 2006 Posts: 927
  • “So MS will bundle the player with Vista and make it the default music player (tightly integrated into the OS probably.)”

    I think this would invoke a lawsuit.  Apple is allowed (at least from a legal perspective) to bundle the itunes software because both items are viewed as comprising “one product” (sounds shady and I may be mistaken, but that’s how I understand it).  It is similar to the idea that bundling headphones with the player is not viewed as a move for domination of the headphone market.  It would be much harder for MS to argue this if instead of music software it bundled the player with its new OS.  Someone please correct me if I’m wrong, for we all learn from our mistakes.  (And let’s all hope I’m right, because if not…MS would have to be downright retarded not to do it- sales of Vista will probably be sluggish (as far as upgrades go at least) so this move would encourage many to update and get rid of a lot of those individuals “holding you back” from improving the OS due to backwards-compatability issues)

    alexpasch had this to say on Jan 28, 2006 Posts: 16
  • I have to agree totally with Beeblebrox. You’ve already decided that the MS mp3 player will totally suck, as will the yet-to-be-announced on-line music store. Maybe they will and maybe they won’t. We have to wait and see. And if they are good - that will be good: a little real competiton (no pun there) would be good for the folks working on the next generations of iPods.

    ray.gos had this to say on Jan 28, 2006 Posts: 8
  • just a genreal comment, because it has to be said every now and then:
    I really appreciate what you are doing here at applematters. almost every single article is a good read with lots of insight and good analysis. thanks for that.

    bloom had this to say on Jan 28, 2006 Posts: 2
  • Yeah, it’s a bit premature to declare it as sucky. Also, I know the BSOD is a joke, but it only worked back when Windows had it. I personally have never experienced it (tho I’m 18 so I don’t remember Windows 95 or 98 very well).

    That said, I don’t think Microsoft’s OS dominance or commodity strategy gives it any advantage in making an mp3 player. I highly recommend this article as it relates to the iPod’s success:

    Microsoft needs to add more value, and games may be the way to do it. Here’s to hoping Apple partners with Nintendo!

    Oskar had this to say on Jan 28, 2006 Posts: 86
  • almost every single article is a good read with lots of insight and good analysis.

    I wasn’t aware that saying, “This hypothetical product that doesn’t yet exist, has only been recently announced and that I know nothing about is going to be the worst designed mp3 player of the year because the company that makes it dares to compete with the company that I have an irrational fanatical devotion to” counts as “analysis.”

    Beeblebrox had this to say on Jan 28, 2006 Posts: 2220
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