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What Microsoft *should* Have Done With Zune

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When we all first heard about Microsoft’s Zune — it sounded like a decent contender for an Apple iPod competitor. Big screen, video, pictures, wireless sharing of music plus rewards for people sharing music. It sounded like it was to good to be true (or to good to be Microsoft). It sounded like a big fat powerful idea.

But reality and corporate trenches are a bitch. Here is only some of what went wrong.

Pay Per Sale to Universal

Despite what most thing, the decision to pay Universal for each unit sold was a relatively good strategic move. This will force iTunes to renegotiate with potentially different terms with the Major labels. (“If Microsoft did it, then so can you”).

However, take special note that giving Universal a piece of the pie indicated that both sides are in agreement that there is a relatively large amount of piracy that happens on these devices. Therefore, the payment is basically a levy in MP3 players which goes right into the labels pocket.

Wireless

Seth Godin has clearly demonstrated, in his book The Purple Cow that for a product to be popular, it must be remarkable in some way. The wireless feature was it for Microsoft, but here is where they botched the job.

Here is what they should have done, since they already agreed to pay for the piracy subsidy. It should have been a free for all. Let people share everything that wasn’t purchased from the Zune store. Let them trade video, audio, text, ebooks, cracks, patches, everything. Publish an API and let people build applications on it. Make it every nerds dream.

But they didn’t did they? The reality is, they basically made the wireless connection useless. Every file that you desire to share, regardless of whether it came from the Zune store, or your own CDs is wrapped in a very restrictive DRM which limits three plays or three days.

Now, If it was me. I would have even allowed Zune music to be shared with no restrictions. But I am a communist.

I am also a realist. Microsoft needed to keep the record labels happy. However, they could have easily done this by restricting the sharing of Zune purchased music and allowing a free for all with any other media.

I think Microsoft knew this all along, but failed at the negotiations table.

Setting the Price to High

If I was Microsoft (what I believe to be a smart modern organization), I would have the knowledge that traditional marketing is dead. All the money they spent on TV advertising campaigns and branding could have been much better spent.

They did something right with paying bloggers to speak Zune and promote/critique it. (This, is not a paid post).

They should have passed the marketing savings onto the customers. I would have priced it quite below iPod ($50 dollars seems like a doable number minus a multi million dollar advertising campaign).

Combined with wicked sharing functionality, this would have been a low market disruption that could have changed the world.

Sadly, many MP3′s from SanDisk and creative seem to be on par with this initial Zune.

No Podcast Support

Podcasting is essential. I use my iPod to stay updated with News and the going-ons of Silicon Valley. I plug in my iPod, it updates my podcasts automagically, and I listen to them at the gym. I won’t buy a Zune because of the inconvenience of this lack of a feature.

There inability to have a backbone at the negotiations table, the pointless advertising campaign, the high cost, and the under utilization of the wireless functionality will be the death of the first iteration of the Zune.