The ad was interesting as it begins the discussion of the value of the Zune Pass. That's important. The power of the Zune Pass lies at the core of the differentiation of their whole business model, subscription services vs. single song downloads. Microsoft needs to go further and explain how these two models can co-exist with each other. Up until now there were only two models for music, the free and ad supported stuff on radio, or music you bought or owned (or perhaps acquired elsewhere). Zune Pass and other similar services change all that. While consumers "rent" video content all the time from theaters, cable companies, Netflix etc, there's also a lot of other stuff sold on DVD. There's no reason for this to be binary -- rent or buy -- it's just never been applied to music and when it has, it's not been explained or marketed well at all.
Both models could easily exist side by side but the first step to making this mainstream is to educate and evangelize the market. Microsoft started to do that but didn't take it far enough. Rather than try to make the argument that filling an iPod costs $30,000, Microsoft should have focused on the value play for Zune. Oddly, they completely fail to mention that Zune Pass users get to keep ten songs a month, effectively reducing the cost of the
"Zune can be a solid experience, but one that is still quite a distance from being in the position to challenge Apple's dominance in the field."
Microsoft also has a credible device story as well. Is the Zune story only about listening on a PC? Remember, devices still drive consumers to stores and services, not the other way around. Microsoft needs to keep the Zune hardware story alive. Somewhere in that commercial there should have been an actual Zune.
Zune can be a solid experience, but one that is still quite a distance from being in the position to challenge Apple's dominance in the field. Making a "financial" case about music value on the iPod was a waste of what could have been a good commercial, especially when there's a much better tale they could have told about the overall value of Zune Pass. Now is the time where Microsoft needs to step up and tell the real Zune story. This holiday will be an important focal point, and there's a large uphill battle that Microsoft needs to engage in if Zune is going to gain any traction in the marketplace. That involves not only telling a better story but introducing some very compelling devices that will resonate with the market beyond the current hardware. I'm not sure the market will listen much more to the words of Bill Gates, "I'm sure a year from now we'll do even better." At least they've stopped calling the iPod "The Model T of Music Players."
So, do you think there's a model here for subscription services? What's the Zune story you think Microsoft needs to tell?
Michael Gartenberg is vice president of strategy and analysis at Interpret, LLC. His weblog can be found at gartenblog.net. Contact him at gartenberg AT gmail DOT com. Views expressed here are his own.