August 30, 2004

MSN in Music Biz

Microsoft will jump into the music-downloading market this week, with the rollout of a new MSN online-music service that will compete with Apple's iTunes and RealNetworks' Rhapsody.

Microsoft To Enter Music-Download Market

By Robin Arnfield
Enterprise Windows I.T.
August 30, 2004 12:18PM

Microsoft will jump into the music-downloading market this week, with the rollout of a new MSN online-music service that will compete with Apple's iTunes and RealNetworks' Rhapsody. MSN Music will launch at the same time as the beta release of Microsoft's new Windows Media Player 10.

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Microsoft is expected to enter the music-downloading market later this week, in a move that will put the software company in direct competition with Apple's iTunes platform.
As a storefront on the MSN online service, Microsoft's music service will offer songs for downloading to PCs and portable music players.

Beta Version

The launch of Microsoft's Internet music store, MSN Music, will take place on Thursday, September 2nd, at the same time as the beta release of its new Windows Media Player 10, according to press reports.

MSN Music will also be in beta mode, and will be given additional features at a later date. The downloading service will offer 99-cent downloads, but at this time will not offer monthly subscriptions.


Strategic Plan

The timing of MSN Music's launch to coincide with the announcement of Windows Media Player 10 indicates that for Microsoft, the goal is wider than competing with iTunes, which has been the dominant player in the Internet music market since its debut in April 2003. According to Forrester Research, iTunes has around 70 percent of the U.S. music-downloading market.

Windows Media allows consumers to play films, music and other digital content on a variety of devices running the Windows operating system. With Windows Media and MSN Music, Microsoft hopes to expand its efforts to make Windows the foundation for its move beyond the desktop and into consumers' living rooms.

Protecting Investment

"Yes, Microsoft does want its software to be the centerpiece of the digital-entertainment hub in the home," Yankee Group analyst Michael Goodman told NewsFactor.

"But its strategy is wider than that. By entering the music-downloading market, Microsoft is protecting its investment in its WMA music format and its Janus digital-rights-management technology. There was a risk that companies would have stopped using WMA had Microsoft not demonstrated that it was serious about Internet music."

Antitrust Issues

Antitrust regulators in Europe and the U.S. will be taking a close interest in Microsoft's launch of its online-music store to see whether it is using its domination of the operating-system market and the near-ubiquity of its Media Player software on consumers' desktops to gain advantage in the online-music market.

In the U.S., Microsoft has already been ordered to remove an obscure link, buried deep inside Windows, that opened an Internet Explorer browser loaded with a Microsoft-branded CD store.

European regulators have been very critical of Microsoft's use of the Media Player to get ahead in the online-media market and will no doubt scrutinize any undue promotion of the MSN Music store.

In March, the European Commission cited Microsoft for offering Windows on the condition that the operating system come bundled with the Windows Media Player, alleging that this effectively stifled competition.

Microsoft is challenging the Commission's ruling in the Windows Media Player case. In September, it will go before the Court of First Instance. The software company intends to ask the European Court to suspend the Commission's remedies, which include requiring Microsoft to offer a version of Windows without Media Player.

CIO Today: NewsFactor Network - E-Business - Microsoft To Enter Music-Download Market

Posted by Craig at August 30, 2004 11:20 PM