One of the things I like about our weblogs is that you can witness us Jupiter analysts bouncing ideas about. This is a microcosm of Jupiterís formal and very extensive collaborative research process which creates strong and well reasoned hypotheses from individual analyst takes.
So just to add my own pennyís worth to the debateÖ.
Itís worth asking a couple of extra questions to frame the discussion. Why would consumer start wanting to buy a Zune player rather than an iPod? It would have to have to tick at least one of the following boxes:
1 – Itís cooler
2 – It offers a better music experience
3 – Itís cheaper
Ideally it would do all three, though as David mentions, creating aspirational devices isnít really Microsoftís forte.
Letís assume for a moment that it did meet all three criteria, then what for Apple? A lot of people tend to say that Apple have got the MP3 player market sewn up because iPod has become synonymous with MP3 player. Well Hoover was synonymous with vacuum cleaner (in the UK at least) and Walkman was synonymous with portable cassette players. Early mover advantage does not necessarily mean long-term market domination.
Gartenberg is right in that itís unlikely the market would support multiple closed loop eco-systems, but just as Card says, the iPod isnít a closed loop. MP3 is the dominant digital music currency (as Ian Fogg has long been at pains to point out). So perhaps what will evolve is an evolution of the games console model, in which the legitimate paid digital music part of the equation remains a closed loop but all devices continue to support MP3 and that remains the standard currency for MP3 players Ė which is it what we call them anyway (sorry Nate, I know I should be calling them Portable Media Players, but MP3 players fits more nicely here!) In a way itís a simple evolution of the existing model, just in the same way that because you might have bought tapes from BMGs music club didnít mean that you didnít play your own mix tapes on your tape walkman.
Ironically, for once a lot of this might actually be out of the hands of the device manufacturers and back in the hands of the labels. As Card always says, the platform comes first and content later. Well that has happened here but the paid content part has failed to mirror the success of previous models, e.g. VHS and DVD movie sales. So the music industry is just beginning to get a little more ambitious with experimenting with alternatives. If they use Kazaa to experiment with a MP3 based model and it works, then well the closed loop DRMed ecosystems will be even less important and the MP3ís exchange rate as a currency will go right up.
Wild Card: Shift in Strategy for Microsoft?
One significant change to the value chain could occur if Microsoft becomes relatively more aggressive. Widespread use of WMA and the Windows Media Player is key to Microsoft. Currently, Microsoft cannot too heavily push its MSN Music services at the risk of unsettling other WMA-based services, which are Microsoft’s clients. If Microsoft decides WMA services have not made sufficient progress in unseating Apple’s current dominant position, however, Microsoft might follow an integrated approach similar to Apple’s by fully leveraging available cross-channel marketing opportunities.