How Xbox Music Could Become the World’s Biggest Streaming Music Service

Microsoft this week announced the launch of XBox music, a blended music subscription, personalized radio and download service available on Xbox, Windows mobiles and tablets, and soon Windows 8 on PCs.  Microsoft does not have the strongest of track records in digital music, with ill-fated previous efforts such as MSN Music and Zune.  However this latest foray could possibly, just possibly be a game changer.

From a user experience perspective Xbox music ticks a lot of boxes:

• It is multiplatform, working across Xbox, tablets, smartphones and PCs.  i.e. most of the device types consumers want to get music on
• It blurs the distinction between access and ownership by integrating radio, on demand streaming and downloads
• It combines free and paid

In fact there is an argument to be had the what Microsoft have done with Xbox music is what Apple should have done (should do?) with iTunes.  But this isn’t what gives Xbox Music such disruptive potential and indeed Apple won’t be overly concerned yet.  Apple has managed to make music work in a way that no other device company has because it exercised near absolute control across its tightly integrated ecosystem, from top to bottom.  Microsoft might be able to exercise that sort of control on Xbox, but nothing close to it on phones, tablets or PCs.  So do not expect Xbox music to turn Microsoft into a music device and service powerhouse that will usurp Apple.

The PC Beachhead

So just where does the disruptive threat come from?  From the little old PC.  In my view the boldest move Microsoft have made here is to commit to hard bundle free streaming music with Windows 8.  Think about that for a moment.  Every single copy of the latest update to the world’s most ubiquitous PC operating system will have a Spotify equivalent included for free.  The last version of Windows will have shipped 350 million units by the end of this year.  When you start looking at that sort of scale Deezer’s 26 million users and Spotify’s 24 million users start to look positively modest in comparison.

Microsoft have not yet revealed details of how many weekly hours of free music a Windows 8 free music user can expect to get, but have stated that the allowance will scale back after 6 months, which suggests that the initial allowance will be meaningful.  Which of course is hugely disruptive to the incumbent streaming services.  Suddenly a competitor’s massive marketing funnel will be preinstalled on the PCs of their target and existing customers.  Microsoft will have paid handsomely for this free music allowance and it should be viewed as a hard cash investment in Steve Ballmer’s recently publicly aired mission to ‘make Microsoft cool’.

Microsoft Must Get Its House in Order if it Wants Digital Music Success

But before we get too carried away, we need to remember that Microsoft has tried and failed numerous times before to make music work and so the odds are not necessarily stacked its favour.  Microsoft has a number of key hurdles it must clear if it is going to make this big music investment payoff:

• Microsoft needs to join its organizational dots.  Part of the reason Microsoft’s previous music initiatives faltered is because it failed to break through its internal organizational silos. For example, the last time Microsoft launched a streaming music service (via MSN) it wasn’t compatible with its Zune music player or Zune store.  Xbox looks like a brave effort to join the organizational dots, in much the same manner as Sony Music Unlimited, a brave effort to try to follow Apple’s iTunes model.  Both Sony and Microsoft will have to reverse decades of organizational thinking and process if they are to truly transcend their organizational silos.
• The user journey has to be truly seamless.  Consumers have long grown weary of bloatware shortcuts on the desktops of their newly purchased PCs, attempting to entice them with 3 months free trial of some service or another.  Microsoft will have to make the user signup and activation journey for Xbox music truly seamless and as deeply integrated into the Windows experience as is possible.
• Europe may not play ball. One key force will pull against deep integration: regulatory oversight.  In 2004 the European Commission expensively forced Microsoft to unbundle Windows Media Player from Windows and to pay a massive $761 million compensation package to Real Networks.  And that was just for hard bundling a music player.  How will the European competition commissioner look at a hard bundled US music service that could seriously disrupt two European streaming music services (Spotify and Deezer)?

So Xbox music has the potential to be a game changing play, bringing digital music to the non-Apple masses.  But Microsoft will have to get over itself and some major market challenges first to fulfil that potential.