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Wildcard Prediction December 4, 2008

Posted by David Card in Media.
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I’m probably not allowed to say this, and I’m certainly not paid to do so. But here’s the wildcard prediction, based on the announcement of a new Online Services chief at Microsoft, who’s an ex-Yahoo engineering manager rather than a media or product guy:

Microsoft spins off MSN to Yahoo, which also buys a chunk of AOL. Microsoft and Time Warner remain minority shareholders in the resulting uber-portal. Search and ad networks powered by Microsoft technology.

– Unites consumer email, IM, a couple of powerful ad networks, and a lot of valuable online content properties
– Doesn’t solve integration issues, social media missteps, or lack of a leadership role in video
– Isn’t necessarily competitive in search, but has potential
– Is very competitive in display. Perhaps too competitive?
– Leaves a lot of mobile questions unanswered
– Doesn’t necessarily unite search and display marketplaces or attribution techniques
– Is going to be a hard sell as a partner for branded media

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Latest Zune Moves November 20, 2008

Posted by David Card in Media.
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Microsoft made a series of moves this week around its Zune device and service, including hardware price cuts ($10 below iPods), a new firmware release with bundled games, launching a new TV campaign pumping the software, and a new pricing scheme for its subscription service. Microsoft renegotiated its label deals so that now, for the same $15 a month, subscribers can keep ten songs a month. That’s either a free album or the on-demand service for $5, depending on how you look at it. Everybody but Sony is in DRM-free MP3 format.

That’s a sweet deal, but will likely appeal primarily to the same digital music aficionado customers who’ve always had a spot in their hearts for subscription services. Those high-spending, digitally active music fans represent about 15% of the US online adult and teen population — around 26 million adults and 3 million teens. About 2-3 million people subscribe currently.

I asked Microsoft if it considered just cutting the price of the service, and execs said, sure, but that wouldn’t get over the “rental” hump. I also wondered if the model can be profitable. On-demand music subscriptions can be, if customer acquisition costs are managed, but 99-cent singles are only barely profitable at scale. Microsoft answered that the music biz is all about scraping out a few points of margin from multiple revenue streams. Okay, but subscriptions, niche though they are, are one of the few places where there might be a decent margin for the service and the rights holder. And Microsoft still hasn’t done much about advertising revenues.

Microsoft’s TV campaign features artists like Common, Afrika Bambaataa, and Kings of Leon and is focused on national cable with a few primetime network spots. Its theme is turning your PC into a music discovery machine, and is a move towards Microsoft’s new positioning around “Zune-powered experiences” across multiple “tuners.” That is, not just MP3 players, but PCs, phones, Xbox, etc.

UPDATED: Sony BMG is onboard

Windows Live Still Undefined, Needs More Two-Way Syndication November 13, 2008

Posted by David Card in Media.
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What Microsoft calls “Wave 3” of its Windows Live services shows modest steps towards its goals of integrating more social features into what still remains an odd-feeling collection of services. Users can now get a feed experience on their profile that is capable of incorporating activity reports from outside services like Twitter, Flickr, Flixster, Photobucket, iLike, and others.

I’m skeptical of Microsoft’s ability to steal away users from MySpace and Facebook — and Microsoft execs told me that’s not the core objective. Rather, they hope to integrate social network features into other established activities. Microsoft’s strength is its Hotmail and Messenger customer base, so this makes sense, but MSN feels absent. And though it’s the original platform company, in this consumer-facing roll out Microsoft isn’t emphasizing APIs and mash-up capabilities

More important, I’d like to see more two-way syndication. Users should be able to get their Hotmail & Messenger updates within Facebook if they want to. Microsoft doesn’t lack that vision, but this wave is more about the reverse direction, and of course, the two big social networks are noteworthy by their absence.

All the portals are feeling the threats to their previously dominant online media business model from Google and from the social networks. Neither Microsoft, AOL, nor Yahoo has successfully answered these threats, and each wants to tap into the potential of real social marketing (not selling cheap banners on MySpace) and a so-far completely unrealized universal communications hub.

Ironically, the portals with their big sales forces, army of developers, and relationships with advertisers and agencies, are in a better position to figure out what the future of social marketing will look like than the social networks are. But MySpace in particular is working on fixing that, even if Facebook threw the bigger dice first with Beacon (they’ll get it right, eventually). As for communications hubs, they’ve always held promise, but there’s never been a perceived need for them on the consumer side. Meanwhile, the social networks are rapidly becoming the hubs for a variety of social computing activities, if not e-mail replacements.

Stay tuned, the report’s almost done.

Other folks’ takes:

Joe Wilcox at Microsoft Watch
Mary Jo Foley at All About Microsoft
Kara Swisher at Boomtown