eWeek has an interview with Robbie Bach, president of Microsoft's Entertainment and Devices Division. He talks about Xbox and Zune. On Zune he says there will be no (hardware) Zune Phone and Zune Marketplace is ready to go DRM-free if asked by major music companies. Read below the Zune related parts of his interview...
What about the Zune? What's the opportunity there been like?
Well, … people always want to say, gosh, Apple has such a big lead, what are you going to do, how do you possibly compete with that, and why would you bother? And part of my response is, you know, they've sold 100 million devices. So, let's just do some math. You and I can do this. How many people are there in the world? Five, six billion. Let's call it five—it's a round number. Of those 5 billion, every single one of them has a music experience. Music is the most ubiquitous entertainment experience in the world. So, there's a music experience for all those people.
Let's say half of them are never going to have a digital music experience and never have a chance to have a digital music experience, so lop off 2.5 billion people.
Now let's just for yuks, because 2.5 billion is too big a number to deal with, lop off another billion people. Now you have a target audience of a 1.5 billion people. Not everyone is going to want a digital device; we can go through the yak-yak around that. But the audience is huge, and we are really early in what's going to happen in the music space. And the music industry is … in the process of reinventing itself.
And so for us, A) there's a big market; B) we think the opportunity is just beginning; and C) if you want to be in what we call connected entertainment, you have to be able to connect movies and video with music, with games, with communications technology to be able to do that. You can't not have a player.
So, early phases of this, we're about 10 percent market share in the category we're in, which is the hard disk. That's a good first step. Like Xbox was before it, the first step is what it is, it's nice, it's not perfect. People have commentary and questions and things we can improve, and we would say, yep, you're right. And we're not stupid, we see all those things, and we're good developers, and we know what we need to do. And you're going to see the product get better and better and better. You're going to see us be relentless in marketing. And you're going to see us expand into other parts of the category beyond the hard disk space. And I think we can be successful; I think we can build a nice business.
I looked back at my notes from the Microsoft Financial Analyst Meeting last summer and you talked a lot about communities, especially around Zune, but also around other products. Can you expand on that?
Sure. Zune today probably isn't a great example in the sense that community is part of the process for Zune that we believe in, and we haven't...really created the community environment. Now, that's something we're obviously working on, and you're going to see a lot more of that from us. But today we have a store, we don't have a community, and that's something that's missing, and it's part of why I don't think the product is complete yet, and something we're going to continue to expand. And the people who have bought a Zune will get access to that community, too, so it will be a perfectly good environment for them. More generally, we think about community as a place where people to go create their social network. And I'll be a psychologist for a moment here. I think the tensions and pressures of the world today, the pace with which we work, the pace with which things happen, the degree to which people move around, your social fabric just isn't very strong. It's not like you grew up in Appleton, Wisc., you went to school, you come back to Appleton, Wisc., you take your dad's business there, and that was 30 years ago. That doesn't happen anymore. In that old world your community was the neighborhood you grew up with, it's the friends you went to church with, it's the kids of your parents' friends. | Zune today probably isn't a great example in the sense that community is part of the process for Zune that we believe in, and we haven't...really created the community environment. |
In the new world your community is all over the country, and it's your friend from high school who went to a different college, it's the friend who moved away, it's the person who my son plays on an AU basketball team with and has a bunch of friends who don't go to his school and don't live in his community. And yet we have a strong desire to have community and to have social connections. So, what do we do? We use technology to create it. That's what MySpace is about. That's what Xbox Live is about. It's what the Zune social experience will be about. It's what creates that—that's what YouTube is about, although less so in their case, obviously. Most of the social experience happens actually in MySpace, with YouTube providing the vehicle to get the media back and forth. But you're going to see that continue to expand.
You use that social community actually as a marketing opportunity, because not only does this generation of people work harder to create their social community, they're also perhaps the most cynical consumers we've ever had about advertising.
And the challenge that raises for the advertising agencies and the advertisers is your ad has to be more credible, more engaging, more real than ever before.
For me as a marketing person I say, yeah, that's true, but even more importantly what I have to do is I'm not advertising to everybody necessarily, I'm advertising to the influencers in your social network. Who are the people you look to for advice? Who are the people you look to for feedback? When a new movie comes out, what happens? Well, yeah, there's some advertising, but the first group of people that go to it come back and talk about it, they blog about it, they go to their space and say, 'Hey, did you see?' They send a text message, and you watch what happens there, and instantly you know. And you know whether something is going to catch on or whether something is not going to catch on.
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Does Microsoft have what it takes to operate a consumer electrics company? And how do you balance that with your traditional OEM strategy?
Well, I think the thing you have to do is you have to look at each product and category differently. From a balanced perspective there are categories where we're not going to do devices. We don't do phones. We don't have plans to do phones. Because we don't think it fits for the category. And we've got great support from our operators and from the handset manufacturers. There are other places like Zune where because of Apple's success, and frankly because of the uneven experience we were able to deliver just by being the platform provider, we decided we had to do it ourselves. I have no desire to do hardware. I have a desire to produce a great end-to-end experience for consumers. If I can do that just with software and services, that's easier for me honestly. If I need to do hardware, I am building the expertise hands down to be able to do that when I have to. Xbox is the hardest piece of consumer electronics hardware to produce in the world, no debate. It just taxes way more of anything you could possibly want to do. Zune technically speaking is dramatically easier. Almost any other device you could describe to me would be dramatically easier than producing what we did in Xbox. | We don't do phones. We don't have plans to do phones. Because we don't think it fits for the category. And we've got great support from our operators and from the handset manufacturers. |
And so by becoming experts at doing that, we are building core skill sets that we can leverage other places if we think the business requires it. But it's not a hardware first model. We believe the experience has to be great, and then we decide which pieces of that we have to add value to based on the category.
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Back to Zune, when will the Zune music store have DRM (digital rights management)-free content from EMI?
As soon as EMI says, "Hey, we want to do this. When do you want to do it? How do you want to do it?" I mean, all the DRM situations are under control of the labels and actually the publishers, and actually publishers are as important as the labels are in that sense. And the artists certainly have some degree of influence. I don't think of DRM as something we like or dislike. It's something we're asked to do. Somebody says, "Hey, we don't want you to do it," we say, "OK, so what format do you want it published in? You can use MP3, you can use ACS, you can use Windows Media. Tell us what it is, tell us if you want no protection, tell us what that means, and we'll go, and we'll work through the business model, sign the contract, and away you go." So, to me it's just a function of when they want to do it and how they want to do it. The EMI Apple thing was not new news to anybody. They've been talking to everybody for a while. And so then it comes down to a business arrangement and all the things that go along with that. | I don't think of DRM as something we like or dislike. It's something we're asked to do. |
I just thought I'd throw it in there. I agree, it wasn't huge news, but it was interesting.
It's not a big surprise, it's interesting. It would have been more interesting if it had been Warner or Universal. In a way, … because of their market position [EMI] can either prove or disprove that works, but … they're not a tipping point provider. You'd have to look to Universal or Warner or Sony BMG to say, OK, one of those guys moves [in] that direction, it changes the dynamic in a different way. In some ways that's more interesting. Read the full interview on eWeek [via Kotaku ] Related articles:
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