Rhapsody killer?

Last year we wrote an article about RealPlayer Rhapsody, a service from Real Networks that introduced a subscription model to music downloads to compete with the pay-per-track system available from Apple's iTunes. While we fully understood that Apple's iTunes and their iPod music players possessed a "cool factor" not likely to be taken down by Rhapsody, the point of the article was to demonstrate the cost effectiveness for consumers of a subscription model compared to paying for each track. While we did not come right out and say it, we concluded that it would be unlikely that Rhapsody would be able to take a large piece of market share from Apple- not because a subscription model does not make for a good business model, but instead because Real Networks was not as big a player as Apple.

Now a new player has entered the market with a subscription model, and they are playing to win. That player is everybody's favorite whipping boy, Microsoft. Bill Gates and company are not new to the music market. They launched their "Zune" music player as a competitor to Apple's iPod in 2006, and quickly found that Apple was not going to be easy to overtake. The Zune was just one in a long line of handheld music and video players being offered by dozens of companies. Key to Apple's success was the popularity of iTunes, the service which provided content to iPod users (iTunes of course provides content to computers as well). The Zune never amounted to much because it lacked this type of service- until now...well until this past September anyhow.

In September Microsoft launched Zune 3.0, and this fall has been dedicated to marketing the project. While we don't want this to read like an advertisement for the service, we do need to explain what the service does in order to detail how it plans to compete with iTunes. Much like the aforementioned Rhapsody service, you pay $14.99 a month and you can listen to unlimited songs in the Zune library on your PC or a compatible MP3 player. The songs are not DRM free and cannot be copied to CDs. There is one big difference between Zune and Rhapsody though, and that is that included in the $14.99 monthly fee are ten free DRM-free MP3 downloads, which would cost $9.90 over at iTunes. So if you would normally buy at least ten songs a month on iTunes, with Zune you will be paying just five bucks more each month for the added bonus of being able to listen to any song you want on your computer or MP3 player at any time.

What's missing from this service though is the same thing missing from Rhapsody, and that is the "cool" factor that Apple brings to every product it creates. Critics have dropped bombs all over Apple TV, a weak attempt from Apple to enter the home entertainment market, but several bloggers have noted that there are enough Apple fanboys out there to keep the product afloat. Apple's iTunes service is a far superior product compared to Apple TV and already has a strong foothold in the music download market. To unseat it, Microsoft will need to do more than just bring added value to the industry. Perhaps they should change the name from Zune to Mojave? Oh, that's right...

It will certainly be tough for Microsoft's Zune to knock iTunes off of its pedestal. But Zune will more than likely keep them sweating over at Real Networks as Rhapsody suddenly looks like a dated concept. In addition, Microsoft has staying power and multiple channels through which they can promote Zune. It will be an interesting battle ahead, but witnessing the last ten years, we wouldn't bet against Steve Jobs right now.