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Digital Audio Insider is David Harrell's blog about the economics of music and other digital content. I write from the perspective of a musican who has self-released four albums with the indie rock band the Layaways.

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July 07, 2006

Microsoft Rumors
by David Harrell

Microsoft Rumors
My bandmate Porter pointed me to an Engadget story on Microsoft's rumored iPod killer, with this intriguing tidbit:

To attract current iPod users Microsoft is going to let you download for free any songs you've already bought from the iTunes Music Store. They'll actually scan iTunes for purchased tracks and then automatically add those to your account. Microsoft will still have to pay the rights-holders for the songs, but they believe it'll be worth it to acquire converts to their new player.

Maybe it's just a rumor, but to "pay the rights-holders for the songs" would mean forking over 70 cents or more for every purchased track in someone's iTunes library. (Apple's paying at least 70 cents to record companies for an individual download purchase.) Still, in some cases the numbers could work out because despite total iTunes sales of more than one billion songs, that averages out to around 20 tracks per iPod owner. Translate that into $14 (70 cents X 20) and you get a customer acquisition cost that isn't too pricey for Microsoft.

And, as Porter noted:

Microsoft has the cash to do it. And it seems like the only possible way they'll be able to pry people loose from iTunes.

As a shareholder, I'm nervous about it. Xbox is a (qualified) success, but anybody going up against Apple in product design could get stomped, and MSFT's strength is definitely not product design.

In addition to Microsoft's product design and marketing issues, one major problem with a "free iTunes replacement" strategy is that there are some folks who have purchased quite a few tracks from iTunes, according to this Mac OS X Hints survey. While I doubt anyone posting to a Mac OS website is going to switch to a Windows product, it seems unlikely that Microsoft would pay thousands of dollars to replace the iTunes library of a single customer.

One other complicating factor is the free iTunes track of the week. These tracks show up as purchases in your iTunes library -- Apple even e-mails you a receipt for the transaction. As far as I can tell, there's no way to distinguish within iTunes between free and purchased tracks. Some of the people responding to the survey above reported more than 100 of these free tracks in their libraries.

But maybe it won't cost Microsoft 70 cents a track. The major labels still want to break the iTunes stranglehold, so it's possible that Microsoft has managed to negotiate some sort of sweetheart deal for its iTunes replacement plan.

tags: iPod iTunes Microsoft

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THE LAYAWAYS

Out Now -- "Maybe Next Year" -- The New Holiday Album:

"This is a sweet treat, deliciously musical without being overbaked for mass media consumption." -- Hyperbolium

"Perfect listening to accompany whatever holiday preparations you may be making today." -- Bag of Songs

O Christmas Tree - free mp3 lyrics and song details
Away In A Manger - free mp3

Download from eMusic, iTunes, Amazon MP3, or Bandcamp. Listen to free streams at Last.fm.

"...about as melodic and hooky as indie pop can get." -- Absolute Powerpop

"Their laid-back, '60s era sounds are absolutely delightening." -- 3hive

"...melodic, garage-influenced shoegaze." -- RCRD LBL

Where The Conversation Ends - free mp3
January - free mp3
Keep It To Yourself - free mp3

Download from eMusic, iTunes, Amazon MP3, or CD Baby, stream it at Last.fm or Napster.

"The Layaways make fine indie pop. Hushed vocals interweave with understated buzzing guitars. The whole LP is a revelation from the start." -- Lost Music

"Catchy Guided by Voices-like rockers who lay it on sweetly and sincerely, just like Lionel Richie." -- WRUV Radio

Silence - free mp3 lyrics and song details
The Long Night - free mp3

Download from eMusic, Amazon MP3, or iTunes, stream it at Last.fm, Napster, or Rhapsody.

"These are songs that you want to take home with you, curl up with, hold them close -- and pray that they are still with you when you wake up." -- The Big Takeover

Let Me In - free mp3
Ocean Blue - free mp3

Download from eMusic, Amazon MP3, or iTunes, stream it at Last.fm, Napster, or Rhapsody.

More Layaways downloads:

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