Is Microsoft counting on Steve Jobs’ Obstinance?

Amid much hype and more than a little speculation, the results of the Zune release are in. The general take seems to be that the Zune did fairly well on the first day of release, rocketing all the way up to number two, and has fallen like a meteorite with each ensuing day on the market. That is overly optimistic; those that opined that the Zune’s original day on the market was successful are giving too much credit for the Zune coming in at number 2. The Zune as we will all recall was, massively hyped, artificially hip*, nicely featured and widely anticipated. So when the Zune rolled in at second place it should have been a huge letdown, much like if the season ending episode of Heroes finished behind a rerun of M*A*S*H*. It isn’t that M*A*S*H* wasn’t a good show but, like the iPod, it has been around for long enough that everyone who want to see it has seen the show. In short, the Zune’s introduction was an utter failure.

After initial trepidation at the release of the Zune, the fans of all things Apple can seize this moment to gloat. Covering the Zune with repeated shovelfuls of derision is the de facto response of the most smitten iPod fans while the rest of the digital music market has simply forgotten the seemingly failed experiment.

At this point it would be easy to say that the Zune has entered a digital death spiral, that the whole thing was right up there with Microsoft Bob on the big list of bad Microsoft ideas. That notion gives Microsoft far too little credit. Sure, the company is over managed with a bureaucracy that flattens the smallest nail head but it is also the company that just won’t give up. Microsoft is a lot like a wrestler in an “I quit” match with the outcome in his favor. No matter how many choke holds, arm bars or number of times he is pounded like a tent pole with a chair the guy won’t give up, the book says he must win after all. For a case study of Microsoft’s tenacity recall the fate of Netscape, Microsoft doesn’t quit, they win.

Still, this setback must sting. In fact, the more schadenfreude filled among us are undoubtedly imagining the halls of Microsoft filled with the sounds of wailing at the companies abject failure to capture a significant part of the .mp3 market. Microsoft will keep trying but there is bound to be more than little depression right? Doubtful. Microsoft is not staffed by pie in the sky by dreamers but by realists. The early results of the Zune were no doubt anticipated and prepared for. Microsoft bought name recognition and, subtly, laid the groundwork for a crafty counter attack.

Microsoft’s leaves over the punji stick lined pit of doom? Why the largely derided agreement to pony up a dollar to Universal for every Zune sold of course! The move was (predictably) derided by the most muddle headed minds in the blogosphere . Such trivially obsessed knuckleheads saw the agreement as an affront to decent non-music stealing.mp3 player users everywhere. Microsoft sees the move differently. To Microsoft it wasn’t a supplication before the might of Universal, rather it was a dollar per unit well spent to force the hand of Steve Jobs.

What does Microsoft paying extortion to Universal have to do with Steve Jobs? Recall that Steve Jobs is well known for his stubbornness. Witness the fiasco that was the Apple III, a fiasco that came about in no small part because of Steve Jobs’ obstinate refusal to allow engineers to put a sorely needed fan in the machine. Note the fact that it took over five years after Steve’s return for Apple to release the Mighty Mouse and finally realize that Steve has told music companies to go pound sand on more than one occasion. Steve Jobs decides what is right and then refuses to move. This behavior, this inflexibility will play right into Microsoft’s hands/

The way is clear. When Universal begins renegotiation with Apple in early 2007 Universal will want the Microsoft deal. No really, Universal is going to ask for a little something something for each iPod sold. If it sounds crazy remember that to Universal every song downloaded is a stolen sale, thus every iPod sold where they don’t get a cut will now be, by the companies twisted logic, lost revenue that Universal deserves. Steve will say “f*** off” (Jon Gruber has a pretty spiffy imagining of the events, he goes a long way to reach a joke The Rock could convey in a few phrases but it is very well worth reading). Universal, being the money obsessed, no value added collective group of slimy slugs they are might grow a backbone for a moment, stop suing little Timmy and pull its content from iTunes.

Other publishers will follow suit and, low and behold, soon Microsoft and those that use the suddenly archaic Plays for Sure** will be the only game in town with legal music people want to buy. That scenario will put a dagger in the iTunes part of the iTunes iPod team.

Or maybe not. What Microsoft is forgetting, what the studios seem to be blissfully unaware of, is that iTunes doesn’t sell music or iPods. Apple might tell everyone iTunes sells iPods and consumers might think iTunes sells tracks and TV shows but they are mistaken. iTunes sells convenience. Even if Microsoft’s rosiest dreams came true and the only songs left on iTunes were hits of the eighties by Limozeen the situation won’t improve for the Zune. First Zune has the befuddling pricing scheme and that is coupled with a software experience that seems to be everything iTunes is not. Therefore, it is easy to conclude that without the huge iTunes library Apple might sell a few less iPods but Microsoft won’t sell any extra Zunes. As a corollary Universal won’t sell any extra tracks but one can be sure the use of P2P programs will rise by an amount proportional to the drop in iTunes sales.

If Universal ends up rebuffing Apple’s offer of “nothing” when the contract talks roll around and cite Microsoft as the way things should be done you’ll hear a lot about the end of the iPod and a fiery Zune being reborn from the ashes. Like the Phoenix, it will be just another myth.

Note to Microsoft: “Welcome to teh socia1” is hipper than “Welcome to the social”
Plays for Sure: Now with less than 1 in 4 chances of actually playing!