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Microsoft's new tune

XBox Music could be a turning point in the music industry's fitful adaptation to the broadband era.

October 25, 2012
  • Xbox Music debuted last week on the game console, offering a combination of free music streaming, a subscription option that would allow users to download individual tracks or listen to songs without advertising, as well as a digital music store.
Xbox Music debuted last week on the game console, offering a combination…

This week Microsoft is set to release an operating system for computers, tablets and smartphones that will put a vast amount of music at users' fingertips, free of charge — with the music industry's blessing. XBox Music, a service integrated into Windows 8, is just the latest in a series of music-related initiatives by the software giant, and its record hasn't been good (seen any Zune music players lately?). Nevertheless, XBox Music could be a turning point in the music industry's fitful adaptation to the broadband era.

The new, advertiser-supported service will let users play songs on demand from an online jukebox, create customized webcasts based on the music of their favorite artists and buy MP3s from an online store stocked with an enormous selection of tracks — in short, a combination of Spotify, Pandora and Apple's iTunes. For $10 a month, users will be allowed to play an unlimited number of tracks without commercials, as well as access the service on a mobile phone running Windows Phone 8, a new operating system set for release soon. XBox Music is already available on XBox game consoles for a fee, and is expected to be available next year for computers and smartphones that don't run Windows 8.

The features aren't novel; what's different is the degree of integration. Analysts expect tens of millions of people to buy devices with the new version of Windows in the coming months, and every one of them will be able to stream music on demand for free shortly after they hit the power button for the first time.

It took years for the major record companies to accept the idea that letting people play songs on demand for free wouldn't devalue music and kill the business. They now see those services as a chance to generate advertising revenue from casual music fans who've stopped buying CDs, and to persuade more avid listeners to become monthly subscribers for the sake of unlimited, mobile access to music. On the other hand, some artists still aren't convinced that the minuscule per-song royalties paid by subscription and webcasting services will ever add up to anything meaningful. Nor have Spotify or Pandora proved a way to profit from providing free access to music online.

The key to generating more royalties and profits appears to be persuading masses of music lovers to make the leap from assembling a personal collection of songs and albums to relying on an expansive, shared music library in the cloud. Relatively few have done so thus far; subscription music services have been around for more than a decade, but collectively they've signed up only about 3.5 million customers in the United States. If the issue is that most people simply don't see the value in such services, they'll never be more than a niche product. But if the main hurdle is simply a lack of awareness, that's one problem Microsoft is poised to solve in a hurry.

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