Microsoft

Here are the top five, most-read articles this week, published at any time. 

Sirius XM apparently drops stations, infuriates users: RAIN noticed that Sirius XM’s Facebook page was exploding with comments from outrages users, over missing stations in the satellite broadcaster’s channel lineup. We never got a response to several requests for comment from Sirius XM. [READ]

Sirius XM will reportedly drop Clear Channel stations soon: Related to the above, from which many readers clicked over for background information. Sirius XM remains in the news, having announced slightly higher subscription prices for 2014. [READ]

Apple announces 20-million iTunes Radio users; fuzzy math abounds: The Apple-vs.-Pandora media tornado got moving when Cupertino announced latest audience metrics for iTunes Radio. Problems arise when you compare apples to oranges. (See what we did there?) [READ]

INTERVIEW: Jim Lucchese, CEO, The Echo Nest: Readers settled into Part 1 of our conversation with the head of a powerful unseen force in music services. [READ] (Part 2 is here.) 

Microsoft’s new Web Playlist dismantles traditional “station” listening: Readers are interested in a unique new feature in Xbox Music that unleashes the hidden musical quality of web pages. [READ]

Windows 8.1 was released last week, and with it an updated Xbox Music service. Some of the upgrades to Xbox Music are merely usability features that make interactions easier. But one entirely new feature expands the competency of Xbox Music and creates a brand new listening mode.

Called Web Playlist, the function can connect the Xbox Music app to any web page, and play music referenced on that page. To realize the breakthrough nature of this feature, it’s important to realize that actual music does not need to be on the page. Web Playlist is not grabbing existing files and streaming them. Instead, it is analyzing the page, identifying references to artists and bands, and building a playlist based on those references. Any web page -- a message board, the comment section of a blog post, a music festival promotion -- turns into a relevant streaming music platform.

In effect, Microsoft is positioning Xbox Music to compete against Google Play and iTunes Radio by recruiting the entire web as a dispersed global music service.

Aside from a clever idea and breakthrough underlying technology (provided by The Echo Nest), Web Playlist potentially disrupts consumer behavior. In a year when the online radio/jukebox space has started to seem glutted with overlapping and duplicative services (Slacker copying Songza, Rhapsody mimicking Spotify and Rdio), Microsoft’s new feature separates the user from stand-alone platforms entirely -- except for Microsoft’s, of course -- and unleashes the listener upon the web at large, its musical potential suddenly unlocked.

Time will tell how compelling Web Playlist is, and whether Xbox Music has enough momentum to lift off. It works only in the Windows 8.1 environment, so its market is sharply constrained by platform. Of course, so is iTunes Radio. Perhaps the question is: when will we see this feature replicated by other services? Microsoft built the app, but the underlying intelligence belongs to The Echo Nest, a provider whose technology layer runs through many music services. 

Stay tuned. RAIN spoke with Jim Lucchese, CEO of The Echo Nest, about Web Playlist, how The Echo Nest’s music analysis compares to Pandora, and what The Echo Nest employees listen to in the office. The interview will appear Wednesday.

As Windows 8.1 counts down to lift-off, Microsoft is placing multiple bets during one of the most tumultuous and transitional times in its history. One of those bets is a renovated Xbox Music app, which will be available to all users by the end of this week.

From Redmond's perspective, the last year can be viewed as an attempt to develop a consumer market for the Windows 8 experience. The Windows 8.1 update makes a few course corrections derived from user pain points in the 8.0 operating system. While the year might not be termed a success, it is undeniable that Microsoft owns the only OS which is truly unified across desktop, phone, and tablet devices -- a bold and forward-looking business strategy that will take time to play out, for good or bad.

In that unified ecosystem, many moving parts update at different times, lurching the whole thing along. Xbox Music has always been a work in progress, intended as a listening platform planted in the home base of Xbox gamers, Outlook emailers, Windows phone mobile users, and Windows 8 desktop pioneers.

Microsoft claims to have based its Xbox Music improvements on feedback from users, and brags that the service is “completely re-imagined and rebuilt.” The design as a whole is reportedly simplified, smoothing previously clunky performance in certain devices. The player controls now remain visible at all times -- a tweak that many users will doubtless welcome as a “well, duh” improvement. The overall thrust, based on previews and leaks reported in Winbeta and The Verge, is quicker access to personalized music, requiring fewer clicks to get the sound going.

Improvements and all, Xbox Music lacks differentiating spotlight features that separate it from the increasingly homogenized streaming-music pack. Its earliest iteration was frankly rudimentary, and it remains mainly an ecosystem touch-point produced by a many-faceted software company.

Being a first-mover can be dangerous.

No music service is more aware of the perils of pioneering than Rhapsody, the subscription listening platform that has been operating since 2001. CEO Jon Irwin, in his RAIN Summit West 2013 keynote, remarked: “We’ve been around for over 11 years. Sometimes that’s a good thing; sometimes that’s a bad thing.”

Rhapsody’s market position seems to be an uneasy thing, at least, if you give credence to this week’s rumors of an executive shakeup underway. Nothing has been substantiated, but Rhapsody’s business realities, combined with whirlwind change in the internet listening landscape, make the rumors plausible.

If nothing else, putting a question mark over Jon Irwin’s bio reflects light on larger unanswered questions about Rhapsody’s service model and future.

Rhapsody was a farsighted startup in 2001. Launching with a small and esoteric music catalog, consisting entirely of classical recordings to start (largely provided by specialty label Naxos), the platform established major-label agreements within about six months. Along with early competitor eMusic, Rhapsody committed to the subscription path -- there is no free listening and no ads. (Google’s All Access service is going down that path, too.)

Many observers believed that Rhapsody’s access-as-ownership model was the future, implying as it did that ownership of a product unit (CD or track) would be rendered unimportant by an always-on celestial jukebox of a vast recorded catalog. That scenario is closer to playing out now, but it took a long time (in internet years) for it to manifest. The iTunes Music Store launched in 2003, giving labels a way of leveraging the album/track paradigm in the online realm, while coaxing consumers into the digital age with a store model they could relate to. iTunes revolutionized music buying by keeping it familiar.

The mobile internet changed consumer demand more radically than Apple’s iPod MP3 player could service with its hard drives of bought and stored songs. Alongside the sea change of mobile, new services introduced free listening, supported by advertising and usability restrictions that most people were (and are) willing to tolerate. While Rhapsody continued to supply a feels-free access to a long tail of music, Spotify and its ilk furnished actually-free listening, discovery, playlisting, and social sharing.

If that didn’t pressure Rhapsody’s steadfast subscription model enough, the big sluggers are now coming to bat -- the ecosystem giants Google, Microsoft, and Apple. These collossal tech/media brands engage in primary businesses (advertising, software, hardware) that can easily float loss-leading divisions that sell music. Apple’s music-specific ambitions are probably the most distinct, and certainly backed by a monumental history of shaping consumer habits, but all three companies (plus Amazon) own immense user bases whose casual exploration of built-in music services can take share from established indies like Rhapsody.

So, whether Jon Irwin remains Rhapsody’s leader or not, the unanswered questions remain the same: Can a subscription-only service provide compelling value against free-listening platforms? For that matter, can any streaming-music business hold its own against content costs?

Investor valuations can soar in certain cases, but nobody is turning a profit quarter after quarter. (Rhapsody’s most recent year-over-year quarter was down eight percent.)

The most visionary music service is rewarded for its far-sightedness by owning the longest track record of profit futility. Hundreds of thousands of dedicated users hope Rhapsody can remain buoyantly afloat in increasingly rough waters.

Microsoft waded boldly into new waters today by extending its Xbox Music service to non-Windows mobile devices, and eliminating subscription fees from the desktop web version.

The maneuver comes one day before Apple’s iPhone/iOS 7 event on Tuesday. The timing seems intended to counter the soon-to-be-launched iTunes Radio service, while also driving a stake into the ground occupied by Spotify and Rdio.

As of today, Xbox Music has a familiar two-tiered model. Unsubscribed users (the free tier) can hear music through the desktop interface, but not in the mobile app. Subscribed users (the payment tier) can listen to the "Radio" portion of the service (formerly called Smart DJ), and will, in future versions, be able to download tracks to their smartphones for offline playback.

By releasing Xbox Music apps on iOS and Android platforms, Microsoft is implicitly acknowledging the distant third-place position of Windows mobile devices, and that Xbox gamers likely do not carry Windows phones. Stepping into competing ecosystems is a necessary distribution tactic to fully engage the existing Xbox user base.

While it’s easy to interpret the expansion of Xbox Music as a "Watch out Spotify" moment, Microsoft’s service is currently rudimentary compared to the more sophisticated Spotify client and app experiences. Entrenched users of existing services have invested in their favorite platforms by developing social relationships, making service-specific playlists, and downloading subscription tracks for offline listening. This "service equity" immunizes the platform from user churn to some extent.

At the same time, Spotify and all other independent listening platforms have reason to fear the usage clout of the major ecosystem companies -- Apple (iOS), Google (Android), Microsoft (Windows 8.x), and Amazon (Prime, if it ever gets into Internet radio) and their massive built-in audiences.
 

This week in RAIN we're featuring contributions from various industry executives, journalists, and experts on the state and future of Internet radio.

BY BRAD HILL
From "unique innovator" to "a face in the crowd." That is the typical startup trajectory of a product that establishes a new consumer category.

The loss of first-mover advantage can happen fast, as with Apple’s iPhone, which first came to market in 2007 and in five years was locked in a global marketshare struggle with Android phones (and Microsoft and RIM products to a lesser extent).

Category competition tends to blunt innovation as it locks in standardization. For many smartphone buyers, there is little to differentiate an iPhone from an Android phone -– from the basic functions to the industrial design to the on-screen interface. What was once unique becomes commonplace.

Streaming music services have become similarly commoditized, thanks to suddenly increased consumer uptake and demand.

The commoditization curve has been relatively slow for Internet radio; during its early years the streaming/subscription platforms were dimmed by the shadow of iTunes and the quick mainstreaming of the music-download market. The Rhapsody subscription service launched at the end of 2001, and while there have been ownership changes and product enhancements, the core listening and discovery system has remained steady. From the first, Rhapsody and similar startups offered music access as an alternative to locally stored music ownership.

Several digital-life changes accelerated the popularity of the access model, especially a core triumvirate of factors: social, mobile, and a lengthening tail of indie music. Pandora, Spotify, Rdio, Rhapsody, and many others now scrabble for a larger share of the stand-alone streaming business.

While that competition rages, 2013 is shaping up as the year that on-demand streaming music becomes fully commoditized, and the signifier is when the major "ecosystem" companies plug in a standardized “radio” feature into their web and mobile apps. Google and Microsoft have launched their entries; Apple has staked out its ground with iTunes Radio expected to debut in the fall.

As these announcements and first product iterations roll out, it is easy to see how little invention has been invested in their development.

Instead, it is as if a punch list of required features has been ticked off and arranged with perfunctory design effort. That punch list includes a big catalogue (20-million tracks is standard), on-demand listening either free or with a paid subscription, user curating and collecting, pre-programmed “stations” (playlists), mobile access for listening anywhere, and (for subscribers) downloading music through the mobile app for offline listening. Independent streaming platforms invented the template; big media companies are copying it for their immense captive audiences.

(Variations distinguish the ecosystem streamers from each other a bit. For example, Google All Access allows users to mix their previously owned music files with their subscription downloads. Microsoft’s system, Xbox Music, spreads across a unique network of connected devices consisting of phones, tablets, computers, and the Xbox gaming console.)

Fine points notwithstanding, the streaming services offered by Google, Microsoft, and Apple are rolling out with a different business model from Pandora and the other stand-alone brands.

The independents exist to attract users to a discrete experience; the ecosystem streamers exist to prevent users from leaving an encompassing experience.

Google, Microsoft, and Apple are mostly non-music businesses -– device manufacturing, operating systems, and advertising. For them, music exists alongside mapping, productivity, general content, recreation, and mobile computing as an attraction to their high-margin enterprises. It’s understandable that their music streaming services would perfunctorily hit standard features.

A recent NPD survey found that respondents in the 13-35 age group listened to streaming music nearly as much (23%) as to terrestrial radio (24%) in Q4 2012. Among streamers identified, Pandora took the clear lead with a 39% share. The question for 2013 is how the Herculean tech companies, with their ability to place a new service on the home screens of millions of mobile devices, will displace Pandora, iHeart Radio, Spotify, and other leaders. Whether the indies survive the elephantine forces stepping into the space remains to be seen. The indies’ advantage is their history of innovation and interface design. They are less commoditized due to unique usability features and highly evolved interfaces.

No matter how it shakes out, consumers are the big winners. The celestial jukebox, a progressive idealist’s dream in the late 1990s, is part of today’s fixed reality.

Brad Hill is a former Vice President at AOL, and the former Director and General Manager of Weblogs, Inc.