In addition to lowering prices on its family of flash-based Zune personal media players earlier this week, Zune and its subscriber service, has gone straight past value-proposition marketing to the “freemium” handout.

To-date, the Zune’s music service comprises an online  service where all the Zune-DRM’d music resides, PC software and proprietary hardware players. Kind of like iTunes mostly, save for the $14.99/month payment model and the wireless-sharing feature that lets Zune Pass subs share songs, playlists  via the hardware’s built-in WiFi radio.

Now, in an effort to The Zune team announced today that Zune subscribers who pay the $14.99/month fee will get a monthly hit of 10 free, DRM-free songs to download and own. The only catch, and it’s kind of minor, actually, is that you can’t rollover the 10-song credits. Only use three in a month, the other seven don’t rollover.  Seems simple enough.

“But Mike, “ you’re probably saying to yourself, “…this is lowest form of customer acquisition, giving away free stuff in order to get people to sign up for a premium music service.”  To which I would reply, “Yeah, so?”

Business is business and the Zune organization is trying to establish a differentiated subscription service – leveraging Microsoft technology — to compete with Rhapsody and Napster, and the entire a la carte market.  Subscription services have always wrestled with customer acquisition costs. We’ve seen Rhapsody and Napster attempt to lower acquisition costs by enabling free (but limited) streaming of their content through Web browsers which didn’t force consumers to download the client software required for conventional subscription offerings. Other tactics those entities have utilized include syndicating their browser-based offerings to other Web-centric music sites such as Yahoo! Music and the music-centric social network iLike. 

What’s that old saying? You have to spend money to make money . . . Has Microsoft spent as much on Zune as Apple has on iTunes and the iPod?

1 Comment
  1. 11 December 2008 at 1:30 pm
    Chris Maxcer says:

    I must admit, this new Zune subscription made me pause for a couple of seconds — and I’m a big fan of the iPod and iPhone. Granted, I don’t yet spend more than $15 bucks a month on new songs — about $8 or so. But having the ability to listen to a full library of tunes . . . I’m sure I’d discover a half-dozen more songs each month that I’d like to own outright. And that unpressurized ability to discover songs _easily_ makes the Zune model interesting to me. How many people have listened to a 30-second song clip on iTunes and bought the song only to realize the first half of the song is not only irritating, but stupid? It’s only $.99, but I hate to throw it away.

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