Microsoft Beats Apple To European Music Downloads, Singles As High As US$1.91

by , 8:00 AM EDT, August 14th, 2003

The battle for the European digital music download market has begun, and it isn't Apple firing the first shot. According to an article at Guardian Unlimited, Microsoft has teamed up with a company called OD2, founded by singer Peter Gabriel, to bring digital music downloads to European customers.

The service will be accessed through a new tab in Microsoft's Windows Media Player, and will allow customers to reportedly choose from over 200,000 songs for .99 Euros (US$1.12 as of press time) for singles. In British Pounds, songs will be priced slightly higher, at 75 pence (US$1.20), with the BBC saying that some songs will be priced at either 99 pence (US$1.59), or £1.19 (US$1.91). The BBC also reports that albums will be priced starting at £7.99 (US$12.82), or €12.49 (US$14.13). Differences in pricing in US dollars can be attributed to currency differences between the US Dollar, the Pound Sterling, and the Euro. There is no subscription fee for the service.

In comparison, Apple charges US$.99 per single, and US$9.99 for most full albums through its iTunes Music Store (iTMS). Recently, we have been seeing full albums priced as high as US$11.99 at the iTMS. Apple also does not charge a subscription fee.

The service is being pushed as part of the MSN Music Club, an existing service for streaming music through Window Media Player 9 (WMP), and will launch with some 200,000 songs from all five major labels. Windows Media Player is the technology used by the much lambasted BuyMusic.com, but the MSN Music Club is available directly from the Windows Media Player application, similar to Apple's iTMS being accessed through iTunes.

According to the BBC report, the service is not a response to Apple's iTMS. The news service references Charles Grimsdale, CEO of OD2, the company managing Microsoft's new service:

Microsoft's service was not a direct response to iTunes' popularity, but was designed to please fans who were reluctant to sign up for a subscription, [OD2 CEO Charles Grimsdale] said. It had also been made possible because record companies had "opened up" their licensing requirements in the last six months, he said.

This, despite the fact that Bill Gates said just in July of this year that his company was considering a music service. Apple launched its own iTMS in April, almost two months before Mr. Gates said his company was considering something similar. From a C|Net article on July 25th:

Responding to questions at an analyst meeting here Thursday, Gates indicated that any music store project would be more a matter of providing computer users with added convenience--and presumably, keeping people using Microsoft software--rather than a direct moneymaker.

"It's maybe a feature your platform should offer, but it's not like you're going to make some (big) markup," Gates said.

The service is available now to European Windows users through the Windows Media Player 9 app.

The Mac Observer Spin:

This is a Super Slick™ move by Microsoft. The company has come out of nowhere with a fully functional online music store. Sure, Big Redmond no more developed this than BuyMusic is a pleasant place to shop, but for all intents and purposes, Microsoft is one of only three major players in this market, and that is very good for the company. It's smart, they seem to be handling it properly (leveraging both the Windows monopoly, which is illegal in the US, and its ubiquitous WMP software), and the company is even offering some transference rights to its customers. To be fair, we await finding out some specifics on those rights before we believe the company that wants to rent its software to us is actually meeting Apple's end-user rights for the iTMS.

Just as this is great for Microsoft, it is correspondingly not good for Apple's eventual entry into the European market with the iTMS. Microsoft has been able to launch this service because it is working with a company (OD2) that has already secured pan-European licenses for a catalog large enough to launch. Apple is still in the negotiating process, and the launch of the MSN Music Club could potentially allow Microsoft to grab a major foothold in this emerging market before Apple arrives. That may end up being a crucial element in this battle.

What remains to be seen, of course, is how the end-user experience goes. BuyMusic's hurried launch brought it to market first in the Windows market in the US, but its abysmal service, problems with transferring songs, pricing glitches, and other problems have seriously hurt its potential, at least its short-term potential. One would think that Microsoft itself could make sure that its own service has no usage problems, no rights issues, and no problems with issues like burning CDs. One would think, but it remains to be seen if that will be the case. This is, after all, the same company that makes Windows.

The other benefit Apple may have is one of pricing. If the company can negotiate licensing rates similar to the rates it got in the US market, that would be a huge competitive advantage, but there's nothing to say that Apple can do that. We don't know why MSN Music Club's pricing is so whacked (US$1.91 for a single? That's crazy!), but it could be an issue with the European labels, and not Microsoft or OD2.

So, the bottom line is that Apple has its work cut out for it, and Microsoft has scored an incredible coup.