Subscribers get Microsoft Zune Pass break

Excerpts from the blog

Microsoft's Zune still isn't going to catch Apple's iPod, but you've got to give the group credit for creative approaches to music licensing.

Zune is announcing today that subscribers to its $15 per month Zune Pass will be able to download and keep 10 songs a month. It also cut device prices earlier this week, with the base 4 gigabyte model falling to $99 from $129.

The Zune Pass "hybrid" model could make its subscription cost more palatable to consumers. Getting $10 worth of songs lowers the perceived cost of the service to $5.

It's also a good comeback to the 25 free plays a month that RealNetworks began offering this year to propagate its Rhapsody service.

Apple, meanwhile, doesn't have a subscription service, but then it's expected to sell about 19 million iPods this quarter alone versus the 3.5 million Zunes sold to date.

What's really interesting about the Zune Pass announcement, though, is that it signals Microsoft's increased emphasis on the service side of the business.

Expect to see Microsoft extend the service beyond Zune players to other Web-connected devices such as phones and set-top boxes, which will give subscribers access to this music collection in the cloud.

This will follow Rhapsody, which is now available on Verizon phones, TiVos and various home audio devices.

Could Microsoft offer the Zune service through a wireless carrier, similar to Rhapsody's Verizon deal?

"Absolutely," Zune director Adam Sohn said.

Sprint or T-Mobile USA perhaps? They sell Microsoft-powered phones, Verizon has Rhapsody and AT&T is tight with Apple.

Another logical partner for the Zune service would be Netflix, which has all sorts of ties with Microsoft. Netflix boss Reed Hastings is on the Microsoft board and the company has a distribution deal with Xbox, Zune's big brother in Redmond.

As Netflix expands its stream-to-TV service, based on Microsoft technology, it could add Zune Pass to compete with the video-and-music bundles offered by cable TV services.

Sohn didn't confirm or deny my Netflix hypothesis.

"Everything's on the table," he said.

We started out talking about the downloads, but I think we ended up previewing the Zune strategy we'll start hearing more about in 2009.

"We start to think about Zune as a service tied to you and less a service tied to a particular mode of consumption," he said.

In other words, it's not just about the Zune hardware.

The big question is whether anyone will be able to afford a $15 month music service by the time Zune's grand plan emerges.

Games and business

While Steve Ballmer was making his case to Microsoft shareholders Wednesday morning, representatives of the state's video-game industry were across the street at Bellevue City Hall, making their pitch to Lt. Gov. Brad Owen and the state Legislative Committee on Economic Development and International Relations.

Although other cities and countries are trying to lure game companies, the Seattle area is doing pretty well. It's among the world centers for game development, with more than 150 companies employing more than 15,000 people.

Washington also ranked the second best state in the nation for its "new economy" climate, in a report issued Wednesday by the Washington, D.C.-based Information Technology & Information Foundation. The state gained two spots from the group's 2007 report, trailing only perennial leader Massachusetts.

Continued support of education was one concern mentioned by panelists including Jason Robar, founder of Issaquah game company The Amazing Society, and Raymond Yan, chief operating officer of DigiPen, the technology college in Redmond.

Game companies already benefit from state research and development tax breaks. Given the economic situation, they're not going to be asking the state for much more in 2009, said Lew McMurran, WTIA vice president for government affairs.

This material has been edited for print publication.

Brier Dudley's blog appears Thursdays. Reach him at 206-515-5687 or bdudley@seattletimes.com.