Apple, Google, and the Streaming Stakes

Microsoft’s new “Xbox Music” service is the company’s latest dive into a burgeoning market for music streaming and a lifestyle approach towards media consumption. The venture, a reiteration and reworking of Microsoft’s Zune music service, is functionally similar to the Spotify model of ad-supported or subscription-based media on demand.1 Much like its competitors, Xbox Music offers users the ability to stream music for free, create playlists, purchase and download albums and singles, and access its cloud of media from any compatible Windows device.2 Microsoft intends to establish itself as an entertainment biome in the homes of customers - a recreational lifestyle of music, television, film, gaming, and social networking - by capitalizing on the widespread prevalence of the Xbox gaming console and the Windows operating system, and with new hopes of infusing the mobile market with the latest Windows 8 Phone and Surface tablet. Expansion Xbox Music is Microsoft’s follow-up to very positive statistics showing a sharp increase in the consoles’ usage for entertainment purposes.3 For many, the Xbox has become more than just a platform for gaming; it has become a hub of content. Because of this, Microsoft identified a potential for expansion and developed Xbox music as well as cloud capability and specific compatibility with other Windows products. Both Microsoft’s Xbox console and Windows operating systems are present in millions of homes and are currently the two main vehicles for delivering the Xbox Music service to customers. Several new products including the Windows 8 Phone and the Surface tablet are optimized to control the Xbox interface through an application known as SmartGlass.4 (SmartGlass is also available on Apple’s iOS and Google’s Android OS.5) Any of these mobile products may serve as a means to access and experience the music service, effectively allowing the Xbox to become the center of a home’s entire media library.6 Many of the services that consumers seek can be accessed from a convenient set of products, regardless of hardware or location. Microsoft is venturing into mobile technology territory, making clear their intentions of securing a place among iOS and Android as the top providers of mobile entertainment. Learning from Google Google is the dominating mobile force with Android OS powering three out of four smartphones shipped globally.7 The company also has taken a similar approach to the all-in-one media hub by streamlining its Google Play service. The features are very similar to what Microsoft and Xbox Music offer, but there are a few key factors that will determine whether or not Microsoft will be able to enjoy the same successes of Google and Android. Google has been developing the concept of cloud computing and mobile access for several years, launching Android in 2008 and becoming the mobile market leader in 2010.8 In many ways, Microsoft is playing catch up. However, Google has always had very little control of hardware development, leading to multiple devices with vastly different specs all trying to run the same OS at once. This led to inconsistencies in performance. Microsoft has been watching closely and is promising consistent, high user experience quality by strictly enforcing minimum hardware requirements.9 The company will have to keep its promises regarding performance after launching the first three Windows Phone 8 devices. One Step Ahead of Apple Interestingly, and met with the optimism of its stakeholders, Microsoft is leading the race against Apple towards interactive streaming. Xbox Music offers not only an Internet radio alternative to Spotify and Pandora, but also a music-downloading alternative to iTunes all in one location. While Apple is credited with having a larger market share and thus a closer relationship with the recording industry, Microsoft maintains the allure of affordable and expansive hardware options and the ability to coordinate the pre-existing popularity of its products with the convenience of cloud-based computing. Time will tell if Apple’s forthcoming streaming service will conquer the market with the help of the iPhone and iTunes. However, Microsoft has lodged its foot in the door and now has the potential to create an entertainment ecosystem of rivaling caliber. Risk This expansion towards entertainment as a whole is ingenious. But while Microsoft has gathered all the necessary tools to create an ecosystem, it may be taking a risk in its attempts to fill it with a community. Microsoft and Xbox Music must consider that established Xbox users and the market they are currently targeting are not necessarily the same group. Transforming the Xbox console into a media hub seems like a logical next step, and users appear to be enjoying its current entertainment capabilities. However, the company may be interpreting the numbers as a green light to change the purpose of the console. Adding functionality is a good thing, but attempting to build a new image and utility around a pre-existing product may deter those that use the product for what it is. With the release of the Wii console in 2006, Nintendo took a similar risk. The company shifted its image, and began to seek a mass market that did not include many of its previous supporters. Enthusiasts that had followed Nintendo since its earliest stages shied away to avoid the influx of the new Nintendo community. Similarly, an Xbox supporter may become disenchanted with the console once the emphasis switches from video games to content that he or she is already able to access in other ways. Conclusion Through imposing such importance on the Xbox console, Microsoft is attempting to grab more of the market by adding mass-appeal value. In doing so, it might seem that Microsoft is treating their current constituency as a given, a guarantee, and as secondary to the new market they seek. Nonetheless, Microsoft’s Xbox Music service has the potential to claim a large portion of the digital media market. The company has followed an effective strategy in rolling out new products and services to be implemented with the old. Xbox Music may have what it takes to become a large contender amongst Spotify, Pandora, and iTunes in the digital music industry. In the near future, we will see how the current Xbox community receives the service and whether or not the increased emphasis on the console as a home entertainment system has a dynamic effect on the Microsoft community. By Kyle Billings and Christian Kim Endnotes: 1. Ingraham, Nathan, "Microsoft rips a page from Spotify's playbook to take on iTunes," The Verge, Oct. 30, 2012, http://www.theverge.com/2012/10/30/3577204/microsoft-xbox-music-itunes-spotify-digital-music-showdown. 2. "Introducing Xbox Music," Xbox Music, Nov. 18, 2012, http://www.xbox.com/en-US/music. 3. Warren, Tom, "Microsoft: Entertainment overtakes multiplayer gaming on Xbox, The Verge, Mar. 27, 2012, http://www.theverge.com/2012/3/27/2905923/xbox-live-entertainment-overtakes-multiplayer-gaming-stats. 4. Gross, Doug, "Here comes Microsoft's Xbox Music service," CNN Tech, Oct. 15, 2012. http://www.cnn.com/2012/10/15/tech/web/xbox-music/index.html. 5. Whitney, Lance, "Xbox Smartglass app arrives for iPhone, iPad," CNET News, Nov. 07, 2012, CBS Interactive, http://news.cnet.com/8301-10805_3-57546297-75/xbox-smartglass-app-arrives-for-iphone-ipad/. 6. Spence, Ewan, "Lessons For Microsoft's PR over Zune and Xbox Music Pass," All About Windows Phone, Oct. 16, 2012, http://allaboutwindowsphone.com/features/item/15964_Lessons_For_Microsofts_PR_over.php. 7. Chapman, Glenn, "Google's Android takes bite out of Apple," NewsComAu, Nov. 19, 2012, http://www.news.com.au/business/breaking-news/googles-android-takes-bite-out-of-apple/story-e6frfkur-1226519431757. 8. German, Kent, "A brief history of Android phones," Android Atlas, Aug. 2, 2011, http://reviews.cnet.com/8301-19736_7-20016542-251/a-brief-history-of-android-phones/. 9. "Minimum hardware requirements for Windows Phone 8 revealed," WMPoweruser, Nov. 4, 2012, http://wmpoweruser.com/minimum-hardware-requirements-for-windows-phone-8-revealed/.

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