Microsoft's PlaysForSure partners in denial?

Last week, just before signing of on Friday, I pointed to the news that Microsoft had confirmed it's intentions to launch it's own portable media playback device.

Last week, just before signing of on Friday, I pointed to the news that Microsoft had confirmed it's intentions to launch it's own portable media playback device.  At that time, there were already a few reports on the Web including the original newsbreaker on Billboard Magazine but no one asked the next logical question:  If Microsoft is going to make its own media playback devices and run its own corresponding online service, what if anything does that mean for all of its partners in the PlaysForSure ecosystem that it's been building up over the last two years.  On Friday, I wrote:

The second question that comes to mind is, "What about all of Microsoft's PlaysForSure hardware partners like Creative Labs, Samsung, and iRiver?"  Their entire strategy is built around the notion that Microsoft is creating an ecosystem that each can equally play in and that Microsoft won't be competing against them. But if Microsoft is coming out with hardware, then something has changed. Either Microsoft can't count on these partners to help it compete against Apple's iTunes and iPods, or, the hardware it's coming out with is more of a reference design that its existing partners can build from....Only time will tell. 

That question also extends to the multitude of PlaysForSure-compliant online services such as Napster-to-Go, AOL Now, FYE, and Wal-Mart Music Downloads. As a reminder, the way the ecosystem works, Microsoft is basically the provider of the underlying PlaysForSureb-branded technology and the ecosystem consists of merchants that sell or rent downloadable PlaysForSure-compliant audio and video to owners of playback devices that they've purchased from PlaysForSure-compliant device manufacturers.  Music purchased for download from the PlaysForSure-compliant Napster-to-Go is therefore guaranteed to work on the PlaysForSure-compliant H320 portable digital audio player from iRiver. Music from a PlaysForSure-compliant merchants will not work on an iPod since Apple is not a licensee of Microsoft's technology. Likewise, music purchased from Apple's iTune's online music store won't work on a PlaysForSure-compliant device. 

Under the hood, the primary technology that results in interoperability, or lack thereof, are the two companys' incompatible copy protection technologies  otherwise known as Digital Rights Management technology (the technology that attempts to prevents pirated content from being uploaded to the Internet where anyone can get it for free). DRM is what I often refer to as C.R.A.P. (see CRAP, The Movie and CRAP, The Sequel).

Whereas Apple runs the online service and makes the hardware that's compliant with it (mirroring the strategy it has long taken with its computers), Microsoft's picked the partnering route in a strategy that mirrors the route it took with Windows where the company basically makes the software, licenses it to third parties, and let's those third parties duke it out in a competitive battle that ultimately benefits consumers (in terms of low prices and innovative hardware like notebook computers) as well as Microsoft who collects a bounty on every system sold. 

But with Zune, it appears as though Microsoft is prepared to take it all in-house and what exatly that means for the future of the partners that helped Microsoft to launch its  PlaysForSure-compliant ecosystem was left unsaid last week. This week, News.coms's Ina Fried dug a little deeper, but didn't unearth anything that's particularly telling of what Microsoft is thinking.  Reported Fried earlier today in an appropriately headlined story Swan song for Microsoft's music allies?:

Microsoft's Zune player is designed to be a counterpunch to the iPod, but it could deliver a sharper blow to some of the company's longtime partners....It leaves one question up in the air, however: Just how much attention will now go to Microsoft's PlaysForSure program, which promotes the broad range of services and players that use its Windows Media technology? Microsoft says it is not abandoning that 2-year-old effort. But it has not said whether its new player will support outside music services that use the Windows Media format, or whether any Zune service will work on outside players. On top of that, it has certainly not played up compatibility in what it has to say about Zune....some analysts have said the arrival of Zune signals an end to the company's broad-based partner approach....Microsoft denies things are so black-and-white. The software maker said it will continue to promote other products that have Windows Media technology at their core...."As a company, we remain committed to the strategy," a Microsoft representative said on Monday. "There's room for both kinds of approaches."

Ouch. That's what I'd be saying right about now if I was one of those partners that hitched my wagon to the PlaysForSure horse.  That said, Fried has one of those partners downplaying the signficance of Zune:

Device maker iRiver said it is not convinced that having to compete with its technology partner will be a bad thing.... That said, whatever Microsoft's first product is, [iRiver CEO Jonathan] Sasse said it is liable to compete directly with an existing device [on the market, not necessarily one of iRiver's].

Sure.  Short term, Microsoft will have something by the holidays that, from a specification point of view, compares tit-for-tat with one or two devices. But Sasse as well as his contemporaries are in denial if they think this isn't going to impact their business over the long run. Microsoft, of course, has to do whatever it thinks it must do to keep Apple from eating its lunch in the world of multimedia entertainment which is what Apple is doing, at least on some fronts).  On the other hand, this is exactly the sort of risk that companies licensing such foundational technologies (as DRM) take when those technologies are proprietary and why, if at all possible, it makes sense to hedge that risk with product R&D around something more open.  If I were Sasse, right about now, I'd be picking up the phone and calling Sun to find out more about the Open Media Commons and Project DReaM. It may not be perfect. But at some point, businesses and users need to get a better handle on how much of their strategies, budgets, and their investments in technologies (eg:users buying music) they're willing to subject to decision making processes over which they have no control (eg: those of the vendors of certain proprietary technologies). 

Two good examples: (1) As long as you own an iPod, you can't shop around for protected music (I say protected because, finally, at least one source of music -- Yahoo! -- is experimenting with unprotected music).  There's one source and it'll cost you 99 cents per song no matter what (eg: no matter if the music industry would like to charge you more or less). (2) You establish a reliance on a proprietary technology and the vendor of that technology either (a) decides to abandons that technology or (b) arbitrarily (at least to you) raises the cost of it.  What choices do you have then?