Microsoft Had a Big Week in Music, Dropping Streaming and Charging Next to Nothing for Albums

Courtesy Microsoft

Microsoft has changed its music strategy yet again. The company announced this week its plan to shut down the free, advertising-based version of Xbox Music Pass subscription service in order to focus on paid subscriptions and downloads. Xbox Music Pass will be discontinued on December 1st in all countries where currently available.

A perpetual follower of the likes of Apple, Pandora and Spotify, Microsoft updated and rebranded its Zune music service as Xbox Music in 2012. The service's strength lies in the popularity of the Xbox platform. Xbox Music runs not only on mobile phones, tablets and web browsers but also on the Xbox gaming platform. Like competing on-demand music services, Xbox Music allowed users to build online collections and provided subscribers with offline listening.

Microsoft has ditched the freemium streaming strategy in favor of paying customers. Its new download customers don't have to pay much, however, as Xbox Music recently started pricing popular albums at either $0.99 or $1.99 inside its Microsoft Music Deals app (for Windows only). And it appears Microsoft is absorbing the deep discounts to attract Xbox Music users. "We are not supporting this with any discounts," a source at one major label tells Billboard.

Asking users to pay isn't without precedent. Beats Music lacks a free, advertising-supported tier. Sony Music Unlimited offers two paid tiers and no free tier. Deezer has entered the U.S. market by first seeking paying customers, although the service does offer a free tier in other territories. Paid-only Internet radio services exist, too, such as and Mad Genius, a new service based in Denver.

Xbox Music's free service may not be missed. The strength of the freemium strategy rests in its ability to attract users that may one day become subscribers. It gets people through the door, so to speak. But Microsoft doesn't have the same problem as a relatively unknown, standalone streaming service that needs a freemium model to attract subscribers. A better reference point is Sony, whose subscription service is meant to add value to its popular hardware devices such as the Playstation console, TVs and DVD players.


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