Microsoft Ambitions Are Now Set to Music

Microsoft Corp. will open the initial version of its long-awaited online music store today, furthering the company’s drive into entertainment.

With MSN Music, Microsoft will become just another underdog music retailer instead of the dominant technology provider. Apple Computer Inc. has captured the lion’s share of the online market with its iTunes Music Store, which has sold more than 125 million tracks in a little more than 16 months.

The point, however, isn’t just to sell music. Microsoft also wants to spread the use of its digital music technologies and boost the popularity of its MSN online service.

Executives at the Redmond, Wash.-based software giant say they focused on the basics in establishing the store, which sells 99-cent songs and $9.99 albums that can be acquired with a single click of the mouse.

The store -- accessible through Microsoft’s Web browser or its latest music-playing software, Windows Media Player 10 -- will initially offer about 500,000 tracks from more than 3,000 record labels, with another 500,000 songs coming shortly, said Larry Grothaus, lead product manager for MSN.

Microsoft has a mixed record as a retailer of consumer goods, falling flat in its first two efforts to combine television and the Internet but steadily gaining ground with its Xbox video game console. The company’s push into entertainment has been relentless -- its digital video technology has secured a place in the next generation of DVD players, and it soon will take a third stab at delivering the Internet to TV sets.

Microsoft’s ambitions for MSN Music extend beyond downloadable songs. It’s also looking to get into selling music videos and ring tones, among other items.

The store’s main competitive advantage will be the huge amount of traffic MSN and related sites already attract. According to ComScore Media Metrix, more than 100 million people, or 64% of all Web surfers, visited MSN in July, second only to Yahoo among online portals. And Microsoft’s entertainment-oriented WindowsMedia.com site drew 50.2 million people, Nielsen/NetRatings reported.

Analyst Michael McGuire of GartnerG2 said having an online music offering would be an important factor in the competition among major Internet players.

“All the other major portals are trying to figure out how to do this,” McGuire said.

Putting a store in front of millions of Web surfers won’t necessarily persuade them to spend money there, however. Although he praised Microsoft for creating a “nice and clean and functional” store, McGuire added, “they have to generate some buzz.”

The main features of MSN Music -- ease of use, no monthly fee, broad catalog -- do little to distinguish it from the iTunes Music Store or the growing number of downloadable music outlets that rely on Microsoft’s digital music software. And because Apple uses a different technology, songs bought from Microsoft’s store can’t be transferred to Apple’s iPods, which make up more than 70% of the market for high-capacity portable music players.

Grothaus stressed that MSN Music would work with more than 70 devices, including several that are far less expensive than the iPod. Songs bought from the iTunes store, on the other hand, can be directly transferred only to iPods.

“The key thing with MSN Music is choices. We believe that not every customer wants to pay $400 for a device,” Grothaus said, referring to the price for the most expensive iPods.

Maybe so, McGuire said, but it would help MSN Music to be associated with an iconic player such as the iPod. “That integration between the store and the player is still very important,” he said.

Analyst David Card of Jupiter Research said the MSN Store would be unlikely to eat into Apple’s market share. But it could help spread Microsoft’s digital rights management, or DRM, technology, which in turn could bolster Microsoft’s Windows software platform, he said.

“This is the first baby step,” Card said. “They’re absolutely serious about DRM, and that’s the main reason for the music store.”