I’m not excited about this.  I’m quite happy with OS X.  I’m not one of the minions tearing their hair out, bitching about Vista.  But as a business story, this is fascinating.

You see Microsoft is married to an old business model.  They make their money selling Windows and Office.  What if these are suddenly free?

This is exactly what happened to the record companies.  They were humming along, making beaucoup bucks in the nineties selling overpriced CDs with one good track, and Napster came along and ruined the business model.

How did the labels respond?  By trying to keep the future from happening, then suing those desirous of living in the future, then blaming the artists and insisting they hand over 360 degrees of rights for almost nothing in return.  Their only hope of survival with any power was to jump ahead of the curve, retool their business for what didn’t yet exist.  But there are no visionaries at major labels.

Microsoft has got money.  But they’ve got no innovation.  It’s kind of like Detroit.  Mercedes-Benz came up with all kinds of safety initiatives, Honda met fuel standards way in advance and Detroit said both were impossible and booked the profits, only changing when forced to by the government and consumers.  But it was too late.  After decades of extracting cash but failing to reinvest it, the Detroit companies failed themselves.  Microsoft has beaten back challengers in the past, but can they beat back a company as rich as Google?

Don’t talk to me about Windows Mobile.  That’s in a death spiral.  Don’t talk to me about Bing, that’s like debating the merits of Subaru.  All the cash is coming from Windows and Office.  If Google makes them free…

And they’re probably going to be free.  When connections are fast enough and you can do everything you want online.  Look at it this way.  Road warriors oftentimes don’t even travel with a laptop anymore, an iPhone or a BlackBerry is enough.  Do you really need all those apps, all that crapware on a large, overpriced piece of junk?  Or should you be able to just pay for what you want?  Kind of like in the music business.  On iTunes, you can buy just what you want, and the labels hate this!  Look at this from a consumer viewpoint.  Do you want all those apps that come on your Windows computer?  Wouldn’t you like to be able to buy just what you need?  Why not?

The labels are still focused on selling more than you need.  Instead of creating products so desirable you want more.

The music business has been turned on its head.  And everybody who had any power before is bitching.  Music is free!  Damn those pirates!  Let’s go back to the twentieth century!

That’s a worthless discussion.  Equivalent to telling people to go back to typewriters and the horse and buggy.  Not only do you need to accept the present, you’ve got to view the future!

The primary issue facing the purveyors of music today is attention.  How do you get people to pay attention, and keep paying attention?  One way is the major label way, spend a fortune to get radio airplay and TV exposure.  But both of those are declining markets.  And you’re still competing against a plethora of interests, and not only music.  Whatever it takes to get people hooked, you should consider.  Free music is a great strategy because people only bond to acts if they hear the tunes.  Making it feel like free is also a good strategy.  Spotify works because it’s convenient!  All the tunes in one place!  I’m not saying you can’t charge for music, but charging comes last!  Getting people hooked comes first.

And that’s extremely difficult these days.

Used to be you had three TV networks and just a few local radio stations.  Now you’ve got 500 TV channels and Internet radio and iPods.  Doesn’t a new world require a new strategy?

If a company as large and powerful as Microsoft, a veritable monopoly, can be challenged by what’s coming, its very existence called into question because it is not prepared for the future, is it any wonder that the zit on the ass of the economy known as the music business can be decimated?

The good news is it will be reincarnated.  Just with a different business model.  That’s what’s going on now.  Don’t bitch and moan, try and get ahead of the customer and entice him when he finally reaches you.  Providing more, not less.  He doesn’t want to rip you off, he wants to give you all his money.  But only if he wants what you’re purveying, and exactly what you’re purveying.  Does anybody salivate over the new edition of Windows or Office?  Only if they’re frustrated with the crappy old one that is making them tear their hair out.  Once you start protecting what you’ve got, trying to deny the future, keeping people locked into old ways, you’re on the way to decline.  Remember this.