Ballmer claims Microsoft won't lose money on Zune
Microsoft CEO Steve Ballmer says his company will not lose money on the sale of its Zune digital media players this holiday shopping season, but admits it won't make much money either.
In a Q & A session with BusinessWeek about Web 2.0 and the rising competition, Ballmer concedes that it's the "guys who can touch us in multiple places" that are seen as Microsoft's top competitors rather than those "guys who can touch us in any one place."
Ballmer highlighted the open source movement and advertising as two alternative business models in which he believes Microsoft must focus its energies in order to compete effectively.
"In the case of open source, we couldn't adopt the business model. We adopted a competitive approach that so far has worked very well," he said. "In the advertising case, we can embrace that model. We don't have to sit here and say it's that bad."
"A third model," Ballmer said, "is that there are cases where software gets monetized through hardware. That's what an iPod is. iPod is a software thing. You just happen to collect the money on the hardware."
Ballmer said his company's upcoming Zune player fits into the hardware model because the value, if its successful, is all in the software. "It's in community [the ability to share music and pictures with other Zune users]," he said. "I want to squirt you a picture of my kids. You want to squirt me back a video of your vacation. That's a software experience."
"The truth is," Ballmer added, "if it makes money, it will be built into the gross margin on the hardware. We'll figure out how to make money on the community perhaps later though advertising or other means."
Microsoft Chief Executive Steve Ballmer | Photo Credits: AP
Asked how much money Microsoft will lose per Zune, Ballmer said, "None."
"Apple put the hammer down there, dropped the price [of its 30GB iPod] down to $249," he continued. "If they had been $299, it would have been nicer. They have the advantage of scale. So we're at $249, too. We don't make a lot of money, not to start out."
In a Q & A session with BusinessWeek about Web 2.0 and the rising competition, Ballmer concedes that it's the "guys who can touch us in multiple places" that are seen as Microsoft's top competitors rather than those "guys who can touch us in any one place."
Ballmer highlighted the open source movement and advertising as two alternative business models in which he believes Microsoft must focus its energies in order to compete effectively.
"In the case of open source, we couldn't adopt the business model. We adopted a competitive approach that so far has worked very well," he said. "In the advertising case, we can embrace that model. We don't have to sit here and say it's that bad."
"A third model," Ballmer said, "is that there are cases where software gets monetized through hardware. That's what an iPod is. iPod is a software thing. You just happen to collect the money on the hardware."
Ballmer said his company's upcoming Zune player fits into the hardware model because the value, if its successful, is all in the software. "It's in community [the ability to share music and pictures with other Zune users]," he said. "I want to squirt you a picture of my kids. You want to squirt me back a video of your vacation. That's a software experience."
"The truth is," Ballmer added, "if it makes money, it will be built into the gross margin on the hardware. We'll figure out how to make money on the community perhaps later though advertising or other means."
Microsoft Chief Executive Steve Ballmer | Photo Credits: AP
Asked how much money Microsoft will lose per Zune, Ballmer said, "None."
"Apple put the hammer down there, dropped the price [of its 30GB iPod] down to $249," he continued. "If they had been $299, it would have been nicer. They have the advantage of scale. So we're at $249, too. We don't make a lot of money, not to start out."
Comments
WTF
"I want to squirt you a picture of my kids. You want to squirt me back a video of your vacation. That's a software experience."
The way Ballmer describes it, it sounds more like a "hardcore" experience than a "software" experience. Am I the only one uncomfortable with all this squirting going on?
Here's a great review of Zune by the way, dunno if anyone's already posted this - http://www.roughlydrafted.com/RD/Hom...974628809.html
1. Steve Ballmer--ugliest. guy. ever. i just want to punch his pimply face each time i see it. for no good reason.
2. the article was masterful doublespeak. in short, they *will* lose money, and are betting on software sales and "community" buy-ins to make up the difference.
3. "Apple has the advantage of scale"? wtf? Microsoft has access to production scales as big as the iPod, anytime they want.
4. the Zune-sucks-really-really-a lot. a lot. it sucks. much.
Did he really say 'squirt'?
A third model is that there are cases where software gets monetized through hardware. That's what an iPod is. iPod is a software thing. You just happen to collect the money on the hardware.
And Zune is different because they're using the mirroring the exact same closed business model used by Apple. Excellent.
Apple put the hammer down there, dropped the price down to $249. [...] So we're at $249, too.
WRONG. You're at $249.99. Weiner.
I want to squirt you a picture of my kids.
...guys touching us in multiple places...
Anyone else starting to question this guy's... everything? Enough said.
"We don't make a lot of money, not to start out."
The word is "won't," not "don't." Who proof-read this anyway?
-Clive
"Squirt"? WFT?
If I were an investor, I'd sell based on that alone...
There was a lot of weirdly tortured corporatespeak in that interview. I can't say I learned a whole lot, or even sure what exactly was said in some cases.
Apple *does* have advantage of scale, btw -- no question. They're selling tens of millions of iPods every year. MS is still learning to play at this game, as shown by their slightly botched 360 roll-out.
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...Developers Developers Developers Developers
Developers Developers Developers Developers...
:shiver:
On the up side, I heard Mark Foley just ordered one.
"The truth is," Ballmer added, "if it makes money, it will be built into the gross margin on the hardware. We'll figure out how to make money on the community perhaps later though advertising or other means."
So basically, if I buy a Zune now, later it will get flooded with ads? Thanks Ballmer... but no thanks.
3. "Apple has the advantage of scale"? wtf? Microsoft has access to production scales as big as the iPod, anytime they want.
Yes, but they know they can't sell the volume of Zunes than Apple can sell iPods. Thus, they can order in the volumes that Apple can, and THUS can't take as steep of discounts that Apple can. That's why Zune must sell at a loss, despite what Balmer says to keep shareholders happy.
-Clive
"I want to squirt you a picture of my kids"?
Who does this nutcase have writing his copy, Tobias Fünke?
Sounds like Ballmer is a very educated man!
Ok, ok, just having fun, I know what you mean...
"I want to squirt you a picture of my kids. You want to squirt me back a video of your vacation. That's a software experience."
This guy is not up to date with the capabilities of Zune. I've done a lot of Zune reading on the 'net (basically all Zune sites and Microsoft sponsored developer and marketing blogs for Zune) and you can't send videos through Zune's wireless feature. At least not at launch.
You can do that for songs (3 plays in 3 days, or 3p3d) and pictures, but not with videos.