Microsoft aims to acquire Musiwave

Possible purchase suggests that Microsoft will continue a piecemeal approach to the consumer mobile market, rather than follow Apple's lead and build its own phone.

Microsoft's mobile phone strategy and its digital media strategy often seem to be in different worlds. For mobile phones, the company has focused primarily on the Windows Mobile OS, a few mobile applications (Outlook being the most useful one), and--more recently--online services such as Live Search that can be used on many mobile platforms, including (gasp) the BlackBerry (the No. 1 competitor that Windows Mobile has in its sights).

For digital media, the company first pursued its partner-driven approach, promoting the Windows Media Platform for both online stores and devices, and then went with the end-to-end approach of Zune. At times, there's been overlap--for example, Verizon uses the Windows Mobile platform to power its VCast service, and there is a version of the Windows Media Player for Windows Mobile. (Does anybody use it? I have no idea.) But there hasn't been any big coordinated effort to push digital media on the Windows Mobile platform, and certainly nothing resembling the all-in-one experience of the iPhone.

On Monday, Microsoft announced its intent to acquire Musiwave, a provider of digital music services--downloads, ringtones, and so on--to phone carriers, mostly in Europe, although Canadian provider Telus is also a customer. The official release name-drops several Microsoft brands that could make use of Musiwave's services, including MSN, Windows Live, Windows Mobile and--yes--Zune.

So is this going to drive the long-rumored Zune Phone? I doubt it. It looks like this possible acquisition was driven by the Windows Mobile group, which still believes that the best long-term business model for Microsoft is to sell platform software and services to as many carriers and handset makers who will buy it. Zune and Xbox aside, Microsoft still doesn't have the DNA of a hardware company--it would prefer to sell huge volumes of broad-market, horizontal software. The margins are higher, the cross-pollination with its other pure-software businesses is more effective (if Outlook Mobile worked only on Microsoft-built phones, how would that help the company sell more e-mail servers to corporations?), and there's no dominant handset maker that threatens another core Microsoft business (unlike Xbox, which responded to the threat that network-connected game consoles would cut into consumer PC sales, and Zune, which responds to the iPod halo effect on Mac sales).

Two possibilities seem more likely to me than a Microsoft-built Zune phone. One, Microsoft could offer Musiwave as a turnkey service for operators to add mobile music services quickly and easily--the carriers get to retain control of the billing relationship with the consumer, which they're loath to give up, and Microsoft sells infrastructure software (Windows Server, for example) as facilitating technology.

Or, Microsoft could in fact be building a Zune client for Windows Mobile, or for various mobile platforms (as they did with Live Search). In that case, Musiwave might provide some sort of necessary technology to make the Zune Marketplace available via third-party carriers. Although I can't imagine the carriers being too happy about that, it's better than losing customers to the iPhone.

 

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