MSN shouldn't guide Microsoft's music strategy

The Zune device hasn't sold, but the software and service are pretty cutting-edge, and the next generation Zune HD offers another chance. So why is Microsoft letting the U.K. division of MSN plan a streaming music service?

The group overseeing MSN Music in the United Kingdom seems to be operating off in its own little bubble, totally out of step with Microsoft's broader music and digital entertainment strategy.

Mixview, one of the many cool features in the Zune software. MSN Music? Can't touch it. CNET Networks

First, they launched MSN Unsigned, a half-hearted attempt to let unsigned bands promote their music on MSN. (It's devolved since then: the button on the MSN Unsigned page to "send us your music" launches your e-mail application with a barely configured note--just a subject header. Apparently you're supposed to attach something, but darned if I can find any instructions on the site.) Then they announced an overpriced, DRM-encumbered mobile music service on the same day that Microsoft announced its first layoffs ever.

Now comes the news, first broken by U.K. paper The Telegraph, that MSN is planning to launch a free streaming music service in the U.K.

Fine idea. Free music-streaming services are spreading like kudzu , a recent Morgan Stanley report by a 15-year-old intern suggests that kids expect streaming music to be free, and Microsoft has a strong advertising platform to earn money from the site.

But there's just one problem: Microsoft already has an all-you-can-eat music service--that it expects customers to pay for. It's called the Zune Pass. Yes, Microsoft's Zune sales have been abysmal, but the PC client software has evolved into a super-slick media player , and the forthcoming Zune HD is actually cool enough to give Microsoft a fighting chance in this market.

So if Microsoft's going to launch a free streaming music service, why not tie it into the Zune Marketplace and software? A free streaming-only service integrated into the Zune Web site and/or Zune software could help upsell customers to the paid version of the Zune Pass (which would allow users to download and transfer the songs to their Zune devices). More important, who's driving Microsoft's digital entertainment strategy, the Entertainment and Devices group (Zune, Xbox) or MSN? Having two groups working at cross-purposes isn't very efficient.

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