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Microsoft bakes Xbox Music into Windows 8

The software giant sets its sights on Spotify and Pandora, making its new streaming music service the default way to hear tunes in Windows 8. The service will extend to mobile phones and its video game console.

Xbox Music in Windows 8 Microsoft

Microsoft plans to use the full force of its dominant Windows operating system to challenge iTunes and Spotify in the digital music business.

The software giant has baked its new 30-million-track Xbox Music service into Windows 8, making it the default way for users to listen to songs. The service, which CNET first reported in February and the company announced in June, will let users stream music for free, creating custom playlists, as long as they're willing to hear occasional ads. They can also subscribe to an ad-free version for $9.99 a month. And users can buy and download songs as well.

Microsoft is rolling out Xbox Music across its consumer offerings. (See also: Xbox Music aims to one-up Spotify.) It debuts Tuesday on Xbox 360 consoles, and will roll out on Windows 8 tablets and PCs on Oct. 26. The company said it will offer Xbox Music on Windows Phone 8 in the not-too-distant future, and it will even create versions of the service for rival platforms, such as Apple's iOS and Google's Android mobile operating systems, available next year.

The moves are all part of Microsoft's effort to expand the Xbox brand beyond its well-established gaming focus.

"Xbox has become the entertainment brand for Microsoft," said Scott Porter, a principal program manager at Microsoft. "Music is a key part of that strategy."

Putting Xbox Music on Windows 8 is, without question, a challenge for rivals such as Spotify and Pandora, which offer similar services. Like previous versions of Windows, Microsoft will likely sell hundreds of millions of copies of the new operating system within a few years, putting Xbox Music in front of everyone of those customers. By comparison, it's taken Spotify four years to garner some 15 million active users, and more than 4 million paying subscribers.

"A lot of people are going to be unhappy about this," said Michael Gartnerberg, an analyst at Gartner who was briefed by Microsoft about Xbox Music. "This is going to put a lot of pressure on Spotify. It's going to put pressure on Pandora."

Twelve years ago, a federal judge ruled that Microsoft violated antitrust laws by leveraging its dominant personal computer operating system to give its Internet Explorer browser an unfair advantage over Netscape Navigator. The market has evolved since then. Many Spotify and Pandora customers, for example, access those services on their tablets and mobile phones, in addition to PCs.

Xbox spokesman Jose Pinero said nothing will prevent Windows 8 users from downloading services such as Spotify and Pandora, if they want them.

"Consumers will have a choice," Pinero said. "They can install any other app."

The ad-supported version of Xbox Music will let users stream an unlimited number of songs for free for the next six months. After that, terms might evolve, the company said. In addition to doing away with ads on Windows 8, the subscription service will give users unlimited playback of any track in the catalog on their Windows Phone 8 devices and Xbox 360. The service won't be available for Windows Phone 7 devices.

Microsoft also plans to add a "scan-and-match feature" next year that will add music in a subscribers libraries to their cloud-based Xbox Music catalog. That way, they'll have access to any songs they own on any device, even ones not available in the service's 30 million track library.

Microsoft has integrated the services among its products so that users can, for example, create playlists on a Windows 8 tablet, then play them over Xbox 360 on their home entertainment system. For now, the Xbox 360 is the only device that connects to home theater systems, though users can connect PC's, tablets and phones to speaker systems as well.

The service is the latest attempt by Microsoft to elbow its way into the digital music business. The company has continued to phase out pieces of its Zune music service. The Zune Music Pass service will continue for Windows Phone 7 users, though Pinero said the company focus in music going forward is Xbox Music. In 2005, it announced plans for the short-lived Urge service, built with MTV Networks.

Gartner's Gartenberg believes those services failed in large part because they attempted to mimic market leader Apple and generally did a lesser job of it. He thinks Xbox Music has a far better chance of success because it's changing market dynamics, offering features that Apple currently doesn't.

"It's not a model Apple offers," Gartenberg said.

The free streaming service will be initially available in 15 markets worldwide. The paid service, called Xbox Music Pass, will be initially available for Windows 8 and Windows Phone 8 in 22 markets around the world.