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This week's big Apple news is... the launch of Microsoft's Zune music player? Although the new device doesn't even work with Macs, the Zune is likely to affect Apple's iPod business. Glenn Fleishman looks at the Zune's features and some early reactions from the press, and then editor-at-large Geoff Duncan discusses how Microsoft abandoned its own PlaysForSure model, as well as the significance of the company's deal to pay Universal Music a percentage of each Zune sale (and why artists probably won't see any of that money). In other news, we note the releases of new MacBooks containing the Core 2 Duo processor, an archive CD from MacTech, Yojimbo 1.3, The Missing Sync for Windows Mobile 3.0, and 1Passwd 2.0. Lastly, Adam notes a change in how we use dates in TidBITS, and points out our borderline insane alter egos at Crazy Apple Rumors Site.

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MacBook Gains Core 2 Duo Processor

  by Adam C. Engst <>

Apple announced a processor upgrade for its MacBook laptops that replaces the Intel Core Duo processor with the faster Core 2 Duo processor. Apple claims that the processor change provides the new MacBooks with up to 25 percent greater performance than their predecessors (see "MacBook Fills Out Laptop Line," 2006-05-22). The same three models are still available: a white 1.83 GHz MacBook for $1,100, and differently configured 2.0 GHz models in white ($1,300) and black ($1,500). The other changes - only in the 2.0 GHz models - are a doubling of the default RAM configuration to 1 GB and the addition of a double-layer SuperDrive. It's also now possible to order a MacBook with up to 200 GB of hard disk storage, though the 200 GB drive is a slower 4200 RPM drive, whereas all the other drives spin at 5400 RPM. The new MacBooks are available immediately.

Yojimbo 1.3 Adds Tagging

  by Adam C. Engst <>

Bare Bones Software last week released Yojimbo 1.3, an update to their information organizer (see "Let Yojimbo Guard Your Information Castle," 2006-01-30). Version 1.3 of Yojimbo is most notable for its addition of tags, or user-defined keywords (of one or more words) that can be easily applied to any item in Yojimbo via the Quick Input Panel, the Inspector palette, the new Item Details bar, or AppleScript. Tagged items can then be located with searches or gathered together with Tag collections. Other changes include additional control over how Yojimbo accesses the Keychain, support for tables and lists in note items, and the capability to open links within Web archives in the background via Command-clicking. Yojimbo 1.3 requires Mac OS X 10.4.3 or later and is a free update for all registered users. New copies cost $40, and a 30-day demo is available.

Mark/Space Releases The Missing Sync for Windows Mobile 3.0

  by Jeff Carlson <>

A growing number of smartphones (cellular phones with PDA features) on the market these days are powered by Microsoft's Windows Mobile operating system, which doesn't interface with the Mac out of the box. Mark/Space last week released The Missing Sync for Windows Mobile 3.0 to address that shortfall. Like the company's counterpart for Palm OS-based devices, The Missing Sync for Windows Mobile synchronizes data on the mobile phone with iCal and Address Book or other applications that take advantage of Apple's Sync Services technology built into Mac OS X.

The latest version enables synchronization of files, folders, Safari bookmarks, and notes; improves iPhoto album and iTunes playlist synchronization; imports photos and movies shot using handhelds with built-in cameras; and supports Address Book contact photos. This version also works in conjunction with Bare Bones Software's Yojimbo 1.3 to synchronize notes between Yojimbo and Windows Media devices.

The Missing Sync for Windows Mobile 3.0 requires Mac OS X 10.4.8 and costs $40 for a 28.9 MB download version, or $50 for the software on a CD. Upgrades from version 2.5 are free if purchased after 2006-10-01; otherwise the upgrade price is $20.

TidBITS Week in CARS

  by TidBITS Staff <>

Further cementing our status as the industry pundits best positioned to have our names used in fake quotes, Crazy Apple Rumors Site tapped TidBITS staffers not once, not twice, but three times last week - in a row! - while inventing expert commentary. On 06-Nov-06, TidBITS publisher and inveterate clubber Adam Engst suffered flashbacks to the mid-1990s dance scene for a piece on the new proof-of-concept Macarena virus. Then, on 07-Nov-06, in an election night special, TidBITS networking and political columnist Glenn Fleishman participated in a fake panel (with John Gruber and Shawn King) discussing what Apple would be like if Steve Jobs won re-election as CEO (which, as we all know now, was a foregone conclusion). Finally, Jeff Carlson, TidBITS managing editor and cultural commentator, mused on the fallout surrounding rumors of Justin Long being fired as the Mac in the "I'm a Mac" ad campaign, suggesting that without Long, he'd be forced to anthropomorphize his Mac as actress Jennifer Connolly (please promise not to tell his wife). Thanks to CARS editor in chief John Moltz for helping us say the kind of things we could never say in TidBITS, mostly because they're utterly fabricated and borderline insane. Keep up the good work, John.

MacTech Creates Archive CD

  by Adam C. Engst <>

Now here's an interesting project. MacTech Magazine has created a $50 CD containing the entire archives of the magazine (over 2,800 articles from 1984 through September 2006), all 29 issues of Apple's programming journal develop, all 21 issues of FrameWorks (the newsletter of the Software FrameWorks Associate, previously the MacApp Developers Association), and more than 100 MB of royalty free source code from all three publications. It's all presented in a custom viewer application that provides simple browsing and quick Spotlight-based searching. What I find most interesting is that MacTech has apparently had the largest ever pre-order backlog for this CD - greater than for any other CD they've produced, despite the fact that most, if not all, of this information is available on MacTech's Web site for free. Clearly, there's something appealing about having so much information in a single place, accessible even without an Internet connection and in an interface that's dedicated for quick browsing and searching. Hmmm... perhaps we'll have to do a CD of the last 16 years of TidBITS content.

1Passwd Updated to Version 2.0

  by Joe Kissell <>

Last week Agile Web Solutions released 1Passwd 2.0, a major upgrade to the utility that helps manage passwords and uses a single set of data to fill forms in most Mac OS X Web browsers. The new version adds support for OmniWeb and DEVONagent, as well as a Secure Notes feature comparable to the one found in Apple's Keychain Assistant. This latter feature enables users to store securely any free-form data, such as serial numbers or confidential text snippets.

The version 2.0 upgrade is free for registered users. Otherwise, the software costs $30; a free trial version is available. In addition, purchasers of "Take Control of Passwords in Mac OS X" receive a coupon for a $5 discount. The developer has stated that a free upgrade for Leopard compatibility will also be made available to all registered users after Mac OS X 10.5 ships.

DealBITS Drawing: PDFpen Winners

  by Adam C. Engst <>

Congratulations to Clarence Ching of, Percy Carrion of, and Steven Harris of, whose entries were chosen randomly in last week's DealBITS drawing and who received a copy of SmileOnMyMac's PDFpen, worth $49.95. Other entrants received a 20 percent discount on PDFpen and PDFpenPro. Thanks again for entering this DealBITS drawing, and we hope you'll continue to participate in the future. Thanks to the 951 people who entered. Keep an eye out for future DealBITS drawings!

Dates in TidBITS

  by Adam C. Engst <>

I'm terribly sorry, but this article will neither improve your love life nor provide dried fruit for your morning oatmeal. Instead, I want to talk about the seemingly mundane topic of how we present dates in TidBITS, since it's something we've put a good bit of discussion into over the years, and it might prove useful for those of you who must also write dates in a consistent fashion.

Back in 1990, when Tonya and I started TidBITS, we were relatively clueless Americans, probably in all sorts of ways, but certainly with regard to date formatting. We used the common U.S. date format of MM/DD/YY (that's a two-digit month, two-digit day, and two-digit year, separated by slashes) all over the place, since that's what we'd been taught in school. Gentle readers from around the world quickly informed us that such date formats were utterly confusing to many in other countries, who would expect that format to be the more logical DD/MM/YY (and we won't even get into the confusion that could result after 2001, when that two-digit year was no longer unambiguous).

And thus it was that, likely on the trenchant suggestion of Ian Feldman, the guy from Sweden who created the setext format that we were to switch to in 1992, we changed our ways and began using a more explicable date format: DD-MMM-YY, where the month was a three-letter abbreviation: Jan, Feb, Mar, and so on.

Alas, our Web archive does not provide evidence of our cluelessness, since at some point, we regularized all the dates to the new format, so even our very first issue (1990-04-16) now sports the better date format.

Our next lesson from overseas came courtesy of our friends in Australia, who kindly informed us that the seasons were different in the southern hemisphere. Talking about how some product was to be released in the spring bugged them, since they had to perform mental gymnastics to determine what month that would likely be. As much as we aren't perturbed about requiring our readers to bring a few of the little gray cells into play when reading TidBITS, we'd rather have you paying attention to the content and not doing date math. Since then, we've tried hard to recast such dates into appropriately understandable alternatives. So instead of talking about how Leopard is slated to ship in late spring of 2007, we'll instead say that it's due out in the second quarter of 2007 or the middle of 2007. Every now and then, we'll still refer to a season, but only when we're talking about our summer, for instance, where the fact that it was hot and many people were on vacation is relevant to the discussion.

And so it has gone for what is closing in on 17 years. We've found situations where our canonical date format doesn't work as well, and for those situations we've come up with alternatives that either read more smoothly or that are more logical. No one format is best in all situations, so here then are our house rules. There's no right or wrong here - these are merely what we prefer, and you're welcome to play by our rules if you like or merely pick and choose those that you most appreciate.

Relative Dates Understood by Context -- Most innocuous are those dates that are meant to be read entirely in the context of the fact that TidBITS is a weekly periodical. As such, if you're reading along in an article and you see something like "Apple last week announced that Mac OS X Leopard would provide full Windows compatibility..." you intuitively know that the announcement took place in the week preceding the current one. Of course, if you're reading such an article in our Web archive, you must glance up to the top of the page to determine the date on the issue. These dates aren't meant to be specific; they're just telling you that something happened recently, in the context of the publication date.

Specific Dates Relative to the Current Year -- Another form of relative date appears when we're talking about events that will happen on a particular day in a particular month, but with an assumed year. We use these dates mostly when the name of the day is important, and it's easy to assume the year, as in announcing what we're doing at Macworld Expo. "On Wednesday, January 10th, Adam will be dissecting iPhoto 7 in a session..." No one should have any trouble figuring out from context that the year is 2007 (since it's the Macworld Expo that will take place shortly after the article publication), but both the day of the week and the date are helpful pieces of information to convey for those recording events on a calendar. Adding the year is neither necessary nor helpful for anyone reading before the event, and the articles in which such dates are used are unlikely to be particularly interesting to anyone after the fact. (Those people can figure out the year from the article date if they so wish.)

Specific Dates -- Here's where our canonical format comes in. Many dates are specific by day, month, and year, but have no need to include the day of the week. Consider "Apple's upcoming 'Buy 1, Get 1 Free' program for loyal Mac users will start on 01-Apr-07." (We leave it to the astute reader to determine when April Fools Day is each year.)

Plus, we often need to specify date ranges, and writing out two full dates would be awkward in comparison. For instance, "The recall covers batteries sold between 15-Jan-03 and 01-Mar-05" is much shorter and more easily parsed than "The recall covers batteries sold between January 15th, 2003 and March 1st, 2005." In part, I believe that's because the short day-month-year of our format ensures that the two dates can be read together more easily than the longer month-day-year format that results from writing out the date.

Month-specific Dates -- Sometimes dates are specific only to the month and year, and although we have at times in the past used a truncated form of our canonical format (Feb-07, for example), we've more recently decided that the obvious alternative (February 2007) is more readable and only slightly less concise.

Following the recommendation in the "Chicago Manual of Style," we do not include a comma between the month and the date. "Apple usually releases new Macs in time for the holiday buying season; look for a major announcement in September 2007."

Financial Dates -- Because we discuss Apple's financial results on a regular basis, we've found ourselves needing to use financial dates, which revolve around quarters of the year. (Unfortunately, fiscal quarters don't necessarily correspond to the actual quarters of the year, so Apple just finished its fourth fiscal quarter of 2006 and is currently in its first fiscal quarter of 2007.) For running text, we prefer to write out the quarters, as in "For its fourth fiscal quarter of 2006, Apple reported record profits..." However, since it's often a good idea to put such dates in headlines too, where space is at a premium, we abbreviate the dates along the rules of the month-year format: "Apple Reports Record Profits for Q4 2006".

Article References -- None of the above date formats have changed much, though I'm sure we've occasionally been inconsistent in our usage over the years. However, we've been including references to old articles in our Web archive. The problem with such references is that our lengthy history means that one referenced article might be 1 year old and the next might be 8 years old. That's an important difference, and something we feel that readers should be aware of. For a very long time, then, we included the issue number along with the article title, as in "Remember when I wrote 'Apple Cracks Down on Google AdWords' in TidBITS-799?"

It was a good idea, but a mediocre implementation, since although we may have a sense of how the TidBITS issue number maps to rough dates, it's an unreasonable expectation for most readers. Do you know when TidBITS #799 was published? Didn't think so. So when we recently switched over to our new database system, we used the opportunity to change our article referencing style, appending our canonical date format to the reference so readers could place the referenced article in chronological context. (See "Apple Cracks Down on Google AdWords," 03-Oct-05.) It became easy to see exactly when this particular article was written.

All was well and good for a while, but then the forces of logic on our staff, as represented by Matt Neuburg, raised the point that if the goal was to make it easy for readers to quickly place the article at a point in time, wouldn't it make more sense to use a different format that leads with the most relevant part of the date - the year - and then becomes more specific. In other words, why not use this format: (see "Apple Cracks Down on Google AdWords," 2005-10-03). That way, when reading, the first four digits immediately tell you if an article is relatively current because it was published this year, a bit old because it's from a year or two ago, or really old because it's from the 1990s. And if the article is current, the month and day then provide the additional information necessary to place it more specifically. Swapping the month abbreviation for the numeric month also helps in fixing chronological locations. You probably don't really care that something happened in October of a given year, just that it was toward the end of the year, as the numeric month makes clear.

So, as of this issue, we'll be using this new date format for article references. As an aside, it isn't just a good idea, it's an international standard: ISO 8601. It isn't perhaps one of the most widely adopted of international standards, but for anyone working with date formats that need to be quickly parsed and sorted by computer, it's the best.

Now, you might be wondering why, if ISO 8601 dates are so logical and obvious, we don't use them everywhere. It comes back to what I said at the beginning about needing the date formats we use to be logical and read smoothly. ISO 8601 dates are utterly logical, working from most to least significant values, and they work well for helping readers quickly fix a point in time with regard to article references, but they read horribly.

A block of numbers in the middle of a paragraph is an obstacle to smooth reading for most people, and the fact that people seldom start with the year when speaking about a date makes parsing it into the flow of text even more difficult. I can't speak for other languages or countries, but at least in the United States, common usage is to say the month first, followed by the day, and to include the year only if it isn't obvious from context. Our canonical format doesn't follow this order, but because it abbreviates the month name, it's easier to read than an entirely numeric date.

So for the record, and for anyone who needs to write dates consistently, that's how we do dates, and next week, I'll talk in even more depth about different ways of presenting time. Just kidding!

Zune Doom

  by Glenn Fleishman <>

It's easy for me to sit here and write that no sensible person will purchase a Microsoft Zune music player. However, hear me out. I don't make that statement because the iPod is the apotheosis of portable music players, because I think Microsoft can't produce hardware, or because I'm an all-purpose Microsoft basher.

Rather, Microsoft has made some particular choices that will irk buyers before they ever pick up a unit, or will drive those who are unaware of the limitations mildly crazy within days of purchase.

The Zune will launch on 14-Nov-06, be available in three colors, and bear a 30 GB hard drive. It will cost $250, the same as a comparable iPod. Unlike the iPod, however, the Zune will include a Wi-Fi transceiver and an FM receiver that uses the supplied earbuds as an antenna.

Why? Fie! Here's the part that will set every iPod owner laughing. The Wi-Fi cannot be used to synchronize music, nor can it be used to connect to the Internet to download music. It can be used only in peer-to-peer connections with other Zune owners with whom you choose to exchange music. USB is the only way to synchronize music.

In an article in today's New York Times, Microsoft's VP of Entertainment and Devices Bryan Lee is asked about the missing Internet download feature: "Would the Zune ever be able to connect to the Internet? Could someone walk into a Starbucks and use the connection there to download a song? Mr. Lee answered without hesitation: 'Probably, one day.'"

Also, let me add that music exchanged among Zunes will cease to play after three days or after it's been played three times. This includes music, podcasts, and other files that are specifically licensed for unlimited reproduction or trading, such as music distributed under a Creative Commons license that doesn't allow post-release encryption of the sort that Microsoft wraps around it for these transfers. The Zune software on the computer also doesn't offer any direct support for podcasts, including subscribing to them, although you can manually transfer them.

Don't just listen to me, however, as you pull yourself up off the floor, since I haven't actually touched a Zune yet. How about the opinions of the two leading mainstream computer columnists, David Pogue of the New York Times and Walter Mossberg of the Wall Street Journal? They've had pre-release versions for testing, and they're not very complimentary.

Mossberg Praises, Then Buries -- Mossberg is the kinder of the two. He likes some of what the Zune offers and the iPod lacks, such as a built-in FM tuner, its larger screen, and the Wi-Fi music exchange feature. He also says the Zune correctly synchronizes music and other media files in a way that previous players using Microsoft technology did not. Mossberg even finds the interface easier to use in some respects than Apple's.

But that doesn't make up for a device that's "60% larger and 17% heavier than the comparable iPod," he notes, calling the design "rushed and incomplete." The battery life is poorer than the iPod's, too. The Zune's online store is much smaller than the iTunes Store, lacking TV shows, movies, and music videos, as well as audio books and podcasts.

Mossberg heaps particular scorn on the purchasing model for the online store, which is the same as Microsoft uses for its Xbox Live Marketplace. Microsoft Points are pegged at 80 points to the dollar: $5 buys you 400 points, or 500 points costs $6.25. Mossberg was irritated that you have to buy buckets of points in at least $5 increments; you can't just pay $0.99 via a credit card or other means to buy a $0.99 song, as you can with other stores. No, you have to pay $5 for 400 points and then use 79 points to purchase that song. I'm guessing Microsoft went with Points to tie in to an existing system that already supports worldwide purchase in local currency. The $15 per month subscription plan isn't being pushed, even though it's the gaping hole in Apple's music offerings.

While he doesn't go into depth as to why the Wi-Fi features are a problem, Mossberg writes, "[T]he wireless music-sharing feature on the Zune is heavily compromised, in a way that is bound to annoy the very audience it is targeting."

Pogue Slices and Dices -- David Pogue, a known admirer of Apple products and the iPod series, takes out an entire array of flensing knives to do his work. He spoke to a Zune product manager who essentially said that PlaysForSure is broken, which is something people outside Microsoft - including Real Networks - have been saying for some time. Pogue quotes the Zune group's Scott Erickson saying, "PlaysForSure works for some people, but it's not as easy as the Zune." (For more on these restrictions, see Geoff Duncan's article, "Of the Zune, DRM, and Universal Music," elsewhere in this issue.)

Pogue uncovers the Zune's fake scroll wheel, too, which isn't a scroll wheel at all: it's a round bezel that doesn't spin and isn't touch sensitive. Rather, it conceals four compass-point buttons.

But let's get to the Wi-Fi features. Pogue's tests show that you can send a song to another Zune user in about 15 seconds, and a photo in two seconds; video cannot be sent. Pogue states that "it's just so weird that Zunes can connect only to each other. Who'd build a Wi-Fi device that can't connect to a wireless network - to sync with your PC, for example? Nor to an Internet hot spot, to download music directly?"

Pogue also jumps up and down on the restrictions for music sharing. There's no way for you, as the owner or creator of a piece of music, to tag it to not expire after the three days or three plays. (Mossberg found in his pre-release version that some songs would stop after a few seconds or two plays, too, but Microsoft told him that's been fixed.)

Will Zune Bomb? Let me summarize. Zune players can't play PlaysForSure music that Windows owners already purchased. Music purchased for Zune won't play on any other device, despite Microsoft's long-stated criticism of that sort of policy. The Wi-Fi can't be used for synchronization or Internet downloads. Battery life is slightly worse than an iPod's. You cannot buy video content or audio books yet, and podcasts must be managed manually.

Now tell me: Can the Zune kill the iPod, or even erode its market share?

Of the Zune, DRM, and Universal Music

  by Geoff Duncan <>

Microsoft's Zune portable media player goes on sale in the United States tomorrow, marking the company's first entry in a market dominated for five years (and counting) by Apple's now-iconic iPods. Although the Zune is a non-starter for Macintosh users - it doesn't work with a Mac - the Zune's introduction is notable on three levels. First and most obvious: Microsoft's vast resources and long-term tenacity may make the Zune the first credible challenger to the iPod. Second, the Zune represents an about-face for Microsoft in affirming the closed-garden, proprietary digital media business Apple first introduced with the iTunes Store. Third, the Zune introduces a new financial model to the digital industry, whereby music publisher Universal - and probably other labels, as well - will receive royalty payments for every Zune player sold.

I'll leave punditry and prognostication about the success or failure of Microsoft's first Zune device to others; for a look at early reaction to the Zune, see Glenn Fleishman's article, "Zune Doom," elsewhere in this issue. I'm mostly concerned with the latter two points: the Zune's online music and video store (and its digital rights management), and the revenue-sharing arrangement Microsoft has crafted with Universal Music Group.

Of Gloom and DRM -- For years, Microsoft and its partners have been arguing that Apple's iPod/iTunes model is flawed because it's a closed system. Apple protects tracks purchased via the iTunes Store from piracy with its FairPlay digital rights management technology; as a result, material purchased via iTunes can only be used with iTunes software or on an iPod, and cannot be transferred to non-Apple software or devices. (If you're willing to spare the platters, you can burn the music to disc and then re-rip them into iTunes as MP3 files; it's sufficiently annoying to discourage casual piracy.) So far, Apple has declined to license FairPlay to others, so if you buy a song from iTunes and want to play it on one of those cute little iRiver Clix players... well, you can't, even though you "own" the track.

Since 2004, a good portion of the non-iPod camp has been toeing the line represented by Microsoft's PlaysForSure initiative, which guarantees PlaysForSure-branded music and devices are all compatible. If you buy protected songs from, say, Yahoo Music, they can be played alongside protected songs purchased from any other PlaysForSure-savvy seller. If you wanted to switch from a Creative Zen music player to a SanDisk Sansa, PlaysForSure would make sure your music would transfer neatly. Consumers wouldn't be tied to a single vendor for either their music players or their music purchases.

PlaysForSure is built upon the Windows Media platform - essentially Microsoft's equivalent to Apple's QuickTime. Windows Media includes its own digital rights management technology, which Microsoft happily licenses to others. As a result, hundreds of companies employ Windows Media DRM, while only one uses FairPlay: Apple.

For all its touted benefits, however, the PlaysForSure platform hasn't lived up to its promise. Some users - particularly users of music subscription services who move music to portable devices - have found their DRM licenses unexpectedly expiring, while others experience problems transferring music or synchronizing playlists. The variety of services and gizmos trying to use the PlaysForSure platform - and all their quirks and differences - creates havoc for developers trying to build simple and reliable PlaysForSure devices and software.

Implementation issues aside, there is one other glaring fact: all the PlaysForSure services and devices combined have failed to hinder Apple's iPod/iTunes juggernaut. Heck, the industry generally concedes that the second most-popular music service after iTunes - albeit a distant second - is eMusic, which offers music in unprotected MP3 format. Purchases from eMusic play fine on iPods and essentially any other digital music player, but, since MP3 offers no copy protection, the major music labels want nothing to do with eMusic.

The Zune Marketplace -- As Microsoft pondered developing its own digital media players, it took a hard look at PlaysForSure and did something exceedingly rare: it threw in the towel. Microsoft's Zune is not a PlaysForSure-compatible device; in fact, the Zune doesn't even support Microsoft's Windows Media digital rights management. Customers who purchased music through PlaysForSure-branded services - like Napster, Yahoo Music, AOL Music Now, MusicMatch, or even Microsoft's MSN Music or MTV-partnered Urge - cannot play that music on a Zune player. And, it should go without saying, the Zune doesn't support music or video purchased from iTunes.

So how will Zune buyers get media onto their new device? They can rip music from their standard audio CDs and import unprotected music and video using the Zune software. However, Microsoft certainly wants Zune owners to get media from their new online Zune Marketplace.

The Zune Marketplace will operate much like other online music stores, offering millions of tracks from major and independent music labels on an a la carte basis, along with album info and artist news. Microsoft will also offer a Zune Pass, which is an all-you-can-eat music subscription for $15 a month. Using a Zune Pass, users can download as much music as they like from the Zune Marketplace - and listen as often as they want - so long as their subscription remains current.

The initial price for music tracks on the Zune Marketplace will be 79 Microsoft Points. You may have heard of Microsoft Points if you have Microsoft's Xbox 360 video game console. In short, the system works like a pre-paid telephone calling card: Microsoft Points enable Microsoft to support online micro-transactions too small to be practical for credit cards, as well as avoid setting prices in individual currencies. Points are also redeemable for games, demos, and features at Microsoft's Xbox Live Marketplace, and Microsoft recently announced it will start offering selected movies and television shows to Xbox 360 owners via Xbox Live - some in high definition - beginning 22-Nov-06. Microsoft Points are non-refundable and currently non-transferable, but don't be surprised when Microsoft expands Microsoft Points into other areas of its online businesses, including user-to-user transactions.

Taken together, the Zune player and the Zune Marketplace will operate as a closed system astonishingly like Apple's iPod/iTunes combination. Microsoft's Zune platform can be seen as a validation of Apple's closed-garden approach to marketing digital media: clearly, even Microsoft believes that the only way to offer a seamless, feature-rich experience that can compete with Apple is to control both the hardware and the service, just like Apple. The decision can't sit very well with Microsoft's PlaysForSure platform partners: after all, they've been trying to compete with the iPod/iTunes double-whammy for years, using tools even Microsoft feels are inadequate.

An open question is why Microsoft couldn't implement the Zune as a PlaysForSure device and service. Although there have been no official confirmations, the answer seems to be that Windows Media DRM wouldn't let the company implement Microsoft's vision of a future filled with Zune and Xbox devices, enabling at least these capabilities:

Windows Media DRM can (and does) handle the first point, but falls down on the second and third. For example, the Zune enables users to wirelessly share music they've purchased from the Zune Marketplace with other Zune users: recipients don't get just a 30-second preview clip, but the entire track at full audio quality, with the ability to play it three times over three days.

(There's an interesting tangent to the Zune's wireless media sharing. The activity it encourages could be seen as within the realm of "fair use" permitted under U.S. copyright law; however, it's not something Windows Media DRM supports for protected media. So, an argument could be made that the Zune's DRM may infringe less on lawful uses of content than Windows Media DRM; see Adam's article "Why DRM Offends the Sensibilities," 2005-07-05, for more background.)

Microsoft believes this sort of media sharing will be key to establishing a vibrant Zune user community. For commercial music, the Zune enables users to flag shared tracks they've received for later purchase via the Zune Marketplace. But that's just part of the user-community strategy: Microsoft eventually wants to create a milieu wherein owning a Zune device provides anywhere-you-go access to anything Zune users want to share - including commercial music, podcasts, pictures, garage-band demos, video, and games. If there are enough Zunes around (say, in a coffee shop or a school campus), just being a Zune owner may enable users to tap into - and socially connect over - a wealth of content favored and/or produced by local users.

With its new digital rights management technology, media sharing capabilities, and existing micropayment-capable transaction system, Microsoft is looking beyond now-standard monolithic commercial digital media outlets like the iTunes Store. The company hopes to create a system where users can purchase or subscribe to content from major publishers and share both commercial and user-generated content amongst themselves. Furthermore, Microsoft wants to enable users to engage in peer-to-peer transactions independent of its own marketplaces, selling their own content or third party content through affiliates, incentive programs, and viral marketing initiatives.

Universal Sufferage -- Given the scope of Microsoft's Zune project, last week's announcement from Universal Music Group that Microsoft would be paying it a royalty on every Zune unit sold came as a surprise. The royalty is in addition to standard payments Microsoft will make to Universal for selling its music in the Zune Marketplace, and Universal is not granting Microsoft any special content or consideration as part of the deal. Universal is the largest of the "Big Four" music labels, commanding about one quarter of the world's music sales.

According to Jeff Leeds in the New York Times, Universal will receive more than $1 of every Zune's $250 purchase price in exchange for licensing its music for sale through the Zune Marketplace. Microsoft plans to offer similar royalty arrangements to other participating music labels. As more music publishers nose up to the trough, it wouldn't be shocking to see $3 to $6 of each Zune's purchase price go directly into the pockets of music distributors.

Universal says half the money it collects via the Zune royalty will go to its artists, presumably in proportion to the volume their music is distributed. (This means the lion's share of these funds will be allocated to top-selling acts; the leftovers might amount to fractions of pennies against artists' contractual debts and, therefore, never leave Universal's coffers. The other half will presumably flow directly to Universal without even a passing glance at artists.) Microsoft is positioning the deal as a win for music creators. Microsoft's VP of Entertainment and Devices Bryan Lee said in a statement, "We believe that the music consumer will appreciate knowing that when they buy a Zune device, they are helping to support their favorite artists."

Don't be fooled: the deal is about money. Simply put, Universal put the screws to Microsoft and made the Redmond giant smile the whole time.

There is precedent for hardware manufacturers paying music publishers royalties on the sale of systems. At the urging of the RIAA, the Audio Home Recording Act of 1992 amended U.S. copyright law to, among other things, impose royalties on "digital audio recording devices." In practice, the royalty applied to digital audio tape (DAT) recorders and blank digital media. The theory was that the capability to make perfect digital copies of music would reduce demand for commercial recordings, and artists and publishers deserved to be compensated for revenue lost to digital technology. DAT recorders never took off in the consumer marketplace (although they were embraced by audio professionals), but anyone who buys blank music CDs in the United States pays a portion of the sales price into a fund distributed to publishers, "interested parties," and artists' organizations according to a rather lugubrious formula. In a rare defeat for the RIAA, a 1999 court ruling made iPods and other digital media players exempt from this royalty system; thank Diamond Multimedia for that one.

Of course, Microsoft's payments to Universal aren't being mandated by law: they're part of a business contract. Here's how that happened:

For several years the music industry has watched its sales decline as the digital music revolution has taken off. Sales from music download services like the iTunes Store offer a new source of revenue, but as of 2005 they were just barely making up the difference. (The RIAA called 2005 a decline; the numbers read as a wash.) The music industry doesn't believe people are listening to less music - in fact, they're probably listening to more music - and came to a conclusion: we're losing money to digital music piracy. So, the industry launched a campaign to shut down the original Napster, initiated legal action against other peer-to-peer file sharing services, filed thousands of lawsuits against individuals, and developed a frantic zeal for digital rights management technology.

In early 2003, when Apple lobbied the major music publishers to sell music in the iTunes Store, it promoted the store partly as an experiment and partly as a way for the music industry to offer a legitimate digital alternative to music piracy. To their credit, the industry took a chance on the iTunes Store, but in some ways they haven't been thrilled with the results. After all, when these deals were made iPod sales weren't even worth breaking out on Apple's financial statements. In contrast, during its 2006 fiscal year Apple sold more than 39 million iPods for almost $7.7 billion in revenue.

The music industry looks at those numbers and believes their content has been instrumental in creating a $7 billion a year business for Apple. Moreover, the industry reads research reports that say fewer than one in five iPod owners buy digital music regularly and that the average iPod contains a scant 20 songs purchased through iTunes. They conclude Apple's legitimate alternative to piracy isn't as effective as everyone had hoped.

Since all the major music labels are public companies, the primary mission of their leadership is to maximize value to their shareholders. It's hard to convince investors and board members how that goal is met when presented with declining sales and the fact that they helped create a multi-billion-dollar industry for a charismatic California computer maker. Music labels began churning for business strategies which would bring more of that shiny digital music player money their way. Last year, they tried to force Apple to give up its $0.99-per-song model in favor of differential pricing, whereby hot new songs would carry higher prices and catalog music could be discounted. Since iTunes currently represents the vast majority of digital music sales, Apple was able to hold the labels to uniform pricing. Embittered, the labels put their noses back to their grindstones and watched Apple's iPod business continue to grow, waiting for their moment.

And into this grist mill walks Microsoft with plans to launch Zune, a brand new vertically integrated music player and digital music store.

It's easy to imagine music executives wringing their hands with undisguised glee. See, Microsoft doesn't control the market-leading digital music service - to date, its MSN Music and Urge offerings have barely been blips on the digital music radar - so the company can't realistically threaten the labels with dropping them from its online music offerings. There's also some bad blood between the four major labels and Microsoft: a year ago, Microsoft was reportedly planning a music subscription service but broke off negotiations, claiming labels' royalty demands were too high. And with Zune, Microsoft also wants to launch hardware devices: Apple has proven that the real money in an integrated digital music service is in the hardware sales, not the music sales.

So Universal informed Microsoft it wanted a piece of the hardware action.

Microsoft didn't cave immediately: both companies played down to the wire, weathering three months of negotiations only to reach an agreement a few days before Zune was due to hit the market. But the simple fact is that Microsoft could not afford to launch Zune without the world's largest music publisher, so negotiations likely centered on the nature of Universal's hardware royalty, not on whether Universal would get one.

We'll Know Zune Enough -- The implications of Universal's Zune royalty for Apple's music business are unclear, but will hinge on the Zune's success in the music marketplace.

If the Zune proves to be yet another footnote to Apple's dominance of the digital music industry, Universal's hard-nosed negotiations with Microsoft will likely have no impact on Apple's business. If the Zune proves to be a legitimate competitor to Apple's iPod/iTunes combination, the music labels may be able to leverage the Zune's success to wring concessions out of Apple. These might come in the form of differential pricing in the iTunes Store, special promotions or marketing deals, or - if the Zune is a tremendous success - even a cut of the iPod's sales.

Take Control News/13-Nov-06

  by TidBITS Staff <>

Take Control Author Joe Kissell on TV -- Joe has written over a dozen of the Take Control ebooks, so it's likely you've seen his face on our Web site or at the back of one of his ebooks. Now, if you live in the San Francisco Bay area, you can see him live on television. Tune in to CBS-5 at 7 PM on Tuesday, November 14th to watch "Eye on the Bay." Joe will be on for one segment in which he'll be talking about "Take Control of Thanksgiving Dinner," as well as about the San Francisco Food Bank, the worthy organization to which we are donating $1 from each copy of that ebook sold in November. The San Francisco Food Bank will be providing Thanksgiving meals for more than 42,000 individuals this year. To help them fight hunger, buy a book or go to

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  by TidBITS Staff <>

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