Microsoft’s Skype Buy Creates Conflict for Rdio [Update]

By  |  Tuesday, May 10, 2011 at 4:24 pm

All Things D’s Peter Kafka picked up on an interesting wrinkle in Microsoft’s Skype acquisition: Subscription-based music service Rdio may be in trouble.

Skype has a $6 million investment in Rdio, thanks to some lawsuit madness involving Skype’s founders and several Silicon Valley players. Kafka said he’s “pretty sure” Skype and Rdio were planning to deepen ties and drum up more users for the music service.

But Microsoft has its own music service, Zune Pass, and it seems unlikely that the company will want to manage a competitor. For now, neither Microsoft nor Rdio are commenting. (UPDATE: See the end of the post for Rdio’s statement.)

Although Zune Pass and Rdio both offer unlimited streaming music to subscribers, their approaches are quite different. Zune Pass focuses on Microsoft’s own hardware — Xbox 360, Zune media players and Windows Phone 7 — and it has one pricing model, charging $15 per month for unlimited streaming and 10 permanent downloads. Rdio charges $5 per month or $10 for mobile access, and doesn’t let users keep any songs, but it supports more devices, including iPhone, Android, Blackberry, Windows Phones, Roku and Sonos.

So the best case scenario, however unlikely, would be a complete merging of Rdio and Zune Pass, giving users the full range of pricing options and supported devices. The services could even combine their respective social networks to allow more interaction between users.

The worst case scenario would be the closure of Rdio. It wouldn’t be a total tragedy — the subscription music business has enough competition from MOG, Rhapsody, Grooveshark and maybe Spotify to soak up displaced users — but it would be an inconvenience for Rdio users who’ve built up huge libraries and networks of like-minded listeners.

Whatever the case, I hope Rdio (or Microsoft or Skype) clarify the matter before long.

UPDATE: Here’s a statement from Rdio:

“While Skype is an investor in Rdio, it is important to note that it is one of many and that Skype’s acquisition has no impact on Rdio, operationally or financially. We remain focused on our goal of continuing to deliver what we believe to be the best online and mobile music experience on the market.”

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