Zune - the Microsoft alternative to the iPod world

Friday, July 28, 2006

Steve Jobs (Apple CEO) predicted it this January in an interview and now Microsoft confirmed officially that they will enter the digital media player market. They will have to compete just with Apple as their iPod player that accounts for more than half of the sales in this market.

There aren’t a lot of technical details about the Microsoft player as we only know that the hardware and software products will live under the Zune brand. The first player (to be released toward November) will only be able to play digital music but other devices that add video and gaming support are already being planned for 2007.

According to a statement released by Chris Stephenson (GM for MSN Entertainment Business) Zune will have a hard drive and will support wireless Internet access via Wi-Fi. Especially the last feature is seen potentially as an advantage on iPod because currently the Apple system does not provide it.

However Wi-Fi comes with a price (power consumption that eats a lot of the batteries charge) and it will be interesting to see what Microsoft will introduce to justify this addition. Early reports talk about the possibility to share music with other Microsoft/Zune players or buying music to download directly on the player.

Great emphasis is placed on the community aspect of the Zune strategy but it’s too early to know how it will work in detail. What we know is that a 10 players limit will be imposed when sharing content and that users that want to listen the shared song must bookmark it to buy it later.

As for the music subscription service that will have to rival iTunes with its iTunes Store at the moment Microsoft does not have any agreement with record companies. That should change soon however because the first reactions from the record labels are enthusiastic after Microsoft announced that they will offer music in various download and price formats. One of the critics directed toward Apple in fact is their decision to stick with the 1 dollar for song system that does not satisfy the record labels.

To facilitate the migration of users from the Apple system to Zune Microsoft will let the consumers download for free on the Zune devices any song that they purchased via iTunes (Microsoft will pay the right-holders of the song).

Since we do not know how Apple will answer it is too early to know who will win this “battle” but we already know who certainly will not be happy after the Microsoft announcement. The Zune products and services in fact will not only compete with Apple but also with Microsoft recent partners like iRiver, MTV, Napster, Samsung and Creative.

They all sell digital music and they all teamed up with Microsoft to use Windows Media Player 11 as an alternative to iTunes. Now Microsoft will be in a strange position since they will have to promote their own services while still offering help to some of their (old?) partners. For example in the next version of Vista will be highly integrated the MTV’s Urge service that offers music by an online subscription.

The competition between Apple and Microsoft will start only when the latter actually presents the Zuna product and services but its former partner will react a lot sooner. So let’s just buy the popcorn and wait to watch how quickly business relationships can turn around. It will not be pretty…