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Saturday, July 22, 2006 - Page updated at 12:00 AM

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Microsoft confirms its rival to iPod

Seattle Times technology reporter

Microsoft confirmed Friday that it will sell a music and entertainment product later this year under the brand name "Zune," the first of a family of devices designed to compete head-to-head with the dominant Apple iPod.

The first player, scheduled to be on store shelves this holiday season, will have a hard drive and a wireless connection that lets users share music, Microsoft said in an interview with Billboard magazine. Later on, the company could release players for video and video games.

These details have been rumored for months as Microsoft held talks about the devices with the entertainment industry. Some analysts said Friday that Microsoft confirmed the news to ensure that the speculation doesn't drive expectations beyond what the products would actually deliver.

Microsoft released little information Friday, but people briefed on the project said Zune will work with a Microsoft service that allows users to listen to a vast library of songs for a monthly subscription fee. These services act more like a rental service for music, although users can pay more to purchase permanent copies of songs.

The model is used in RealNetworks' Rhapsody service. It isn't a direct competitor to Apple's market-leading iTunes Music Store, which is not subscription-based and sells songs and videos on a for-purchase basis.

A subscriber will be able to share an entire play list of favorite songs with another person, as long as both are paying the monthly fee. The Zune service will also go beyond previous services in terms of allowing artists to connect directly with users in new ways. An artist could offer weekly releases over Zune, for example. One week might be a tour of that person's home or a spoken message to fans.

"Where Apple, I think to a certain extent, focused on the user, Microsoft is taking a different approach and really focusing on the artist and trying to create a system that would best allow that artist to speak to their fans," said technology analyst Rob Enderle.

Microsoft released a geometric, Tinkertoylike logo for Zune on Friday and set up a Web site, at comingzune.com, to promote the devices.

One music-industry executive said Microsoft is planning a huge marketing and promotional launch for Zune. So far, however, the hype seemed to be centered on a whisper campaign that got its first stamp of legitimacy with Friday's announcement.

Analysts said Microsoft will have to pull out all the stops to launch Zune in a way that can make any significant dent in the 70 percent share that Apple owns in the digital music player market. Already, Microsoft took an unusual tactic in choosing Billboard as the vehicle for its first Zune announcement.

"This isn't the type of product that's going to be announced at some kind of industry conference by Bill Gates or Steve Ballmer talking about the technical specs," said Jupiter Media analyst Michael Gartenberg.

Microsoft is also parting with history in that it will begin competing directly with partners who have their own digital music players. Microsoft has worked closely with Creative Technology, Toshiba and iriver on devices, but they haven't made many inroads against the iPod.

To really compete with Apple, Microsoft felt it had to go its own way, even if that meant sacrificing some partner relationships, Gartenberg said.

"Microsoft has been preaching that the market really cares about choice in platform," he said. "But consumers are saying the only choice they care about was should they get an iPod Shuffle or iPod Nano. At the end of the day, the partners failed to deliver any meaningful market share."

But to really get in the ring with Apple, analysts suggested that Microsoft needs to have its own counterpoint to Steve Jobs, the enigmatic Apple chief executive who personally introduces new products at closely watched company events. Jobs regularly fires up the technology crowd in ways that Microsoft executives do not but may need to, for a Zune launch.

Don't expect Apple to step to the sidelines for Zune. Jobs predicted a Microsoft digital music, or MP3, player in a January interview with Newsweek.

"What's going to happen is that Microsoft is going to have to get into the hardware business of making MP3 players," he said. "This year."

And in a conference call with analysts Wednesday, Apple Chief Financial Officer Peter Oppenheimer said he was excited about the company's future products.

"We are very confident in the products in our pipeline and I just don't imagine that the creativity at Apple could ever be low," he said.

Kim Peterson: 206-464-2360 or kpeterson@seattletimes.com

Copyright © 2006 The Seattle Times Company

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