Microsoft unveils its wireless answer to iPod: Zune
Seattle Times technology reporter
When it comes to discovering new music, a friend's recommendation typically beats what's on the Billboard charts.
Microsoft has baked that idea into building a new portable media player that represents its most ambitious effort to challenge the Apple iPod's domination of the market.
After months of speculation, the company on Thursday officially introduced Zune, potentially the next big thing in the high-stakes digital transformation of entertainment.
For Microsoft, this is about more than just a competitor to the iPod, said Mark Anderson, an independent technology analyst. "They're trying to create a new platform and they're a platform company," he said.
Early reviews of Zune were mixed.
J Allard, the Microsoft vice president who leads the project, said the idea behind Zune is that "the entertainment industry was going to evolve and become a software industry."
One key to Microsoft's approach is the ability of Zune users to wirelessly share music and photos. Microsoft hopes this will build on the idea of social networking seen in popular Web sites such as MySpace and differentiate its player from the iPod line.
"The amazing opportunity that's been left on the table [by Apple] is when you can make this experience much more social and much more connected," said Bryan Lee, a Microsoft corporate vice president in charge of the company's digital entertainment push.
A user can select music and photos stored on Zune and transfer it on the spot. The recipient, who has to be using a Zune device as well, can listen to a shared song up to three times over three days. To keep the song, it must be purchased at the online Zune Marketplace store that Microsoft is also introducing. The songs will likely cost 99 cents, or what Apple's iTunes store charges, but Microsoft is also offering the music through as-yet-unpriced subscriptions.
The player, to be manufactured by Toshiba and due out for the holiday season, has not been priced, though analysts and retailers estimate it will be $250 to $300. It will boast a 30-gigabyte hard drive, 3-inch screen, FM tuner and Wi-Fi connection for sharing content and transferring music from a personal computer.
Microsoft showed off three color schemes: white, black with blue trim and brown with green trim. In addition, the company described Zune as the first in an extensive line of wireless media player products, eventually including a cellphone.
Zune fills a gap in Microsoft's overall "connected entertainment" strategy, an effort gaining importance as digital devices become more pervasive. Zune will work with the company's Xbox 360 video-game console, and the song-sharing feature follows the social aspects of online gaming in Xbox Live.
Analysts found plenty to pick at with the Zune system, Microsoft's first effort to integrate hardware and software in this space.
"It is not an iPod killer," said Aram Sinnreich, managing partner at Radar Research, echoing the criticisms of other analysts. "The incremental value presented by the sharing features and the Wi-Fi are simply not great enough to overcome the incredible marketing and social cachet of the iPod."
Apple's power to excite the industry, diminish the importance of features its line doesn't offer and play up the benefits of those it does will test Microsoft's marketing, analysts said.
One example is how Apple Chief Executive Steve Jobs set the tech industry buzzing in advance of his announcement Tuesday that the iTunes store would offer movie downloads. He also showed off a set-top box, still in development, that would allow users to stream digital content from the computer to the television.
While video has grabbed the digital media spotlight in recent days — Seattle-based online retailer Amazon.com announced a movie downloading service last week — Microsoft made clear that despite Zune's ample screen, this player is about the music.
"When we decided to approach this thing, we decided to celebrate the experience of music," said Lee, the Microsoft entertainment executive.
The device plays videos, even orienting the playback in landscape format to take advantage of the larger screen. But the focus is on content that complements the music, such as album covers and music videos. No television episodes, movies or other video content available through services including iTunes will be sold on the Zune Marketplace, at least initially, Lee said.
Microsoft's music-focused approach extends to its marketing of Zune. The company plans to promote the platform with emerging and independent artists, such as Band of Horses and CSS, a Brazilian group whose tour is sponsored by Zune, said Chris Stephenson, a former recording-industry executive who joined Microsoft in March as its general manager of global marketing.
"We're not going to have the big advertising campaign on Sunset Boulevard, connected to major artists, we're not doing that," Stephenson said. "We're helping artists grow."
He added that the Zune Marketplace will debut with more than 2 million songs and feature big-name artists, which he called the industry's "bread and butter." Microsoft is preloading music from many of the major record labels on Zune devices.
The company also plans to help unsigned musicians get their content on Zune Marketplace, he said.
Zune marketing will trade on Seattle's prominent place in the music industry. Stephenson mentioned partnerships with Seattle's Sub Pop Records, which recently signed CSS, and local independent radio station KEXP-FM (90.3).
Like Stephenson, several members of the Zune team have recording-industry experience. There are about 170 people working on the project in Redmond, though the group draws on expertise from all over the company, he said.
"Zune is much closer to a record company than a software or hardware company right now," said Rob Enderle, principal analyst with the Enderle Group. "That gives Microsoft a skill set that is unmatched, including with Apple, in terms of the market."
Microsoft's financial investment in Zune is considerable, and it's not something top executives expect to pay off immediately.
In July, Robbie Bach, president of the company's entertainment and devices division, told financial analysts that the company would spend hundreds of millions of dollars over the next several years on the media player. That investment pales in comparison with the billions Microsoft spent entering the video-game console business with its Xbox product line.
Bach tried to set realistic expectations about Zune and its underdog status.
"This not a six-month initiative, and somehow in six months we're going to have captured the marketplace," he said at the time. "This is something that's going to be a three-, four-, five-year investment horizon."
The stock market appeared to view Microsoft's news favorably on Thursday. Shares gained 35 cents, about 1.4 percent, to close at $26.33.
Whether consumers will react favorably to Zune, particularly its sharing feature, remains to be seen.
A recent Jupiter Research survey found that 18 percent of 18- to 24-year-olds — what analyst Michael Gartenberg called the "Zune demographic" — considered the wireless content sharing a valuable feature.
"A lot of music is distributed by word of mouth," said 18-year-old Tim Sorensen, a longtime iPod user who's about to start his freshman year at Western Washington University. "You tell a friend to listen to a certain song, but you have to play it on a stereo or have one headphone in each ear. I think that would be really cool if you could kind of wirelessly give someone a song to listen to for a little bit."
Sorensen isn't rushing to trade in his new iPod, however.
Benjamin J. Romano: 206-464-2149 or email@example.com. Times reporters Kim Peterson and Brier Dudley contributed to this report.
Copyright © 2006 The Seattle Times Company