After months of speculation, Microsoft finally has announced plans to release Zune, the "iPod Killer". Zune is an ecosystem of co-branded devices, software, and multimedia stores similar to the model that propelled Apple to success. The move appears both necessary and curious for Microsoft who has struggled mightily to compete with Apple in the digital content space.
Microsoft has tried to rely on developing a third party ecosystem to rival Apple. To accomplish this, Microsoft launched the Plays for Sure campaign in 2004. The initiative was meant to promote services and hardware that utilized Microsoft's digital rights management (DRM) but were operated by various parties. Some initial partners were Creative, iRiver, Archos, Samsung, Napster, and others. Without enough marketing effort, Plays for Sure failed to click with the consumer.
Customers continued to recognize that the iPod worked with iTunes, but never seemed to fully or quickly grasp that an iRiver device would work with the MTV Urge service. As services floundered it became clear that Microsoft would have to develop its own branded ecosystem if it wanted to compete. Zune will not operate on the Plays for Sure and appears to be a competitor to services and hardware that support the platform.
Zune will begin to alter the market dynamics. Incorporating technologies not included in the iPod such as wireless connectivity and gaming can Microsoft capture the imagination of the consumer? What does Zune mean for Microsoft's partners? How will it impact competition within the company?
The launch presents a difficult choice for Microsoft. After years of developing partnerships (the most recent with MTV Urge) they must now compete with those very companies and themselves. How angry will partners be? What will the backlash be against Microsoft for the move? Will partners abandon the Plays for Sure platform?
Microsoft:
Windows Media Player, installed on hundreds of millions of computers worldwide was intended to play a key role in helping propel Plays for Sure. Now it appears Microsoft will have to start from scratch to ensure Zune reaches as many users. Until Zune comes pre-installed on PCs (as it one day may) it will be necessary for users to seek out the software and download it. This has worked for Apple and shouldn't necessarily be a deterrent to consumers. However, it does mean that Zune will have a much smaller footprint than Media Player.
Incorporating various types of devices into the Zune line may prove interesting to the consumer. Having a gaming device in the Zune line-up may convince some consumers to buy Zune. Not including gaming into every device was important as gaming only appeals to a specific segment and consumers will not want to pay for features they don't use. Thus adding gaming, and specifically the XBox brand into a portable device may help Microsoft appeal to a group that Apple currently does not or Apple users who also must use a gaming device in addition to their iPod.
If it is true that Microsoft will repurchase a user's purchased library in a Zune compatible format, that will reduce another barrier to entry. It appears this is focused on Apple, but one must wonder if they will do the same for Plays for Sure content. Doing so would surely upset many partners and is unlikely.
If Microsoft is truly trying to create an ecosystem of content, where is the smartphone play? Microsoft has made huge inroads into the mobile device/smartphone market. With Media Player installed on these devices they could easily support Plays for Sure content. Will the devices also support Zune, or will Microsoft ignore this segment of users?
The biggest question is, will consumers switch? What unique value will Microsoft offer? Apple already has millions of fans, Microsoft must do more than Apple to convince users to switch. They cannot simply provide a branded MeToo service. WiFi is an interesting product addition but will listening to the songs of someone near you be enough? How will WiFi affect battery life on the devices?
The play for Microsoft will probably be offering an entire ecosystem, incorporating the home into the equation. While it has failed to move the PC into the living room with the Media Center, perhaps a Zune Media Adapter may find its way into the entertainment stack? It can be assured that Apple has its sights on the living room, if Microsoft can get there first that may provide an advantage.
Partners:
Microsoft's partners should be troubled by Zune's launch. Companies have relied on Microsoft's marketing muscle to help promote the interoperability of their services and various types of hardware even though the effort has been unsuccessful. While some companies have released their own branded devices, such as Napster, companies will now have to develop their own identities.
It may be time for companies to stop relying on the Plays for Sure campaign and start releasing their own hardware. The Napster service should have a Napster player. The Vongo service should begin offering a Vongo player. Doing so will eliminate the need for the Plays for Sure branding and potentially help drive additional users to partner services. Otherwise companies risk users switching to Zune.
Apple
Does Apple really have anything to worry about? This is not the first iPod killer to arrive on the market and will not be the last. It has been several months since Apple updated the iPod line-up and no time would be better to refresh it than now. Doing so will help steal some thunder from Microsoft. On the video front, Apple should continue to expand its library. Movies are important but if Microsoft has movies and Apple does not, users will not necessarily flock to Zune right away. Movies remain a longer term play for digital content and should not be regarded as a killer app at this point. The only area that Microsoft may be able to best Apple for the moment is if a gaming device is released soon. Apple does not cater to this large segment and could potentially lose some of its audience to such a device, although current devices have had minimal impact on Apple's market share. However, there are a number of gaming devices already on the market that Zune would have to compete with.
Apple itself may release a gaming device in the near future, which would help to offset the advantages of a Zune gaming device. Overall though, users have little complaints about Apple's ecosystem. iTunes works well and the iPod remains a must have device. Microsoft will have an uphill battle filled with compelling devices, interesting content, and massive marketing in order to begin to compete with Apple.
Overall
Anytime Microsoft enters a market it is necessary to pause and evaluate. The XBox has helped to redefine the gaming space when only a few years ago Microsoft did not even play in the market. However, Zune may be a harder sell to the consumer.
For studios and record labels Zune should be an easy sell as the decision to work with Microsoft will likely come fairly easy. As content owners continue the desire to have more leverage in their negotiations with Steve Jobs a true competitor to iTunes would provide them with it. Thus, it can be expected that Microsoft will have ample content at launch, but ample customers, that's a tougher sell.
