Zune vs. iPod: Much Ado About Nothing?-- by Nate Winter

The Zune is here, but does it matter?

Microsoft has launched the Zune for Holiday 2006 while keeping its relationship with the new portable media device relatively quiet. Some will say in launching a brand that attempts to be “cool,” Microsoft is down-playing its corporate image. Others say Microsoft is simply trying to establish the Zune as a stand-alone brand -- like iPod or Xbox. Regardless, the state of public awareness seems to be that Microsoft’s association with the Zune is certainly not a secret, but not exactly common knowledge either.

The first major gripe about the Zune is that it is not Apple-friendly. Given the proliferation of iPods (and Macs with it) in conjunction with Apple's constant reminders in advertising that iPod and iTunes are Mac- and PC-friendly, it's a prescient issue.

This fact has many onlookers criticizing Microsoft for not playing nicely with others. Let’s keep in mind though that when Apple’s iPod was released, the iTunes software necessary to use the device was not available for PC (a ballsy move given the Mac’s ~2% share of the home computing market at that time). Some say this was a conscious decision in which Apple was defiantly “sticking it to the man,” while others proclaim it a wisely tentative business decision based on launching a completely new product into a nascent market. Perhaps it was just a VIP scenario in which Apple rewarded Mac users by giving them first access to the new technology. Eventually Apple offered iTunes for PC and everyone was happy (except Microsoft).

I think it is too soon to judge the intent behind the Zune’s noticeable lack of support for Macs. Perhaps the move is simply Microsoft giving its Windows users their just desserts and allowing them access to the new technology first, with the intention of offering it’s Zune software for Mac users in the near future. However, given the prescience and exponential growth of the "Portable MP3 Player"-turned-"Portable Media Player" market, Microsoft can claim this omission as neither precautionary nor accidental.

Keep in mind that Microsoft kept its Office Suite off-limits to Mac users for years, a move which I posit had dramatic effects on the stratified dichotomy of Windows/Apple and their respective associations with Business/Personal and Number Crunching/Creative Work as we know them today. But Microsoft and its Office Suite eventually came around.

The second major gripe is that the file sharing feature for purchased music comes with prohibitive play limits: three plays a day for three days on a shared song. And then the song disappears. Critics are saying, “Who wants to listen to a song 9 times in 3 days and then have it disappear?” This criticism is short-sighted. The file sharing capability of the Zune is innovative. It has great value for non-copyrighted materials like personal photos and other self-produced content. It’s a major step toward removing the computer from the portable media player mix (a ballsy move for Microsoft).

With wireless data transfer capabilities already in the Zune, should we expect to wait too long for a device that allows users to purchase music wirelessly directly through the music player? In fact, many mobile phones have this capability already (even if only because wireless web access is integral to the phone itself). And what better vehicle to drive song sales than a Zune equipped with the tease of temporary file sharing? Our culture of instant gratification will exhaust its 3 plays in the first couple hours, immediately purchase the material it likes, and relish the opportunity to spend so conveniently.

However this feature is not (yet) available for the Zune. As it stands now users still have to purchase and load copyrighted music to their Zune with a PC.

In an unusual move, Microsoft is taking a gamble. By pinning the lion’s share of its marketing on the social aspects of file sharing between Zunes under the tag line, “Welcome to the Social,” Microsoft puts itself in a corner. It limits the potential for slow, one-at-a-time growth that made iPod the brand and market share powerhouse it is today. The file-sharing feature of the player, while impressive, is one that cannot be used without another Zune. Microsoft is essentially telling the buyer that the Zune’s primary feature is only available in the presence of other Zune users. That would be great if there were thousands or millions of Zunes out there right now. But there aren’t. Just iPods.

It’s like owning the world’s first telephone: who are your going to call?

This marketing move presents Microsoft with a double-or-nothing bet. Apple, iPod, and iTunes own the portable media player and home entertainment software markets. Apple: 1; Microsoft: 0. Now Microsoft is positioning the Zune in terms of its value being based on the market share it doesn’t have. On one hand, it seems cocky. On the other hand, if anyone is in a position to take share of the portable media player market away from Apple, it’s Microsoft.

Much ado is clear. Whether it is truly about nothing is left to the masses.

--Nate Winter

Zune vs. iPod: The Battle for Home Domination-- by Nate Winter

Microsoft has launched the Zune. But why is this predictable foray into portable media so interesting? After all, Microsoft is the most powerful technology company in the world with other experience in mobile devices such as the Windows Mobile operating system. Why is the Zune a big deal? Here’s why: Because the future of home entertainment is at stake and because, for once, Microsoft is an underdog.

Portable MP3 players are not important because of their sales, their branding, their image, etc. Microsoft and Apple don’t really care about how many iPods are sold or how many Zunes are sold. Yes, there’s boat loads of revenue to be had by both parties, but revenue on portable MP3 player sales is near-sighted. The battle is not over bragging rights, it’s over the living room. The physical portable device that plays music, views photos, and shows video is almost immaterial. The end game is software. Whose software will become the standard when a computer centrally controls all home entertainment? Will a home’s music files be .m4a files controlled by Apple’s iTunes or .wma files within Microsoft’s Windows Media Player? The answer to that question is what drives Microsoft into the portable media player market with the Zune.

Microsoft wants to make its proprietary .wma and .wmv file types the new .doc and .xls, making Microsoft the undisputed king of entertainment software as it is for office productivity.

The market is too big to ignore and with too many implications for the future. Microsoft’s advantage is its existing entrée into home entertainment with its Xbox and Xbox 360 gaming consoles. Microsoft has successfully leveraged its strengths with software development, peripheral devices, and home networking to claim a powerful first strike into the consumer entertainment arena. And while the Xbox brand’s success has been formidable, its products lack the “every man” quality of an iPod.

If the battle is truly for market share over home entertainment and not revenue, the victor is clearly Apple. Compare an Xbox console (original or Xbox 360) with accessories, game sales, and subscription fees for the Xbox Live service to an iPod (model and size are irrelevant) with accessories and purchases from the iTunes music store. I won’t go into specific detail, but it seems likely that an Xbox generates more revenue for Microsoft than an iPod does for Apple. However, Apple has the advantage because sales of little iPods (with their free iTunes software) dwarf those of Xbox. It’s hundreds of millions of little sales conquering over millions of great big sales.

Because so much rides on the software standards for home entertainment we should expect to see heavy deals promoting Zune sales after the holidays. I won’t be surprised if we begin to see offers for a free Zune with purchase of Microsoft’s new operating system Windows Vista or Microsoft Office 2007 or even new PCs down the line.

What the world really wants is some truly universal formats. But I suspect that most people aren’t aware of that need yet. We’re still in those “pissing contest” days of VHS vs. Betamax, HD DVD vs. BluRay, and iPod vs. Zune.

--Nate Winter