No app store for make-or-break ZuneHD

Microsoft's ZuneHD, set to go on sale Tuesday, will not feature an open application store like its competitor the iPod Touch.

It will come with some unique features, though, like an HD radio tuner, and with software that has been well-received by users. Those capabilities will determine whether the ZuneHD sells well -- and whether Microsoft decides to keep selling its own music player, said Matt Rosoff, an analyst at Directions on Microsoft.

After observers noticed a Marketplace folder during earlier demos of the ZuneHD, many had hoped the new device would feature an open application store like the one accessible from the iPhone and the iPod Touch. Marketplace is the name of the open app store that will be available on Windows Mobile 6.5 phones, to be released in early October.

But the Zune Marketplace will be a closed store, meaning third-party developers won't be able to easily build applications for it. The new device will include the same casual games that came with earlier Zunes, plus a few other applications like an MSN weather application and a calculator, said Brian Seitz, group marketing manager for Zune. In November, Twitter and Facebook applications will become available, as well as a "Project Gotham" racing game, he added. Zune customers will be able to download the applications they like for free.

Seitz said the timing wasn't right to include the Windows Mobile Marketplace application, which isn't due out until next month, with the ZuneHD, but he also said it's not certain that a similar open Marketplace will come to the Zune in the future.

"Down the line, if there's an opportunity for us to snap into what they're doing from a mobile application perspective, I'm sure it's something we'll look at," he said. However, Microsoft may decide it makes more sense to limit the applications in the Zune market and offer them all free, he said.

He acknowledged that people are likely to criticize the decision. "I'm not saying we won't get dinged for that because I know we will," he said.

That's for good reason, Rosoff said. "When you look at it as a head-to-head comparison with the iPod Touch, people will see it as a shortcoming," he said.

Microsoft will also debut new Zune software on Tuesday that customers use on their PCs to manage their music. It will feature the "smart DJ," which allows the user to pick an artist and then automatically creates a playlist of similar songs.

Microsoft will also start offering people who subscribe to Zune Pass a way to access the Zune music collection from a browser. That means subscribers will be able to listen to music from the entire catalog from any PC, including one at work, rather than only from a PC running the Zune software. A Zune Pass subscription lets users stream any song from the entire Zune catalog and download 10 songs each month.

Microsoft also revealed a few more details about a Zune feature that will start showing up in Xbox Live later this year. Xbox users will be able to buy or rent movies from a new Zune store that will be featured in Xbox Live.

That's part of a strategy to move the Zune software experience into other products from Microsoft, Seitz said. "Going forward, we hope more people think of a 'holistic Zune business,' as opposed to how many of these things we sell," he said, pointing to the Zune hardware.

The most important upcoming product that will include Zune software will be Windows Mobile phones, Rosoff said. "The Zune interface will show up in Windows Mobile," he said. Even Zune hardware elements, like the touch screen and the form factor of the device, will likely make it into Windows Mobile phones, he said.

Rosoff suspects that Microsoft will eventually get out of the MP3 player market altogether. "We'll just see the Zune as a consumer component of Windows Mobile," he said. "This is sort of the last [Zune], if it doesn't sell."

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