Microsoft looks to social networking for Zune 2.0 allure

Zune Social site a smart move in market share scrum, say analysts

Microsoft Corp. will take another crack at blending social networking with digital music next month with the release of new Zune music players and a renewed campaign to promote song sharing.

It's a smart move, noted some analysts. But the chance it can help Microsoft make headway against Apple Inc.'s iPod players and iTunes music store is slim.

Along with the three new Zune players, including Microsoft's first-ever flash-based model, Microsoft announced a new community site dubbed Zune Social that it will fire up as beta in November. According to Microsoft, Zune owners can automatically share their current playlists with friends using a Zune-to-Zune Social sync.

That sync will rely on user-made profiles that Microsoft's calling Zune Cards; other Zune owners will be able to view a friend's Card, then play short samples of those tracks and/or buy the tunes at the also-redesigned Zune MarketPlace online store. The sharing concept isn't new, as several services -- notably iLike -- already promote something similar.

"Microsoft must find a way to grow the coolness of the Zune," said JupiterResearch analyst Michael Gartenberg. "This isn't a bad strategy, and at least it's found a way to differentiate [itself] from Apple."

Van Baker, an analyst at Gartner Inc., was more optimistic. "It's very important, this sharing," he said. "There's lot of activity [related to] sharing music on the Web and exposing people to new artists. I think this is good for the consumer and for the music business. I like what Microsoft's doing here."

"I think it's a great strategy," said Chris Swenson, an analyst at The NPD Group Inc. "Microsoft's been looking for a catalyst that will generate buzz."

Microsoft did not set a launch date for the players or Zune Social, but used the general "midmonth" to describe the timing.

It also removed one restriction on Zune-to-Zune wireless sharing in the hope of fostering the feature that debuted last year with the first-generation player. Although tracks received from another Zune owner can still be played only three times, the three-day time limit has been dropped. Another former limitation, that a song could be passed only once, has also been eliminated; users who receive a shared tune can now share it with yet another Zune owner.

Last year's Zune-to-Zune experiment, then the only application of the players' wireless capabilities, was a disaster simply because there haven't been enough people with Microsoft's player to make it feasible. "That's part of the process," said Gartenberg. "One of the Zune's features is interactivity, but if there isn't someone to interact with, it's just a catch-22."

"Again, anything that facilitates sharing is goodness," chimed in Baker. But will the new emphasis on sharing be enough to give Microsoft a shot at Apple and the iPod? Baker doesn't think so.

"Microsoft's got a bit of an edge here," he said. "But is it enough? Probably not. Will it help them against non-Apple players? Absolutely. They're going to steal share from the Creatives and SanDisks of the world."

Microsoft's digital music rivals -- other than Apple -- include Creative Technology Ltd., SanDisk Corp. and Samsung Electronics Co. In interviews yesterday, Microsoft executives said they had set the goal of holding down the No. 2 spot by the end of the year.

"That's a reasonable goal," said Gartenberg. "But it's not something they're going to automatically attain. It's going to be a hard thing making it to No. 2."

Even at No. 2, there's no guarantee that Microsoft can compete, even in the long run, with Apple, whose iPod enjoys market dominance, accounting for more than 70% of the business by NPD Group's figures. "Microsoft can't just do something a little bit different," said Swenson. "They have to match the experience of iTunes and find ways to surpass it. But they're not even close now to what Apple and iTunes have."

Or maybe Microsoft is not really putting its sights on Apple and the iPod, Swenson theorized. It may have different targets for Zune and its software. "I see lots of possibilities here," he said. "It's not just about devices. I wonder if Microsoft looks at the success of Facebook and MySpace, and is actually trying to use [Zune Social] as an entry into the social networking realm."

Copyright © 2007 IDG Communications, Inc.

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