Opinion: Why Microsoft's Zune scares Apple to the core

Editor's note: In response to reader comments, Mike Elgan has made some revisions to this article since it was originally posted on Sept. 28. The clarifications involve which operating systems can connect to the Zune, the Apple iPod's market share and the size of the Zune screen.

Microsoft Corp. plans to launch a competitor to Apple Computer Inc.'s iPod, a wireless media player called the Zune, just in time for the holidays.

Apple fans point and laugh at Microsoft's entry into a market totally dominated by the iPod and its transcendent design. Apple's media players are so good they have transformed consumer electronics, inspired a massive gadget "ecosystem" and spawned a thousand imitators. Every pretender to the media player throne -- and there have been hundreds -- has been thoroughly smacked down by Apple and its untouchable iPod.

The secrets of iPod's success appear obvious: beauty, simplicity and "extreme coolness" -- three characteristics Microsoft has never achieved in any product.

So why is Apple so scared? (I'll tell you why in a minute.)


First, what is this Zune thing, anyway?

Zune is a music and video player that Microsoft will launch in the U.S. on Nov. 14 for $249.99. Other countries will have to wait until next year. It's made in China by Toshiba Corp.

The initial version will sport a 30GB hard drive, peer-to-peer Wi-Fi connectivity, a 3-in. screen (320-by-240-pixel QVGA viewable in either portrait or landscape mode), an FM tuner that will display song information from stations that broadcast a Radio Broadcast Data Standards (RBDS) signal and a built-in nonreplaceable lithium-ion rechargeable battery that will probably deliver about 12 hours of music or about 3.5 hours of video on a single charge. It won't last as long as the iPod, but it will charge faster.

Zune will connect to an iTunes-like music store called the Zune Marketplace, which will offer millions of songs, according to Microsoft. Music will be available for 99 cents per song or via an "all-you-can-eat," $14.99-per-month subscription package called a "Zune Pass." Movies and TV shows will become available on the site sometime next year. Marketplace will work with the Microsoft Points program -- Xbox users can spend Points on Zune media and vice versa. Each song on Marketplace costs 79 points. (For instance, 100 points equals $1.25).

Zune will come preloaded with yet-undisclosed songs from DTS, EMI Music's Astralwerks Records and Virgin Records, Ninja Tune, Playlouderecordings, Quango Music Group, Sub Pop Records and V2/Artemis Records.

Best of all, Zunes will be able to connect to one another wirelessly, letting people share songs (as well as playlists and .jpg photos) with up to four other simultaneous Zune users within Wi-Fi range. Recipients of these shared songs will be able to play them three times for up to three days free, after which they'll have to pay to listen. Songs received wirelessly can't be shared.

At least in the initial release, Zune's Wi-Fi won't connect to a network. It's peer-to-peer only.

The Zune PC connection software requires Windows XP with Service Pack 2 or Windows Vista. No Mac-specific version has been announced. The Zune will also connect to TVs, home stereos and Microsoft Xbox game consoles and play music or videos through them.

Zune software will import audio files in unprotected WMA, MP3, AAC formats; JPEG photos; and videos in WMV, MPEG-4, H.264 formats. Microsoft has hinted that it will support other media formats, but hasn't specified which ones. Zune will import songs from Apple's iTunes "as permitted by the online service from which it was purchased," according to Microsoft.

Users will be able to choose a "ZuneTag," which is a unique user name that others will see on a kind of "buddy list" when they connect via Wi-Fi. The device will have a "Community" menu from which users can select an item called "Nearby" to display all Zunes within range.

Microsoft will sell three Zune bundles: a $79.99 Zune Car Pack will ship with a car charger, a $99.99 Zune Home A/V Pack will come with cabling and wireless accessories for connecting to televisions and stereo systems, and a $99.99 Zune Travel Pack will feature high-quality earphones, a remote, a carrying case, and a cable for PC synchronization. The company will also sell separate output cables, chargers, docks, upgrade headphones and other accessories.

Compared with Apple's latest iPod, the Zune is a slightly larger, slightly heavier, slightly less elegant device.

So why is Apple so scared? Five reasons:

1. Microsoft is hatching a consumer media "perfect storm."

Apple fans assume iPod will face Zune in the market, mano a mano, like other media players. But that's not the case. Zune will be supported and promoted and will leverage the collective power of Windows XP, Windows Vista, Soapbox (Microsoft's new "YouTube killer") and the Xbox 360.

Microsoft will make the movement of media between Windows, Soapbox and the Zune natural and seamless. The Zune interface is just like a miniature version of the Windows Media Center user interface and is very similar to some elements of Vista.

Apple iPod fans are overconfident in part because of Apple's dominant media player market share, which is currently higher than 70%. About 30 million people own iPods.

But Microsoft owns more than 90% of the worldwide operating systems market (compared with Apple's roughly 5%), representing some 300 million people. The company expects to have 200 million Vista users within two years.

The Zune will plug directly into the Xbox via a standard Universal Serial Bus cable -- a fact Microsoft will drill into the heads of Xbox users on the Xbox Live online gaming service. The Zune Marketplace will be integrated with, and promoted by, the Xbox Live Marketplace.

Apple faces the prospect of competing not with the Zune alone, but with a mighty Windows-Soapbox-Xbox-Zune industrial complex.

2. The Zune is social and viral.

Since the iPod first came out, times have changed. The rise of social networks like MySpace.com and viral Web 2.0 sites like that of YouTube Inc. have transformed the expectations of young people about sharing and using media. In the context of these trends, Apple is old school. But the Zune, with its peer-to-peer wireless file sharing, is both social and viral.

Tweens, teens and twentysomethings have acquired the habit of feverishly sharing videos and songs. Today, they mostly have to wait until they get home and use their PCs to do so. With the Zune, students will be free to share music, videos and photos right there in class. They'll be able to pass notes to one another. The Zune isn't just a solitary music player. Think of it as a portable, wireless, hardware version of MySpace.

3. Zune may have more programming.

Apple pioneered workable, for-pay music and TV show downloading, and is starting to do the same thing with movies. It deserves a lot of credit for that. Ultimately, however, the value of iTunes, Marketplace and other music stores will be judged by the quantity, quality and price of available media -- not who got there first.

While Apple launched its movie business with movies from Disney (where Apple CEO Steve Jobs sits on the board), Microsoft has already lined up Twentieth Century Fox Film Corp., Paramount Pictuers, Sony Pictures Entertainment, Universal Pictures, Warner Bros., Lions Gate Entertainment Corp. and MGM Pictures.

For TV shows, Microsoft will offer programs from A&E, Animal Planet, the BBC, The Biography Channel, Cartoon Network, CBS, Comedy Central, Discovery Channel, Discovery Health Channel, Discovery Kids, E Entertainment Television, Fine Living TV Network, Fox, Fuel TV, FX, HGTV, The History Channel, MTV, Nickelodeon, Nick at Nite, PBS, Speed, Spike, Travel Channel, TV Land, VH1 and others.

4. Zune's screen is better for movies.

Apple's tiny screen is so high-quality that people are willing to watch full-length movies on it.The Zune's screen is just as good as the iPod's, but larger. It's so large it must be turned sideways for viewing in "landscape mode." This additional screen real estate makes Zune vastly superior for watching movies and TV shows

5. Zune is actually pretty cool.

The Zune is unlike any product Microsoft has ever shipped. It's actually very nicely designed, surprisingly minimalist and (dare I say it?) "cool." (Zune marketing looks cool, too. The user interface is fluid and appealing -- and, again, like MySpace -- customizable. Users will be able to personalize the Zune interface with photos, "themes," "skins" and custom colors.

So while Apple fans are brimming with confidence that their beloved iPod will continue to vanquish all foes -- including Microsoft's laughable folly -- Apple sees the big picture and is rightly nervous about it.

Even if Apple is able to retain its lead, it could still be hurt -- badly -- by the Zune, which will capture mind share, grab market share and squeeze Apple on pricing.

Apple is scared. And for good reason.

The iPod is the soul of Apple's entire business. Apple has been relatively successful at winning converts from Windows to Mac OS X, for example, in part because its whole product line basks in the glow of iPod's success, hipness and ubiquity.

Apple has recently and preemptively lowered the price of iPods, announced an iTV set-top box -- which will ship later than Vista -- and is probably working feverishly on a bigger-screen, wirelessly enabled iPod.

All these efforts may not be enough to save the iPod from the Microsoft consumer media juggernaut. Microsoft has the money, the clout, the partnerships, the mind share and the market share to drive Vista, Soapbox, Xbox and Zune into lives of hundreds of millions of consumers.

The iPod rules -- for now. But Microsoft can't be dismissed as just another wannabe. And nobody knows that better than Apple.

Mike Elgan is a technology writer and former editor of Windows Magazine. He can be reached at mike.elgan+computerworld@gmail.com or his blog: http://therawfeed.com

Related Blogs and Opinion:

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  •  Mailbag: iPod diehards and Microsoft pricing

  •  Douglas Schweitzer: Will they swoon for Zune?

  •  IT Blogwatch: Zune vs. iPod (and dunking stats.)

Copyright © 2006 IDG Communications, Inc.

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