Microsoft revealed the obvious, late last week, when they announced their intentions of entering the handheld entertainment market with products under a brand named “Zune.” The Zune brand is expected to be introduced next month with products hitting stores by October or November. More products will be in stores in 2007.
This will not be a surprise by any measure to anyone who has been even browsing the news lately. The words “iPod killer” and Microsoft have been linked for the past few weeks and have now finally formed into a confirmed reality.
Though major details concerning the functionalities of these handheld devices have not been confirmed, there have been many murmurs of what could be, and will likely be the key features for the Zune products.
All indications are pointing to a music player being the first product to leave the stables of Microsoft’s Entertainment & Devices Division. A digital music service is also expected to be integrated with this music player. The handheld device is rumored to have WiFi functionality, allowing users to buy music without having to connect to a nearby computer, which could be a key advantage over the iPod’s current configuration. The device is also expected to be able to play videos.
There are those who are saying that Microsoft is aiming to create a mutual sharing experience with this handheld music player, which would enable users to show others’ their playlists and recommend music to them.
“Under the Zune brand, Microsoft will build a community for connecting with others to discover new music and entertainment,” said Microsoft in a statement.
About seven or eight Zune products are expected, including a handheld gaming device, which will all be drive- and WiFi-based.
“If you think about the strategy here, it’s really one where they’re trying to overwhelm Apple. Think of it as a flanking move. The caveat here is Apple’s gotta see this coming,” said Rob Enderle, principal analyst at The Enderle Group.
He continued by saying “What makes this market attractive to Microsoft is Microsoft doesn’t appear to be trendy in any sector. One reason their stock is trading down is because no one is excited about the company. You need something that excites people, and that won’t be Windows any time soon.”
The challenges facing Microsoft and its line of Zune products are obvious. It seems improbable that Microsoft, or anyone for that matter, could attain the brand power that Apple has achieved with iPod. But Jupiter Research analyst Michael Gartenberg points out that “When Microsoft decides to enter a market, you cannot ignore the impact it will make.”
He added that “It is likely that by force of will, and spending lots of money on marketing with a high cost of acquisition on new users, they will capture some market share.”
There are still those who doubt that Microsoft can will Zune into any kind of leverage. Carl Howe, analyst at Blackfriars Communications, points out that “Microsoft spent in excess of $10bn on MSN, and it has not really made a dent in Yahoo or AOL.”
Howe added, “And it’s working on similar results with Xbox 360, where it lost $1.3bn last year promoting a platform on which it loses more money the more units it sells. Now we know why Microsoft notified Wall Street that it was going to be spending more money this year. This program has red ink written all over it.”
Regardless of analyst outlooks, this move seems just about as much a necessity as a pursuit of an opportunity for Microsoft.
Michael Gartenberg at Jupiter Communications says that “I’m not surprised [Microsoft] decided to do this because the problem isn’t just the iPod. It’s that Apple controls a key point in the digital home. The customers flow to Apple, and that isn’t good for Microsoft’s ambitions.”
Apple did not immediately respond to these developments.
Sources:
http://www.internetnews.com/wireless/article.php/3621896
http://www.mercurynews.com/mld/mercurynews/business/
15099294.htm
http://www.vnunet.com/vnunet/news/2160939/analyst-reaction
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