Microsoft denies demoing 'Ipod killer' to music industry execs

Posted by Scott M. Fulton, III

Redmond (WA) - In a carefully worded response this morning, a Microsoft spokesperson denied his company's participation in a demonstration of a portable music device capable of wireless networking to music industry executives, calling a Bloomberg report on Wednesday and a Associated Press report this morning "speculation and rumors." However, the spokesperson stopped short of denying a demonstration of such a device from someone took place.

"For the stories you are seeing," the spokesperson wrote TG Daily, "they are based on speculation and rumors and, as such, Microsoft didn't participate. We don't have anything to announce at this time."

On Wednesday, Bloomberg reported that Microsoft had hired a music industry executive, Chris Stephenson, to negotiate for rights to distribute digital content over the company's own platform. The news was attached to a report whose headline stated Microsoft is planning to release a branded MP3 player device of its own, with WiFi capabilities, before Christmas. However, many of the substantiating facts in the report appear very similar to a March 2006 blog entry by San Jose Mercury News reporter Dean Takahashi, who has been researching the history of the Xbox 360 and other Microsoft hardware device projects for a forthcoming book.

Takahashi has been right before, particularly with news that Intel was shopping for a buyer for its XScale mobile processor unit.

This morning, the AP cited numerous music industry executives, speaking on condition of anonymity, as saying that they have been briefed on some of the specifications of this Wi-Fi player, with the intention of securing licenses for content. Microsoft's statement this morning denies that the company took part in such a demonstration or briefing.

Last month, stories about Microsoft's having demonstrated an "Ipod killer" in Japan were soundly denied by Microsoft and others. In actuality, the demonstration involved the next generation of digital rights management in Windows Media Player 11, in cooperation with JVC, Toshiba, NTT DoCoMo, iRiver, Creative Labs - long-time Microsoft partners in the development of a platform that might have any chance to compete against Apple's Ipod + Itunes combo. At that time, Microsoft appeared to make it clear that it had a duty to maintain relationships with its current set of WMP partners.

As the story made waves again this week, one BusinessWeek correspondent speculated on the possibility that Microsoft isn't building an "Ipod killer" exactly, but instead planning to seed the market with a device of its own that's compatible with those produced by its Japanese partners. All the excitement around a possible Microsoft "Xplayer," as some have dubbed it, would theoretically boost Creative, iRiver, and Sandisk, all of whom would be producing products for the same software platform which the nameless executives referred to this morning.

A blog posting by Seattle Post-Intelligencer reporter Todd Bishop cites an April 2005 agreement between Microsoft and low-power chip producer Transmeta - the text of which is available publicly - as evidence that Microsoft is indeed producing something, and that this something could very well be completed within the holiday timeframe.

Further evidence comes from the E3 conference two months ago, when Microsoft unveiled its Live Anywhere platform as providing multimedia services to Windows users, Xbox 360 gamers, and Windows Mobile users, and then proceeded to draw an intentionally fuzzy picture of a fourth category to round off the picture. With or without a Microsoft-brand device, Live Anywhere is likely to catapult Microsoft into the role of a Mobile Virtual Network Operator (MVNO) - a company that deploys network services over carriers it doesn't own, or bandwidth it leases from others.

So a plausible picture is emerging, albeit full of "speculation and rumors," of a multimedia software platform being built on WMP 11's DRM technology, but very likely to be integrated into Live Anywhere. It doesn't require speculation to conclude that Live Anywhere will involve Microsoft's Japanese hardware partners; the leap of faith comes with the notion that Microsoft may be building its own WiFi device to help bolster the market for Live Anywhere compatible devices. There are some unresolved issues here: First, why would such a device be demonstrated now to recording industry executives - who historically have not been too hip on the Ipod's existence? The only sensible reason for such a demonstration may be to underscore WMP 11's relatively unbreakable security - to show that an "Xplayer" or WMP 11 device might not be used to circumvent copyright.

To make such a demonstration appealing, it might have to include features the RIAA has indicated it wants to see, such as disabling the ability for users to copy songs from their CDs onto their MP3 players. Nevertheless, it wouldn't make sense for Microsoft not to take part in such a demonstration, unless the company's first priority is to maintain "plausible deniability."

Second, how much would Microsoft be willing to lose to make sure its own portable platform succeeds, but doesn't succeed too much? If Microsoft were to price an "Xplayer" near the price point of Sony's Playstation Portable - where it might have to be in order to make a dent - it could be losing a substantial sum for each unit manufactured. But such a price might also compete too heavily with its own Japanese partners, whose capability to compete would have to be sustained in order for this new platform to survive.

However, if Live Anywhere is to become a major feature of Windows Vista, then continued work on this platform in order to accommodate a new Microsoft device could actually be the reason for Vista's delay in the consumer markets. Remember, Vista will (read: "should") be released as soon as this October to business customers, whose Vista versions would not be needing Live Anywhere; meanwhile, consumers may wait until January or later.

The other unresolved question, though, concerns Apple - specifically, whether this theoretical device from Microsoft and/or its partners would be capable of "killing" not what the Ipod is today, but what it could very likely become. Apple could have plenty of time (or, in fact, could already have had plenty of time, and already used it wisely) to develop a Wi-Fi platform around next generations of Ipod and Itunes. Even if next-generation Ipods are delayed until just before the holidays, Apple would still have enough time to upgrade its service offering, and combat any threat from Microsoft and Japan head-on.