Zune zooms out to retailers across the country

Posted by Wolfgang Gruener

Redmond (WA) - Officially kicking into gear in the one product area where Apple has a dwarfing advantage over Microsoft, the software giant today prepared to cut the ribbon on its Zune portable media player, which will officially launch tomorrow. As a late entrant to a market with a high rate of product failure, Microsoft has a lot of work to do.

See the Microsoft Zune in detail here ...

The 30 GB Zune is set at a retail price of $250, which is exactly as much you would pay for a 30 GB iPod video. According to Microsoft, the player is is now available at close to 30,000 stores. The device is available in black, brown, and white. Sony BMG, Warner Music Group, and EMI Music have all signed on for the Zune Marketplace - the location where Zune owners will be able to buy music for their player. Universal Music Group has also pledged support for Microsoft's new platform, but required the software company to give them a cut of the money from every Zune that's sold.

The Zune has a three-inch LCD screen, which can be viewed in landscape or portrait mode. It will also be able to share content between players via a somewhat crippled Wi-Fi communication feature.

Microsoft enjoys nearly unquestioned supremacy in the fields of operating systems, business software, and its Internet browser. Its climb to the top of the rankings in the world of MP3 players, however, is going to be a Mission Impossible undertaking. Even before its debut, the deck began being stacked against the Zune. Early product reviews strike down the device as well as the Zune Marketplace, for both technical and practical faults. The fake scroll wheel, for example, which looks just like the iPod's user-friendly control panel, represents just four directional buttons.

The design of the Zune also remains controversial, it isn't the most compact design (in fact, it's very clunky), there are numerous other players out there which are more pleasing to the eye and it will remain a mystery why Microsoft felt compelled to offer a brown version of the device.

Also, the Zune Marketplace, which is Microsoft's version of iTunes, has a convoluted price scheme that may be off-putting to some. Song downloads from the online store will cost 79 Microsoft Points, which makes them look cheaper than iTunes downloads; but instead, the dollar-to-point structure is such that 79 points is equal to 99 cents, the same as an iTunes song. Additionally, users have to purchase Microsoft Points in increments of $5. So, unlike iTunes, where users can just buy a single song for 99 cents, Zune customers are forced to purchase at least $5 in credit before they can get one song.

Wi-Fi integration could have become one of the most striking and convincing features of the Zune, but transfer of files and especially the "social" component - which is promoted by Microsoft as one of the devices biggest advantages - is not quite what potential Zune buyers were hoping for. Wireless sharing of music is limited to listening three times to a song you do not own. After that, you'll have to buy that song.

Microsoft already knows that it won't dent iPod sales this Christmas season, but subjectively and objectively, Zune appears to be an unusually weak entry into the MP3 player market at this time. The device lacks the style and identity we have come to expect from a portable music player. But then, Microsoft's debut in this market isn't that unusual, if we look at the big picture.

A chronology of the MP3 player

There's a long-standing history of IT companies failing at providing consumer electronics that are outside of their normal realm of products and services. In fact, the entire market is full of controversy, legal problems, and massive washouts.

The device credited with being the first portable MP3 player is the MPMan F10 from Korean manufacturer SaeHan Information Systems (and brought to the US by Eiger Labs), which had an internal memory of 32 MB, and sold for $250, or $327 for a 64 MB version. What most techies remember as the first digital audio player (DAP), though, is the Rio PMP300 from Diamond Multimedia. Released soon after the MPMan F10, the first Rio player was just a little bit smaller and significantly more functional and visually more appealing than its predecessor.

The PMP300 became the first MP3 player with user-expandable memory, incorporating a card slot for the now defunct SmartMedia format. With 32 MB of built-in memory and support for SmartMedia cards of only up to 32 MB, the maximum capacity for the base model was still just 64 MB. The Rio also sold as a 64 MB model, which could then be expanded to 96 MB through SmartMedia. It also had computer connectivity through a parallel port connection, before USB became the defining universal standard. It retailed for $200 for the 32 MB version, and $250 for 64 MB.

The Rio also set the tone for years to come when the Recording Industry Association of America (RIAA) filed a lawsuit against the maker of the device, alleging that it violated the Audio Home Recording Act of 1992. Rio won the suit, but the RIAA has continued throwing legal action at organizations involved in the digital music market, especially with the advent of peer-to-peer applications, which draw their history back to outlets like USENET and Hotline Connect, though the industry was more famously brought down to its knees when Napster really cracked open the can of worms in 1999.

On October 23, 2001, Apple threw its hat into the ring by introducing the first two iPod models, sporting almost unmatched internal hard drives of 5 GB and 10 GB, and selling for $400 and $500, respectively. With its innovative control wheel design and simplicity of connection and transfer to the iTunes digital music store, it quickly became a hit among music enthusiasts, eventually racking up 90% of the hard drive-based MP3 players on the market.

The first generation iPod

Just months earlier, though, Intel decided to give the MP3 player idea a shot, and the IT giant released the Pocket Concert player, which sold for $350 and was one of the first to include 128 MB of flash memory, which reviewers at the time said could hold "a ton of music." In spite of being critically acclaimed, with a sporty design and a cool-looking docking station, few people outside the audiophile circle ever even heard of it, and it quickly died off.

Creative Technology was another company in the bushes when the iPod came out, having dabbled in the MP3 player market a little bit previously, but seeing the success of the iPod, tried to monopolize on consumer demand and launched a set of Creative Zen digital audio players. It didn't achieve anywhere near the prowess in the market that it wanted, with stock prices continuing to drop. To save face, in May of this year, Creative sued Apple for copyright infringement over specific technical details of MP3 player hardware and design. Apple ended up settling by paying $100 million to Creative, but the few Creative players in circulation still have a very small presence in the overall market.

One company that has been able to maintain a small but steady hold on the MP3 player market, alongside Apple, is Iriver. The PMP maker has several products that have digital video displays that are more suited for widescreen video playback than the iPod Video models. Iriver holds about 3.5% market share, but it does not offer anything to help raise that number.

However, the biggest competition against Apple is currently Sandisk, whose line of Sansa flash memory-based line of MP3 players is the #2 selling series of digital music players. Prices for these stylish players are relatively low, while the device are providing a somewhat open platform and are geared towards the casual music fan.

At least for now, it is still unclear where Zune could find its place.