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Summary:

So Microsoft is going to get into the music device business – imitating the same “integrated experience” philosophy as Apple has successfully deployed to carve itself a big share of the portable music player and online music business. Devices, the store, and the whole nine yards. […]

So Microsoft is going to get into the music device business – imitating the same “integrated experience” philosophy as Apple has successfully deployed to carve itself a big share of the portable music player and online music business. Devices, the store, and the whole nine yards. Hard drives, wifi, wireless discovery … it is as comprehensive feature set you can get using Microsoft Word’s copy & paste feature. Okay, I am being mean ;-)! (Engadget has the details, so no point in repeating them.

If there is a sense of panic inside Infinite Loop, then Jobs’ army must also be feeling feel vindicated. Their way is the only way to make sense of the inherently complex online world. It might be the start of a long drawn out of war, except this time don’t find expect Apple to be the loser …. just yet.

More on that some other day, but the real and perhaps the only story in the news is that Microsoft’s partners – from device makers to music services – just got double crossed by the company they choose to believe in. I like to call it Zun-ked (a tiny take off on Punked.)


Let me break this down: Zune – the devices, the platform, and the store/service – will compete with everyone from Apple (of course) to Creative Technologies, iRiver, Samsung, Archos, Rhapsody, Napster, Yahoo Music and anyone dumb enough to buy into Microsoft’s visions of Urge, Media Player, PlayForSure etc.

Microsoft could argue that Zune would be unique and those others can still do business. But it is also a classic example of why Microsoft is lumbering bureaucratic morass wrapped in a can of conflicts. A modern day version of medieval fiefdoms, perhaps? Take for instance; Urge, which is built into Windows Vista, and is what I guess you could call an almost integrated experience. What happens to consumers when faced with the choice of Zune or Urge!!! Answer – iPod!

Michael Gartneberg, analyst with Jupiter Research is spot on when he writes at the very end of his analysis,

Early market share, however, isn’t likely to come from disgruntled iPod users looking to switch. The real losers in the short term are likely to be the likes of Creative, iRiver and other former partners that have failed to deliver to market share from Apple and will now find themselves not only competing with Apple but with their former partners from Redmond.

Ironically, this is not the first time those who have chosen to believe in Microsoft have been double-crossed. There was the unceremonious killing of the Smart Display. That had left guys like Samsung in the lurch, especially after spending millions on that. I has posed that question to a visiting team of senior Samsung executives, but never really got an answer.

With Zune, Microsoft might have set a precedent in warning off companies who might want to partner with them in the future. Regardless, the Apple-Microsoft duopoly is an interesting opportunity for rest of the industry to come together and figure out a way to work together on open standards. Unfortunately it is not going to happen, so we will watch this game and see who wins.

  1. I think Steve Jobs has been anticipating this move by Microsoft for a
    long time. An excerpt from an interview given to Newsweek in January,
    2006:

    Question:At the Consumer Electronics Show last week, there didn’t seem
    to be any iPod killers.
    Steve Jobs: The problem is, the PC model doesn’t work in the consumer
    electronics industry, where you’ve got all these companies and some
    does one thing and another does another thing. It just doesn’t work.
    What’s going to happen is that Microsoft is going to have to get into
    the hardware business of making MP3 players. This year. X-player, or
    whatever.

    http://www.msnbc.msn.com/id/10853916/site/newsweek/

    And like Peter Oppenheimer declared in his analyst con call yesterday:
    “We’re not sitting here doing nothing”

    Game on.

    Regards,

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  2. Just another note: the Zune feature list is so typical of Microsoft. Throw in everything except the kitchen sink so they can market it as having X 1 when really all people want is X-7. This is the reason Word is bloated and people only use 20% of the features. Even though Microsoft, Verizon etc. all claim otherwise, convergence is not ready for prime time – all they have to do is listen to the consumers (but, do they?) Finally, I wonder if Creative will sue Microsoft for patent infringements!

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  3. Maybe the partners didn’t do a good job of delivering results. I’d guess that Microsoft wants to ensure that iPod users have a better alternative for a media player that works well with Windows Media Player, Media Center and Xbox 360. Since Apple doesn’t have a media center type offering and doesn’t have an entertainment system surely Microsoft is being reasonable in trying to deliver a good user experience.

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  4. Those partners who weren’t able to deliver their products in sufficient quantity may now get into the lucrative business of manufacturing Zune accessories.

    Bring it on Microsoft!

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  5. Zunk’d is a more obvious spelling. It took iPod a couple if years to catch on. We could use “seamless connected experiences” in a lot of other places, too.

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  6. Michael Foster Saturday, July 22, 2006

    It seems that Microsoft can’t win. People applaud Apple for creating an integrated media experience with iTunes/iPod and laugh at Microsoft in its efforts to compete – ‘Why didn’t Microsoft do what Apple did?’, they say. When Microsoft moves towards a more integrated experience, they get criticized for alienating their media partners. What do you think Microsoft should do, assuming their pre-Zune strategy wasn’t working?

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  7. Toshiba Gigabeat S was a year late to market.

    Creative said that they were not competing with Apple anymore.

    iRiver doesn’t seem to be interested in the American market. Their music players have been too pricey anyway.

    You could also say that MS were been zun-ked by their partners for awhile now. Waiting for Apple to release their next version, would be disastrous.

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  8. Matthew Smith Saturday, July 22, 2006

    Zunked? At least someone is innovating in the dap space. I have been waiting for Apple to add wifi to the ipod for 2 years now. Apple’s latest line – nano, video – was so disappointing that I opted to replace my battery on my mini rather than getting a new player. If Zune can do for the dap what the 360 did for consoles, I would be more than willing to move on. Projects such as last.fm show what a music community can be. Itunes is definately vulnerable too.

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  9. I’m confused, although sadly not suprised. I’m not an Apple ‘fan boy’ or a Microsoft hater but Apple is a Hardware company so it makes sense for them to make a media device albeit not a computer; but Microsoft is a software company (primarily) so why do they insist on getting involved in anything that becomes a success? I don’t see more people using Macs because they have Ipods; most non-technical people I know, wouldn’t know the difference between a Mac and a Pc but they do know that there local PC World (or other High Street Computer shop) doesn’t sell them or if they do that they seem expensive compared to ‘X’ pc so it can hardly hurt there OEM sales. It just shows again (to me) that you can’t afford to do business with Microsoft. Of course sometimes you can’t afford to not either but how many times do they have to do this before there is a major backlash from companies working with each other competitors or not rather than with Microsoft? Again I don’t see Microsoft ever losing its domination due to the general public but surely if they can’t work with other companies that aren’t even competition then perhaps those companies will start looking for partnerships with others (think Linux – Ubuntu or Mac). What would Microsoft do if Sony, Creative et al decided to make systems that worked with Linux or Mac and started to promote those Operating Systems to people? They’re effectively forcing people to consider the possibility

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  10. What gets me is the fact that Microsoft is so astonishingly mortified by the existence of markets it does not dominate. It suffers from an instinctive urge to expand, engulf and devour, like a cancer metastasizing to nearby organs – and that’s bound to be its downfall sooner or later.

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  11. Om, I love your blog but my offer to become your GigaOm proofreader/editor still stands – especially after reading this article. You MUST get some proofreading up in this piece.

    I’m in Manhattan (and sometimes Palo Alto) so call me, m’kay?

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  12. This gives music labels (and perchance even movie studios) a potentially second major player in this field, thereby weakening Apple’s negotiating power in the future if Microsoft somehow manages to get any market share from Apple.

    Microsoft has quite the uphill battle in front of itself, since it has to absolutely outmarket Apple in the consumer space. Judging by the loss generated by the XBox division in their attempts to sell their console to the masses, I’d say they are creating yet another major money pit that will generate neglible revenue. On the bright side of it all, at least the media outlets of the world will have better quarters thanks to Microsoft and their ability to throw money down the toilet at will.

    Imagine Microsoft attempting to market their new fangled music player in Japan where a used XBox 360 sells for less than a used Nintendo Gameboy DS. They would be lucky to sell over 10,000 of these players in Japan unless, of course, they forced all the Microsoft Japan employees to buy one.

    It’s time for Steve Ballmer to retire chair throwing arm and step down in failure.

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  13. Wow Om, you really suck. First, I didn’t know you were that bad at English. Use a spell checker or something.

    Second, what the hell is wrong with you that you would be so anti-Microsoft, ESPECIALLY in this case??? They OBVIOUSLY are tired of the failed attempts their partners have made and decided it was time to do it themselves.

    The partners had their chance. Microsoft is in NO WAY double-crossing, back-stabbing, or screwing their partners you effing moron.

    I can’t believe anyone listens to your crap anymore. Put up another ad space why don’t ya.

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  14. You’re right about working with Microsoft! Reminds me of an old Chinese proverb: “Those who foolishly seek power by riding the back of the tiger, often end up inside.”.

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  15. Joseph,

    thanks for the offer. you are right. i needed to proof read it before posting. error is regretted. i went ahead and did as told.

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  16. JustAnotherEXSupporter,

    I apologize for letting you down. No excuse. I think if you look at the piece, I am merely raising the questions which are going around in the device maker circles.

    I don’t hate Microsoft, and there is no reason to. Its some questions about their strategy I pose. Anyway I am equally harsh on Apple, Google and including myself.

    I am sorry for the spelling errors. Will try and not make the same mistakes twice.

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  17. You’re kidding right? You’re seriously going to try to spin the above post as “raising questions”!?

    You’re flat out saying that Microsoft is screwing its current partners, has screwed its past partners, and are implying that it will screw its future partners.

    The only precedent that Microsoft has set (if you really want to read into this whole thing too deeply), is that if, as a partner, you allow the competitor you were supposed to crush maintain the majority share of a nascent market, you are going to get dropped.

    I’m done increasing your pageviews. You don’t deserve it.

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  18. @Ken, unless you were joking, that was a really silly statement. If creative, Samsung etc, are fine just making accessoties, why wudnt they make them for the iPod, which has a massive installed base already.

    @JanSolo, No one is saying that MS is being evil, just that partners must be careful partnering with MS in consumer spaces. If Jobs is indeed right, and being complete end to end providers is indeed the way to win the consumer devices market, then in the future, it might not be bright to partner with MS on other PlayForSure like initiatives. E.g. Windows Media Center Edition might be another space that something similar could potentially happen.

    @Matthew, I really dont get this craze for wifi. There is no point synchronizing through wifi, because you have to be close enough where you can just plug it in, and the speeds are dramatically slower. The only way it might be useful, if MS creates a itunes Shared music like interface, where you can listen to music on someone else’s Zune, while on the go. That would be really cool, but wouldn’t that really hurt batter life?

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  19. JustAnotherExSupporter,

    if competing with your partners by selling a device and operating your own store is not giving them the shaft then what is.

    what i don’t understand is why they would do this when they actually have a wonderful and highly integrated experience with urge in windows vista.

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  20. no where in the press release they say that it will not work with urge. we do not have the complete facts yet and it is bad to critize without knowing everything.
    They are not going to be dropping any development or support for windows media technologies, playsforsure etc.. These two products come from 2 different divisions. U never commented on Apple when they started introducing iPod accessories (FM transmitter..etc.) taking business away from its partners Griffin..

    Please remember everyone (Apple/Microsoft) are here to do business and not run charities…

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  21. Jesus! Maybe you should run your articles by a grammar checker (ironically, MS Word has one) before posting.

    Even me, who didn’t start learning English until I was 16 couldn’t read through this mess.

    How the hell did you get on Digg’s homepage?

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  22. Honestly, this is bad spin – yes, short term Creative et al have to compete with MS. However, if MS grows the non-iPod market, then the vendors will see big sales boosts. Microsoft is basically saying “look, we gave you your chance. Obviously you need more help – here.” MS will come out with one or two mp3 players, give the non-iPod market a boost (if that’s even possible – iPod owns the market for a reason, and that’s the UI), then step out.

    Currently, MS has conceded the market. Nobody cares about Plays For Sure, nobody cares about Microsoft MP3 player support, they all want iPods. This is their attempt to try and get some market share, but mostly to get Mind-Share.

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  23. Just to let you know, your article sucked major arse. And I have a lil less faith on digg diggers as of now…

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  24. @Carlos B– “Even me, who didn’t start learning English until I was 16 couldn’t read through this mess.”

    If you want to complain about someone’s grammar, you may wish to correct your own first.

    It’s “Even I” not “Even me”.

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  25. interesting observation om, I’m a big fan of your writing style.

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  26. how funny… so it took Microsoft to figure out how to make a nearly identical copy of the ipod? Their partners somehow couldnt figure that out? As for features, go ahead and add them…great, but if you cant execute on usability, then whats the point?

    I point you to the Treo 700w. Looks like the Treo 700p, but cannot be operated with one thumb, as the 700p can. Requires more clicking and menu navigation for basic tasks. Overall, not nearly as usable as the Palm version. Now, yes, that was a Palm device, but my point is just having a look-a-like doesnt mean squat. And it just reinforces the perception that MS cant innovate.

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  27. Focusing on the hardware is only one part of the story.

    Don’t forget the likes of rhapsody, napster, yahoo music, & others that are being left out of the party! It’s sad but they should have known better.

    “The service and device will not be PlaysForSure compliant, meaning you will not be able to use your Zune player with Napster or Vongo, for example.”

    Hopefully they’ll be able to switch to MP3 one day, as Yahoo is already out trying to push for! (I think they just realized that they are screwed if they stick with playsforsure)
    http://ymusicblog.com/blog/2006/07/19/buy-a-customized-jessica-simpson-mp3-at-yahoo-music/

    Maybe the major music labels will wake up and realize that the only companies DRM is helping are Apple and Microsoft.

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  28. Michael Griffiths Sunday, July 23, 2006

    This time, your spin is way over the top.

    You are, as far as I can see, using Zune to bash Microsoft and label it as anti-partner.

    I believe attempts at explaining the move, and looking at its potential impact on the market, would be both more useful and more in line with your blog content.

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  29. I am sorry – do you know of any company that has been successful partnering with Microsoft in the longer term?

    Many software product companies have come to believe that Microsoft will partner with them only till such time they roll the features of your product into theirs. There are no safe “white spaces” that Microsoft will promise to leave to partners.

    An uncharitable view is that larger companies will “partner” till the feature sets and demand for a new product are established. During this time multiple “partners” will jockey with each other to refine the product. A lucky one may get acquired – others will be left in the lurch.

    Such is life in the big city – but next time a big company calls for a partnership don’t let the euphoria stand in the way of a full analysis of the consequences, and your ability to make money from this partnership in the short term

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  30. So the question is what else could MS have done instead of competing (Zune) with its partners?

    MS could’ve made sure that PlaysforSure worked 99% of the time by sending more resources (staff) to its partners. MS could’ve built a better WMP and delivered it sooner. MS could’ve made WMP work better with player software – they could’ve developed a more comprehensive player software for their partners to use (or not). There were lots of possible things MS could’ve done, but chose not to. And now, how much effort will MS spend on PlaysforSure and such for those “loser hardware companies” now that Zune is here? (Answer this without being a fanboy either way.)

    But the real reason MS is entering this device market is that it has occurred to them that the iPod is expanding beyond music/video to other things and aiming to become everything a pocketable, mobile device can reasonably be. This is evidenced by the Nike iPod kit and by Jobs statements at that intro. This is a threat as the mobile market becomes as important if not more so than the desktop.

    Origami, MS’ previous platform entry for this mobile space, has proven to be a smashing success, uh, no, failure, because it is too big (not pocketable), too pricey, wrong feature set, bad UI, whatever, and the big boys refuse to make Origami devices. The PDA, which MS has tried to dominate with Windows Mobile, is stagnant, and not evolving into this space. And the Smartphone, MS’ other leg, is still a possibility, except that MS knows Apple is evolving the iPod with communications capabilities (iPhone?). And none of the phone makers is moving quickly enough in the other direction.

    Read between the lines on both sides, guys. Note Apple’s many mentions of “product pipeline”, and the timing of this “Zune email” following Apple’s “we’re not sitting around doing nothing”.

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  31. Lousy analysis mate. How are MS screwing their partners exactly?
    Is it by only allowing them half a decade to compete with Apple so that at the current time ‘only’ 9 out of 10 players still have an Apple logo on them?

    MS partners screwed themselves by being fundamentally incapable of competing. David and Goliath is a fairy story. If you want to stomp on Goliath, call in Goliaths bigger brother.

    Same applies to the software/media side of the equation. Apple has no meaningful competition and its far from perfect or well priced. MS are giving us meaningful choice which, in this market at least, will be a novelty.

    Good luck to them. Zune sounds refreshing to me.

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  32. “Making money from the MicroSoft platform is a bit like picking up pennies and nickles in the path of a steamroller: you will make a bit of money, but only until you are squashed.” – anon

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  33. Tim Anderson Monday, July 24, 2006

    anyone dumb enough to buy into Microsoft’s visions of
    Urge, Media Player, PlayForSure etc

    Hmmm, what about anyone foolish enough to buy into Apple’s lock-in? Is that OK then?

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  34. Found the following paper from Microsoft on a zune type device. It may answer two questions. Why zune has wireless and why it may have a DRM not compatible with other DRMs.

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  35. Forgot to put the link to the paper at the right place.

    http://web.cs.wpi.edu/~claypool/nossdav06/pdf/kirovski.pdf

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  36. Does anyone know when the Zune development started? or when the Offline
    Economies for Digital Media paper was composed? Thanks

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  37. [...] on history (i.e. MP3 player market), expect a Microsoft/Zune branded MCE (XBOX 360 TV ambitions notwithstanding) followed by [...]

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  38. [...] is a big company, one that must grow by expanding into new markets, thereby competing with its one-time partners. Today, Dell serves a complementary market to Microsoft. Tomorrow? Well, everything is on the table [...]

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  39. [...] is a big company, one that must grow by expanding into new markets, thereby competing with its one-time partners. Today, Dell serves a complementary market to Microsoft. Tomorrow? Well, everything is on the table [...]

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