Tuesday, September 09, 2008

The new Zune / iPod Battle

There have been some interesting developments in the digital music player market this week. First, Microsoft trumped Steve Jobs by announcing some updates to its Zune device and software. Then today, Apple announced the updates to the iPod and iTunes products.

Before we consider this week’s developments, let’s review the long and treacherous path of the Zune.

Back in November 2006, Microsoft released its first Digital Music Player, the Zune. Some who had grown tired of Apple’s dominance were excited to see what Microsoft had up its sleeve.

Along with the device, Microsoft also launched the Zune Marketplace, an online store offering 3 million tracks (compared to iTunes’ 6 million at the time) and a subscription model offering unlimited downloads for a fixed price of $14.99 per month. iTunes still does not offer subscription music.

The device was released, and mocked. It was a 30GB hard disk device that came in white, black and brown(?). The original Zune was based on the Toshiba Gigabeat device, and was not designed or built by Microsoft. It was also just a bit smaller and lighter than a brick.

The desktop software used to shop the Marketplace and sync the Zune was awful. It was dark, gloomy and buggy. The Zune didn’t have support for podcasts or audiobooks. And the Marketplace did not offer any video content, even though the Zune player was capable of playing videos.

The Zune’s tag line, “Welcome to the Social” was confusing, but indicated where Microsoft wanted to go with their music player. The original Zune included wireless networking capabilities that held promise for all kinds of exciting features. Unfortunately, the first Zune only used the wireless to send songs to other Zune devices. There were several problems with this. If you could find another person with a Zune (unlikely), the tracks were time-bombed and could only be listened to 3 times in 3 days.

The Zune also included an FM tuner, something that seemed somewhat worthless at the time. Even today, there is no iPod model that offers an on-board FM tuner.

Needless to say, the first Zune was a flop. The Apple fans enjoyed ridiculing Microsoft for their failure. It was obvious that the device and supporting software were quickly cobbled together and released before it was ready. In fact, some reports said that Microsoft’s Zune came together from idea to product in just 10 months. Many felt that Microsoft was losing too much money on Zune and would soon give up on the project.

Instead, Microsoft kept fighting. One year after the original Zune release, Microsoft released a new Zune. This device, designed and built from the ground up by Microsoft, was much thinner, featured touchpad navigation, and 80 GB of storage. Microsoft also released smaller, flash-based players of 4GB and 8GB. The desktop software was rebuilt from the ground up and was a vast improvement over the old software. The new software is bright, lively and very easy to use.

More importantly, Microsoft’s strategy of music sharing and collaboration began to take shape. The “Social” became a way for Zune users to share their music tastes with others. Zune users could place a “Zune Card” in their Facebook or MySpace page showing others what they’ve been listening to.

Also, Microsoft began offering video content on the Zune Marketplace, including NBC shows, which had disappeared from iTunes. The 2.0 version of the Zune finally introduced native podcast support.

Another six months later, Zune introduced the ability to “subscribe” to friends. My friend John has a Zune, and I can subscribe to John, which means I can see what he’s been listening to and, using my Zune Pass subscription, his favorite songs could be automatically downloaded to my Zune.

The wireless capability of the Zune device was finally put to good use in the 2.0 version of the hardware. The device can now sync to the PC wirelessly, without the need to dock the device.

With the new, thinner large capacity device and the flash-based device, Microsoft started making some inroads in the DMP market. Of course, Apple still dominates, but Microsoft is showing that the Zune is indeed a long term project for them.

Meanwhile, Apple made a big splash with its iPhone/iPod Touch devices. The Touch also includes wireless networking, and Apple put it to good use by allowing users to shop and buy songs from iTunes right on the device. But at as much as $500 for the 32GB version, the Touch was still overpriced for many folks.

Now, in the fall of 2008, the crossroads may finally be nearing. No, Zune isn’t anywhere close to the iPod in terms of market share, but in terms of features and capabilities, the Zune may be poised to surpass the iPod/iTunes dynasty.

On Monday, Microsoft officially announced its new Zune devices and software updates. Microsoft will offer a 120GB hard disk device, as well as a new blue 16GB flash device. The device itself is largely unchanged other than some cosmetic differences.

The big news on the Zune front is the software updates.

The wireless capability is now expanded to allow the device to connect to wireless hot spots, not just your home network for syncing purposes.

A few of the features that are differentiating the Zune include Buy from FM, and Buy from the Cloud.
Remember that Zune offers a subscription that allows for unlimited downloads for a flat monthly fee when you consider these features.

That FM tuner is finally going to get some good use. When listening to the FM tuner on your Zune (and connected to a Wi-Fi hot spot), you can simply click the Zune Pad to find and download whatever song you happen to be hearing on the radio. If you aren’t connected at the time, the song will be queued up so that you can download the song the next time you connect to the Zune Marketplace.

You will also be able to connect to the Zune Marketplace directly on the Zune device. You can browse the current top songs and albums, or search for a song, album or artist using the on-screen keypad. When you find a song you want, you can either download it directly to your Zune, or stream the song to listen to it without adding it to your collection.

These two features, combined with the Zune Pass subscription, make the Zune a powerful music finding device.

Zune 3.0 will also introduce even more features to allow for sharing of music with your friends. The Zune will feature Channels – playlists developed by the music editors at Zune tailored to your musical taste – as well as dynamic playlists that are generated and downloaded automatically based on your (or your friends’) listening habits.

All of these new features were announced by Microsoft on Monday in a simple press release. No big event or hype. The new software will be available for download on Sept. 16.

On Tuesday, Steve Jobs put on a grand event to announce the new features and hardware for iPod. For many, the announcement was a bit of a let down.

The rumored iTunes subscription was just that: a rumor. iTunes will now feature a “Genius” that can build dynamic playlists like the Zune. The iPod Nano’s new form is back to its old form, but will include accelerometers to automatically transition from portrait to landscape, as well as a “shake to shuffle” feature. There will be a new 120GB iPod Classic, and the Touch will be available at a lower price. Apple and NBC made up, and NBC shows will again be available on iTunes as well as Zune.

So Tuesday’s iPod announcements didn’t quite deliver the goods that some were hoping for.

While Apple is doing enough to stay on top of the market, could it be that Microsoft is doing enough to gain on the leader?


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