Microsoft announces release date and price, which means Zune will compete directly with Apple’s 30GB iPod.
Microsoft has vowed to put considerable money and effort behind its bid to dethrone Apple Computer’s market-leading iPod, but it would not be using price as a weapon.
Microsoft has recently announced pricing for its new Zune music player, setting the price at $249. The Zune’s price will put it in direct competition with Apple Computer’s latest 30GB iPod, which also costs $249, the company said as it released more details on the device.
Gearing Up for Holiday Rush
Microsoft’s portable music player and its companion online music service will debut on Nov. 14 in the United States, just ahead of the holiday gift-buying rush.
While the Zune products would not be available until the holiday season, Microsoft apparently is trying to draw attention away from Apple’s market dominating iPod player and iTunes store.
While the two companies’ offerings are similar, the Zune includes at least one feature missing from the iPod: the ability to move content wirelessly. Zune users will be able to transfer tunes and photos between devices. Transferred songs, however, can only be played a maximum of three times over three days, unless the person buys it from Microsoft or other supporting music store.
The music service will let people buy songs individually for about 99 cents, the same amount Apple charges for songs from its popular iTunes Music Store. For Zune, Microsoft will use the same payment system as its Xbox Live online video game service, which lets people without credit cards buy prepaid cards at some retail stores.
Microsoft also will offer a Zune Pass subscription service; the device will come preloaded with songs, music videos and film shorts from the store, which will let user’s listen to any of about 2 million songs. “A Zune Pass will cost $14.99 a month or $44.97 for three months.” RealNetworks charges the same monthly fee for its online music subscription service, Rhapsody to Go.
"It is clear that we are not going to see a pricing war at this predictable moment. They are not going to undercut Apple’s prices. But given the lack of volume discount and the screen size and the Wi-Fi capability included on it, $249 is still an aggressive price point," said Michael Gartenberg, research director at JupiterResearch.
Scott Erickson, senior director of product management for Zune, said Microsoft is hoping that people will use the subscription service to seek out music they might not have known about, while also buying some songs outright.
There will also be the option of purchasing individual songs through a system called Microsoft Points. The new Microsoft cash system will work by adding money to an account, as with a prepaid phone card. Points will then be deducted from the account with each purchase. A single song will cost 79 points, "the equivalent of 99 cents," according to Microsoft spokeswoman Kyrsa Dixon.
The point system is already used in the Xbox Live Marketplace, and Microsoft plans to host other online stores where Microsoft points can be redeemed, according to Katy Gentes, product marketing manager for Zune.
Gentes said this system will enable Microsoft to sell retail gift cards of Microsoft points that could then be split over different Microsoft online stores. It will also act as a common global currency for Microsoft products, according to Gentes.
The long-rumored announcement came as little surprise to analysts. Canaccord Adams technology analyst Peter Misek said it is similar to the BlackBerry Pearl; everyone has seen it, looked at it and read reviews. "I really like the Wi-fi capabilities and thought it was creative to share songs and the person who receives it can play it three times over three days," he said. "The tagging system they use is innovative. I like the concept of community."
Misek said the packaging and the product are solid, but he is not sure what the big differentiator is other than the Wi-Fi connectivity. The device will have a 3-inch screen, about a half inch larger than Apple Computer Inc.’s iPod.
Microsoft said Zune software will play files in several popular formats, including the AAC format used by Apple’s iTunes software.
Zune software can automatically import your existing music, pictures and videos from iTunes and Windows Media Player in a variety of formats, including your existing play-lists and song ratings, as permitted by the online service from which it was purchased, Microsoft said in a statement, clarifying in a footnote that the music files must be "in unprotected WMA, MP3, AAC (formats); photos in JPEG; and videos in WMV, MPEG-4, H.264."
A major Apple feature not mentioned in Microsoft’s announcement is the ability to buy movies from iTunes to watch on a PC or Apple Mac, or on the iPod. That means that although songs purchased from the iTunes Store are barred by digital rights management (DRM) restrictions from being moved, songs that were originally ripped from a CD and uploaded to a computer with iTunes software may be able to be copied onto the Zune.
What we tried to do is recognize that consumers have a lot of files that might not be WMA. They have MP3 or AACs because they may have ripped CDs into those files. We want to make it easy for them to bring them into the Zune, if they have the rights. And we just import them as AAC (or MP3) files. They do not change. We are supporting all those different formats and codecs, Gentes said.
Microsoft apparently would not offer movie downloads initially, but such a feature would probably follow in the near future.
Microsoft is entering the online-music market with its own branded products and services as Apple continues to increase market share. The company’s iPod accounts for more than three quarters of the market, according to the NPD Group.
Apple has remained on top despite competing devices from Microsoft partners SanDisk, Creative Labs, Samsung, and others using the software maker’s Windows Media Player. The failure of these companies to make a dent in Apple’s dominance of a multi-billion-dollar market has apparently driven Microsoft to try to do it itself.
While Zune will be starting as the underdog, analysts say Microsoft’s huge cash reserve makes it an immediate threat. The company’s ability to move quickly from the bottom was seen in how it turned the Xbox videogame console into a major competitor of the onetime market dominating Sony PlayStation.
Apple did not immediately respond to a request for comment.
An Uphill Battle
Microsoft has said it plans a major promotional effort for Zune, but analysts say the world’s largest software maker faces an uphill battle against the iPod and iTunes.
Erickson would not provide financial specifics but said the operation would not make money immediately. "In total we would not be making a profit this year, but we will of course work toward becoming a profitable business in the future," he said.
As previously reported, the Zune player will include 30GB of storage, and will come in black, brown and white. It will have wireless capability that lets people share music; play-lists and photos from one Zune to another, and it will feature an FM tuner and a 3-inch LCD screen, another feature not in Apple’s iPod. The Zune will hold 7,500 songs, 25,000 pictures or 100 hours of video, and it will come with a set of earphones, as well as a sync cable and a device sleeve.
“The Zune online store will sell music to own, as well as a subscription service offering unlimited downloads for a flat monthly fee.”
The devices will ship with music and videos preloaded from labels such as DTS, EMI Music’s Astralwerks Records and Virgin Records, Ninja Tune, Playloudrecordings, Quango Music Group, Sub Pop Records and V2/Artemis Records.
Microsoft also released details on the Zune’s three accessory kits.
The $99 Zune Home Pack hooks the device into one’s entertainment system. It includes an A/V output cable, a Zune dock, a wireless remote, a Zune sync cable and an AC adapter. The $99 Zune Travel Pack includes earphones, a Zune dual-connect remote, a gear bag, a sync cable and an AC adapter. For a car, there is $79 kit that comes with a charger and an FM Tuner with AutoSeek.
All of the accessories from the kits will also be sold individually as well. The cables are each priced at about $20. The AC adapter, gear bag, wireless dock remote and wireless dual-connect remote sell for $30 each. The dock and earphones cost $40 each, while the car charger costs $25, and the FM Tuner with AutoSeek costs $69.
All of this means that Microsoft’s marketing department has its work cut out for it, Gartenberg said.
“At the end of the day, it is not going to be price that drives people to Zune,” he said. “It is going to be feature set versus feature set, and form factor versus form factor, and the ability for Microsoft to start marketing this to win the hearts and minds of consumers.”
To preview the product, click here: Microsoft presses play on Zune
Microsoft is also working with accessory manufacturers to offer more goodies for the device. Those companies include Altec Lansing, Belkin Corp., Digital Lifestyle Outfitters, Dual Electronics, Griffin Technology, Harman Kardon and JBL, Integrated Mobile Electronics, Jamo International, Klipsch Audio Technologies, Logitech, Monster Cable Products Inc., Speck, Targus Group International Inc. and VAF Research.
Other hardware manufacturers, including Creative Technology and Samsung Electronics, already offer portable media players that support Microsoft’s software, but they have had little success against Apple.
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