Media battle picks up momentum

09 Oct 2006

When a video mocking Microsoft's attempts to create a music player was posted on YouTube a few months back, it appeared to be a classic viral attack on the software giant.

The ad for the 'Human Ear iPod Pro' skewered Microsoft's bureaucratic product development and over-featured software - exactly the kind of message Apple has been spreading about its rival for years.

But in truth the ad came from Microsoft itself as a way of laughing off its critics as well as showing that the big guys at Redmond have a sense of humor too.

It's not what we expect from Microsoft, but perhaps a little of what Microsoft needs. Ironically for a company with one of the world's most recognized brands and a half a billion-odd users, it's never been much of a consumer company.

In the telecom space we have witnessed Microsoft's glacial progress in the handset and OS business. It has won about 6% of the smartphone market, signing up some A-list operator and vendor partners on the way, but it's still an uphill climb.

Now the Zune music player is about to land. It's due out for the Christmas season at price points yet to be disclosed.

In many ways it is a bog standard device, made by Toshiba, with 30GB memory (about 7,500 songs), video and FM capability and at 158g slightly heavier than the 136g iPod.

Its one innovation is a wireless (Wi-Fi) capability that allows users to share music. It's a great idea, but extremely limited. Only music bought through the Zune store, and only up to three days or three plays, can be transferred. Music ripped from CDs remains out of bounds.

Digital home strategy
On the surface, there's not a lot to excite consumers here. Indeed, given that most owners of MP3 players don't buy any digital music, which in turn accounts for just 6% of the music market, it's hardly exciting for Microsoft.

But this is not about the music player, but the whole home networking and media business.
As Jupiter Media analyst Mark Mulligan told the Guardian, 'At a strategic level, [Microsoft is] probably not that concerned at making revenue from music"&brkbar; but the problem is that Apple is beginning to squeeze into Microsoft's digital home strategy.'

Part of Microsoft's strategy has been to get into the IPTV set-top box, using its partnership with Alcatel to hook up carrier customers. Another part has been to be the brains of the home media network, seamlessly linking the TV, PC and other devices.

Apple is attacking this from two directions. One is the content side, adding a video download service to its online store. iTunes is just completing its first year of Disney movie downloads, with the studio forecasting $50 million in revenue and seeing no impact on the movie and DVD sales.

That content range is being expanded and naturally gives consumers a reason for choosing iTunes and also the iTunes set-top box, which the company recently offered a preview.

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