With an upgraded Zune player and a new strategy for tapping the strength of social networking sites, Microsoft is making serious moves to challenge the iPod.
The company is attacking what it sees as Apple's weaknesses. Zune's hardware and subscription service are still big pieces of the puzzle, but Microsoft's new goal is to follow users wherever they go, from cellphones to social networks.
To that end, Microsoft has invested in Facebook, acquired key technology companies, licensed the Zune store to cellphone carriers and embraced the music widget concept with its Smart Card program.
"Microsoft stands a chance against Apple" in the long-term effort to woo gadget fans, said IDC analyst Susan Kevorkian in an e-mail. "The newly redeveloped Zune platform gives (Microsoft) a strong point of departure."
If this strategy sounds familiar, it should -- it's essentially the same method Microsoft used to conquer the desktop marketplace: licensing technology to third-party companies. In contrast, Apple, its fleeting dalliance with Motorola aside, is mostly sticking to its old, sandboxed ways. The company makes all the hardware and software that works with iTunes and its Mac operating system, and hasn't bothered to create iTunes widgets for increasingly popular social networks. Microsoft, perhaps correctly, sees these openings as ways to increase Zune's market share.
The most ballyhooed (and misunderstood) feature of the first Zunes was their wireless music sharing feature, which ran aground after owners noticed there was no one around to share with.
With the new Zunes released Tuesday, Microsoft has moved "the social" back where it belongs: other companies' social networks. Users of the free Zune software can embed a widget that shows their most recent, most frequently played and favorite tracks on Facebook, MySpace and so on -- wherever HTML is used.
Microsoft also sees a significant opportunity in the area of cellphones, since Apple, with its focus on the iPhone, is unlikely to concentrate on licensing iTunes to cellphone carriers. Microsoft is in the process of acquiring Musiwave, a company that created music services for Vodaphone and Orange in Europe. By combining Musiwave's technology with the Zune store, Microsoft will be able to offer domestic carriers private-labeled versions of the store, according to Chris Stephenson, Microsoft's general manager of global marketing for Zune.
Then there's the video vacuum in Apple's latest lineup of iPods, which lacks a device with a large screen that can hold a lot of video. And, perhaps because Apple has been courting television and film studios to sell their music through iTunes, the iPod maker refuses to give users an easy way to record the television signal they're already paying for, and load those shows onto their portable players.
Microsoft failed to integrate the playback of Media Center files into the first edition of the Zune, but upgraded software now transcodes Windows Media Center videos directly onto the new players, so users can add recorded television programs to their Zunes for free. Stephenson sees another opening in the Zune's sleek interface: He said he thinks Apple was too focused on the iPhone when it designed its new split-screen iPod interface, which he called "absolutely appalling."
Microsoft's recent acquisition of Avenue A Razorfish, should help Redmond further refine the Zune brand, Stephenson said, making it more attractive both to Zune owners and cellphone carriers.