While the Zune products won't 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 long-rumored announcement came as little surprise to analysts. Canaccord Adams technology analyst Peter Misek said it's 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 to 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's 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.
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. Microsoft apparently won't 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 reserves 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.
The Zune player will include 30GB of storage, a 3-inch screen and a built-in FM tuner, another feature not in Apple's iPod. 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 is also offering accessories such as a car pack for playing and charging the Zune on the road, and a home audio/visual pack to integrate Zune with a TV and music speakers. Other accessories include premium earphones, a gear bag and AC adapter.
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.
TechWeb's Laurie Sullivan contributed to this report.