Microsoft Vows To Beat Apple On Price

By David Needle

September 14, 2006

UPDATED: The company says its first Zune device is the start of a new platform.

UPDATED: Calling it the start of a new platform of entertainment devices, Microsoft gave a sneak peek and details of its much-anticipated Zune music player today.

Microsoft  said in a statement Zune is on track to be available "this holiday season."

To put Zune at the top of holiday shopping lists, Microsoft confirmed the Zune's specifications, which have been a poorly kept secret since details started to emerge a few months ago.

Zune includes 30 gigabytes of storage, built-in Wi-Fi connectivity, an FM Tuner and a 3-inch screen. Toshiba is believed to be the manufacturer under contract for Microsoft.
The three shades of Zune.
Source: Microsoft

Zune will come in a choice of three colors: black, brown and white.

A price of $299 has been mentioned on several rumor sites, but after Apple unveiled a 30 GB iPod this week for $249, Microsoft may aim lower.

"We will not be undercut by Apple on price," Matt Dublier, a Microsoft Zune product manager, told

Microsoft emphasized Zune is the start of a new entertainment platform with many more devices to follow.

Also, to distinguish from Apple, Microsoft will let consumers choose whether to purchase music titles or buy a monthly subscription service.

"We believe in offering customers choice," said Dublier. "With an optional Zoom Pass, consumers will be able to subscribe to our entire catalog of music."

Over 2 million tracks are expected to be available at launch, Dublier said.

Along with new hardware, Apple  made several video, TV and movie download announcements this week.

Ironically, while the Zune will feature a screen that is 50 percent bigger than the iPod display, Microsoft seems intent on emphasizing the music side of the business in the early going.

Microsoft said consumers will be able to play video from their PCs on the Zune, but didn't announce any video distribution deals.

In an interview today on CNBC, Bryan Lee, vice-president of Microsoft's entertainment business, said Microsoft will provide more video if consumers ask for it.

Microsoft has to date relied on other companies to build and sell music players using its software, but none of those has made much of a dent in Apple's iPod music player, the dominant force in the market.

Zune will be preloaded with music and videos from record labels including DTS, EMI Music's Astralwerks and Virgin Records, Ninja Turtle, Playloudrecordings, Quango Music Group, Sub Pop Records and V2/Artemis Records.

The Wi-Fi connectivity, while not unique to Zune, is not currently offered by Apple on its iPods.

Microsoft said "Zune-to-Zune" wireless connections will let consumers share full-length sample tracks of select songs, homemade recordings, playlists and pictures.

"The category of digital media players today is fundamentally an isolated experience with your headphones on and no one around," said Dublier. "We're just scratching the surface of what we can offer by way of more social interaction."

Gartner analyst Jon Erensen said Microsoft hopes to tap the growing interest in social networking.

"They have to hope a lot of people buy the Zunes quick and recommend them to friends, because starting from no installed base there's no one to share with," Erensen said.

"As more details emerge, it's going to be interesting to see if they extend the local sharing and let Zune users share songs over the Internet."

Copy protection and digital rights management is a major concern of music publishers who fear the free distribution of music will lead to loss of revenue.

Microsoft said Zune will employ a scheme whereby when a user receives a song from another Zune user, he or she can listen to the full track for up to three times over three days and then have the option to buy it.

Like Apple's iTunes, there will be an online Zune Marketplace for buying music.

Also like Apple, Microsoft hopes to generate a big third party market for peripherals. Altec Lansing, Belkin Harman Kardon, Logitech and several other companies are working on Zune accessories.

Meanwhile, Microsoft itself plans to offer several accessories at launch including: the Zune Car Pack for connecting to car stereos; a Zune Home A/V Pack to integrate the player with home TVs and music speakers; and a Zune Wireless Remote and earphones.

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