Microsoft exec talks about the Zune

Troy Wolverton and Dean Takahashi
San Jose Mercury News

SAN JOSE, Calif. - One thing you can say about Robbie Bach: He certainly likes a challenge.

As president of Microsoft's entertainment and devices division, he's leading the charge against the iPod, one of the most popular devices in recent memory. And how's he going about it? With what some might call a muddy brown brick.

Bach's team today is debuting the Zune, Microsoft's answer to Apple Computer's iPod-iTunes combination that dominates the digital music business. He thinks the company can be a serious threat to Apple by offering a similar all-in-one service with a few tweaks. The Zune adds a wireless antenna, for instance, and a unique color (that's where the brown comes in).

But Bach's record - and Microsoft's - is mixed at best. His division runs the company's Xbox effort, which has sold millions of game consoles - and racked up billions of dollars in losses. Meanwhile, the company's earlier music effort - dubbed PlaysForSure - was routed by Apple in the marketplace.

With Zune, Bach and Microsoft are hoping for better results. We talked with Bach last week in San Francisco about how they plan to get there.

Q: Why choose this market when you could have built, say, a handheld game device?

A: When we looked at it, we said, "Hey ... that's a significant marketplace. It's a high priority, given the momentum that Apple has. And this is something that we need to get after right away."

I need the people who are focused on gaming to focus on Xbox 360. Anything I do to distract those guys is probably a bad thing.

Q: Why does Microsoft see the iPod as a threat?

A: The future of my business (is) connected entertainment. And the concepts that digital media bring to that are super powerful and are (essential) to our growth. Without having a play in the music space, it would be tough to deliver on that.

Q: Does the Zune effort mean you think PlaysForSure was a failure?

A: We're going to continue working on PlaysForSure. All the support and resource work we do will continue to be available for people, because there is a market for that. And there is a group of both companies and customers who appreciate that kind of flexibility where choice matters. (It) scores high on their list of features.

Was it in our view sufficient to only do that? Obviously, the choice we made was no.

Q: Why make Zune incompatible with PlaysForSure?

A: Our goal was to create something that produced that singular experience that could compete more head-to-head with the type of singular experience that Apple creates. And to do that, you have to make trade-offs.

Q: Is there going to be a game version of the Zune?

A: Right now, we're really focused on music. I haven't shipped unit one of the music player, so let me get that marketplace, and prove we can do that before I worry too much about the next set of things.

Q: How many Zunes do you expect to ship this holiday season?

A: It's not something we're talking about.

Everybody should recognize we're shipping in the U.S. only, and we're shipping at one price point in what is a many-price-point category overall. We're (in) a nice category, and we'll get some reasonable share. ... But if you took the grand total of the MP3 market, it's almost a certainty that we'll be a small percentage this holiday.

Q: What would constitute a success for you this holiday season?

A: We want to come out of the holiday with people recognizing that we're going to be a serious competitor to Apple and to iPod.

Q: Where do you think you'll have an advantage over Apple?

A: You can see some of the hypotheses in what we're doing. We think the idea of Zune as a social device, and as a way for people to share and build community is important.

They compete with their own retailers. Their relationships with the ... content community has been ... mixed.

We want to help the ecosystem. Our theory is if the pie gets bigger and the ecosystem does better, we're going to benefit.

Q: You can't do a lot with Zune's wireless feature. While the Zune will play video, you aren't selling movies or TV shows through the Zune store. Why launch this effort now if it resembles, in some ways, a typical, half-baked 1.0 Microsoft product?

A: It's not like 1.0 is not good. 1.0 is a good device, it's good product, it's a good offering. Is there promise for the future and more we can do? The answer is, of course, yes.

Q: Why make a brown Zune? It's such a terrible '70s color!

A: It's the color my daughter wants. You know, sample size of one, but it's a typical reaction. ... Black and white are nice, they're safe, and they're good colors to have. You need some other things.

Q: Now that you guys have got these things coming out, have people in Microsoft stopped taking their iPods to work?

A: No, because we haven't shipped any yet.





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