Microsoft takes another stab at Apple's iPod

John Letzing
MarketWatch (MCT)

SAN FRANCISCO - Microsoft Corp. has released the latest versions of its portable media player, designed for the daunting task of challenging Apple Inc.'s market-dominating iPod.

In recent days Microsoft has begun selling new versions of its Zune media player, equipped with additional storage and backed by an expanded range of software that will offer such features as the capacity to identify and buy songs heard on the radio and receive customized play lists.

Adam Sohn, Zune's director of public relations, said the new models, which include a larger version with 120 gigabytes of storage space and a smaller model with 16 gigabytes, should be fully available next week. Previous versions of the Zune came with up to 80 gigabytes of storage.

The new models are hitting the market just as Microsoft rival Apple is expected to release an update to its iPod line.

Apple has sold over 100 million iPods since the wildly popular device first became available in 2001, while Microsoft in May announced that it has sold over 2 million Zune devices since the product was released in late 2006.

Microsoft is hoping consumers will be tempted to buy a Zune rather than an iPod due to the device's ability to more actively distribute music among friends and contacts established through the company's online marketplace. "We're trying to make this thing more alive," Sohn said.

The new Zune enables users to connect through wireless Internet "hot spots" directly to the marketplace, which can be used to sift through catalogs and buy music and video clips directly.

A user can also pick a particular artist via the software and automatically be presented with music from other artists that could be appealing, in addition to information about what other Zune users who have downloaded the artist's music are listening to.

And in a modern twist on an old medium, the new Zune software enables users who hear a song through the device's FM radio to automatically identify it and purchase it through the online store.

That feature is a work in progress, Sohn acknowledged, as the identifying data attached to songs being broadcast can be spotty or completely absent depending on the particular broadcaster.

Older versions of the Zune, now in its third iteration, can also receive the updated Zune software, Sohn said.

The Zune is a relatively small element in Microsoft's entertainment and devices division, which also features the company's Xbox videogame console.

For the quarter ended in June, Microsoft reported a loss of $188 million for the division, on $1.6 billion in revenue.

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