Microsoft puts iPod in its sights

Microsoft said today the ability to share music through wireless connectivity is destined to be a 'killer app' for them in the competitive listening-device battlefield.

This functionality is a key element of its new Zune portable media player, intended to win over consumers from Apple's market-leading iPod.

The world's largest software maker said it will launch a 30-gigabyte Zune and an iTunes competitor called the Zune Marketplace in the United States this holiday shopping season.

Unseating Apple Computer Inc's iPod will be no easy task, but Microsoft Vice President J Allard said digital music players are in infancy stages, much like Henry Ford's Model T automobile or early video game Pong.

"There are billions of people on planet earth who listen to music and (Apple's) sold 50 million gadgets. So we're in this early phase of digital music and portable entertainment," said Allard, a Microsoft vice president of design and development who is in charge of the Zune line of products.

"We believe in connection. We're launching a product with a a very simple idea. We're putting Wi-Fi in everything we do."

Apple's iPod players don't yet have wireless connectivity but analysts expect eventually they will.

Zune, which has a 3-inch (7.6 cm) liquid crystal display, will allow users to share sample tracks, homemade recordings, playlists or pictures between devices. It also allows users to listen to any shared song three times over a three-day period.

Unlike iTunes, the Zune Marketplace will provide users with the option to either buy a flat-fee subscription to download an unlimited number of songs, or purchase songs individually.

The iPod holds more than half of the digital media player market, according to research company NPD, while iTunes accounts for over 70 per cent of US digital music sales. In the United States, the iPod has more than 75 per cent of the digital music player market, according to NPD.

The Zune, along with its Xbox game console, is part of the software giant's strategy to diversify beyond its core desktop computer business, which is facing competition from Web rivals like Google Inc.

"Microsoft has to stay relevant to how people are accessing information and entertainment. The desktop is not the center of the world anymore," said Toan Tran, analyst at Morningstar.

Redmond, Washington-based Microsoft has said it plans to invest hundreds of millions of dollars to develop and market the Zune, an investment that the company has said may take years before bearing fruit.

Microsoft said it was not ready to provide any exact timing or price for the Zune, which is being manufactured by Japanese electronics maker Toshiba Corp.

A company spokeswoman would only say that the Zune will be priced "competitively" with rivals. Apple earlier this week launched a 30-gigabyte iPod with a 2.5-inch screen for US$249 ($381).

Allard touted the Zune's larger display and ability to be compatible with all video downloaded for the iPod, but stopped short of saying Microsoft is prepared to follow Apple into the market for movie downloads.

"The consumer we're targeting wants choice, and when you see us do something in the video play, you will see very, very broad choice," said Allard, one of the few executives at Microsoft with experience in launching a consumer electronics product from scratch, with the Xbox game console.

Microsoft said Zune will come preloaded with music and videos from a number of record labels including Astralwerks Records and Virgin Records from EMI Music.

Shares of Microsoft were up 40 cents at US$26.38 in late afternoon trade on the Nasdaq, while Apple shares were flat.

- REUTERS