Microsoft's Zune set to make a big noise

Microsoft has ended months of speculation by admitting it will attack Apple's iPod market when it launches its own music player/multimedia device, the Zune.

By early next year then, the fiercely competitive market for music players is likely to be a two-horse race. Now the Windows-centric music player makers Microsoft has been allied with, will be left to fight for the scraps.

The Zune is bad news for the likes of Creative, iRiver, Toshiba and Cowon, who produce music players that work with Windows Media Player and have been backed by Microsoft as an open alternative to the closed system used by the iPod. The arrival of the Zune is a U-turn in strategy for Microsoft, which, with the exception of the Xbox games console and a line of keyboards and mouses, generally stays out of the hardware game.

Microsoft is unlikely to exclude its current partners from using its music software and online music store Urge, but the level of integration the Zune has with Windows Media Player and Urge will give the Zune an advantage current iPod rivals have been lacking.

Zune therefore makes a lot of sense. It will copy the hugely successful iTunes.com music store model and although the technical specifications haven't yet been released, Microsoft has confirmed that the Zune will come with inbuilt wireless networking, allowing you to update your music over a wireless network. None of the rival players yet have this function, but you can bet they'll all be rethinking their product lines to include it. In that sense, the Zune's arrival is good for consumers. It puts even more pressure on the music player makers to pack more value into their gadgets. The problem is that Microsoft's might is likely to crush the players it once relied on to fight the iPod.

If the Xbox product release cycle is anything to go by, we might get the Zune by about March. If Microsoft had any sense it would rapidly make Urge, which has more than two million songs available for download, available worldwide, in time for the music player's arrival. It's unclear if the Zune will work with existing Windows-centric music download services such as Digirama, CokeTunes and Amplifier. It probably will, but Urge will be Microsoft's first priority.

The Zune may well give the consistent experience Microsoft's chief executive Steve Ballmer is looking for. But it does something else - it reinforces the vertical business model mastered by Apple where technology players are involved from manufacturing through to web services.

The second dotcom boom has made this model attractive to the whole industry. It means more concentration, fewer players controlling more of the market for something which we all love - music. And that makes me very nervous indeed.