Microsoft Partners Could Miss Out On Zune Party - InformationWeek

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Microsoft Partners Could Miss Out On Zune Party

The biggest losers initially, however, are expected to be iRiver, Creative, and other device manufacturers that have failed to deliver a player that can compete with the iPod, using Microsoft's media platform.

Microsoft Corp.'s plans to sell a portable media player is likely to steal market share in the short term from partners iRiver, Creative and others, not iPod-creator Apple Computer Inc., experts say.

The Redmond, Wash., company on Friday said it planned to sell this year hardware and software under the brand name Zune that would compete with Apple's iPod and iTunes. In entering the market, Microsoft has shown its displeasure with Apple's continued dominance of the digital player market. Experts say the Cupertino, Calif., computer maker's iPod accounts for more than two thirds of the players sold worldwide.

The biggest losers initially, however, are expected to be iRiver, Creative and other device manufacturers that have failed to deliver a player using Microsoft's media platform that can compete with the iPod.

"If Microsoft is successful, the expectation is that it will initially hurt existing partners more than Apple," Joe Wilcox, analyst for JupiterResearch, said Monday.

Michael Gartenberg, another JupiterResearch analyst, agreed, saying Microsoft is unlikely to find many disgruntled iPod users.

"We certainly haven't seen a whole lot of complaints from that quarter," Gartenberg said. "When you have such a dominant position as Apple, it usually means you've done something right."

Despite facing what seems like an insurmountable challenge -- trying to survive against Apple and Microsoft -- Jonathan Sasse, iRiver America chief executive, sounded almost upbeat in a comment sent via email.

"The potential launch of a device by Microsoft does not appear to threaten our relationship in any way," Sasse said. "In fact, any potential effort by Microsoft in this space could further raise awareness in the industry and elevate the overall success of devices like the iRiver Clix."

The latter point is the best-case scenario for Microsoft's former partners, Gartenberg said. If Microsoft makes progress against Apple, an effort that will cost lots of money and resources, then it could create demand for non-Microsoft devices.

"They're only hope is for a rising tide that floats all boats," Gartenberg said.

The failure of Windows Media-based devices against Apple is not the fault of device manufacturers alone, experts say. While the devices themselves have not captured consumers' imagination like the iPod, Microsoft's Windows Media Player has seemed too complex and unwieldy next to Apple's iTunes.

But improving its technology is only one of the challenges facing Microsoft, Gartenberg said. The company will also need to deliver a device with "lifestyle appeal," something that teenagers and young adults feel is cool to carry around with them.

Thirdly, Microsoft will need to work with other companies in delivering lots of accessories. With the iPod, Apple has created an "ecosystem" that includes cases, car kits, speakers and docks.

"It's not just a matter of introducing a product," Gartenberg said. "Microsoft will have to deliver all three of those things in order to be a success."

The company, however, has proven that it can enter a hardware market and compete successfully against a dominant player. Microsoft, for example, spent billion of dollars on the Xbox over the last several years to make it a strong challenger to Sony Corp.'s PlayStation.

"Microsoft can do good software and hardware together," Wilcox said. "It's now a question of execution."

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