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January 22, 2007

More revelations at the Microsoft antitrust trial

Posted by David Hunter at 1:18 PM ET.

Last week the lawyers for the plaintiffs in the Microsoft Iowa antitrust trial were granted an unusual request.

The plaintiffs in Iowa’s class-action antitrust lawsuit against Microsoft Corp. claim they have uncovered information that indicates the software company is violating its 2002 agreement with the U.S. Department of Justice.

The alleged misconduct surrounds Microsoft’s duty to share software hooks known as application programming interfaces, or APIs, which let disparate programs work together. The Iowa plaintiffs’ attorneys have alleged that Microsoft has not disclosed certain APIs to other software developers who want to make programs compatible with Microsoft software.

Plaintiffs’ attorney Roxanne Conlin asked the judge in the Iowa case, Scott Rosenberg, for permission to tell the Justice Department and the Iowa attorney general what her side knows. Rosenberg responded that she could provide the information if a court order or a subpoena is issued for it.

Why they would need the judge’s permission to drop a dime is explained  better in the legal wrangling starting at page 7654 of the transcript from January 10, but Groklaw summarizes it nicely and observes that the DOJ regularly gets complaints about Microsoft’s adherence to the settlement, most of which are “non-substantive.” It’s hard to tell what the importance of this complaint is without details, but it is apparently making the stock market nervous.

Less serious, but certainly more amusing was the disclosure of yet another frank email from Microsoft executive Jim Allchin (previous revealed missive here). This one from 2003 lamented that Microsoft’s PlaysForSure partners were “sucking on media players” and suggesting that Microsoft open up a dialog with Apple about supporting the iPod.

Amir Majidimehr (Corporate Vice President, Consumer Media Technology Group) responded that they were offering the partners incentives and advice on how to do better; expressed hope for the upcoming Microsoft designed Portable Media Center form factor; and observed that Microsoft might yet have to roll up their sleeves to do it right.

Of course, the Microsoft Portable Media Center initiative sank like a stone along with some more partners and that’s why Microsoft built the Zune. While the PlaysForSure hardware of that era may have “sucked”, today it sure “sucks” to be a Microsoft PlaysForSure partner, not to mention a Portable Media Center partner.

Finally, Microsoft shipping their own personal media player hardware because of perceived partner ineptness sets an interesting precedent. Right now Microsoft seems to be dismissive of the PCs their OEM partners are turning out and currently is in the “help them do better” stage. One can’t help but wonder how soon that will be followed by Microsoft “rolling up their sleeves and doing it right.”

Filed under Antitrust, Apple, Argo, Coopetition, Creative, Dell, General Business, Governmental Relations, Hardware, Legal, Microsoft, PlaysForSure, Portable Media Center, Portable Media Center, Technologies, Windows Mobile, Zune, iriver

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July 22, 2006

Microsoft admits to Zune

Posted by David Hunter at 4:45 PM ET.

It wasn’t an announcement. It wasn’t a demo. It wasn’t even a preview. But via an interview in Billboard magazine and a plethora of press statements, Microsoft confirmed the gist of the rumors and ‘fessed up to be working on a family of personal media players and an associated online media purchasing service under the brand name Zune. The best roundup of all of the press sources (official and unofficial) I have seen is from Ryan Block at Engadget. The net: Zune is coming this year and not only targeting Apple’s iPod and iTunes, but also emulating Apple’s business plan:

-The Zune brand is intended to be an entirely vertically integrated end-to-end solution, not unlike the iPod / iTunes / iTunes Music Store triumvirate.

- The service and device will not be PlaysForSure compliant, meaning you will not be able to use your Zune player with Napster or Vongo, for example. This will be an entirely new system. Microsoft will continue to support and develop for their PlaysForSure initiative, but all things PlaysForSure are handled by two (sic) entirely separate division that will not have any crossover.

The latter point – that Microsoft’s erstwhile PlaysForSure partners are left out in the cold by the Zune – is one nail that I can never resist hammering (e.g. [1], [2]) and it seems to be quite a popular target:

Om Malik:

More on that some other day, but the real and perhaps the only story in the news is that Microsoft’s partners – from device makers to music services – just got double crossed by the company they choose to believe in.

Let me break this down: Zune – the devices, the platform, and the store/service – will compete with everyone from Apple (of course) to Creative Technologies, iRiver, Samsung, Archos, Rhapsody, Napster, Yahoo Music and anyone dumb enough to buy into Microsoft’s visions of Urge, Media Player, PlaysForSure etc.

Microsoft could argue that Zune would be unique and those others can still do business. But it is also a classic example of why Microsoft is lumbering bureaucratic morass wrapped in a can of conflicts. A modern day version of medieval fiefdoms, perhaps? Take for instance, Urge which is built into Windows Vista, and is what I guess you could call an almost integrated experience. What happens to consumers when faced with the choice of Zune or Urge!!! Answer – iPod.

Jupiter Research’s Michael Gartenberg:

Early market share, however, isn’t likely to come from disgruntled iPod users looking to switch. The real losers in the short term are likely to be the likes of Creative, iRiver and other former partners that have failed to deliver to market share from Apple and will now find themselves not only competing with Apple but with their former partners from Redmond.

As uncomfortable as the position in which Microsoft finds itself is (and perhaps also dangerous to other future partnership ambitions as well), going it alone on personal media players is also likely the only way to succeed in that market as Nicholas Carr succinctly explains:

The Windows way worked for PCs because PCs are general purpose devices that become more attractive as more software and peripheral devices become available. An open architecture encouraged the development of lots of software and devices that expanded what a PC could do in ways that customers valued. They were even willing to put up with crashes and reboots and driver conflicts and all the other annoyances inherent in managing complex, heterogeneous systems. A special-purpose device, like a music or media player, is a different beast altogether. Customers want it to do what it’s supposed to do, and do it really well – and look good while it’s doing it. It’s fine – and in fact valuable – to have a lot of compatible accessories, as long as those accessories don’t mess up the internal workings of the core system itself. That’s been the Apple way with iPod, and now it’s the Microsoft way with Zune.

Some folks would argue that the Apple way is pretty good for consumer PCs too, but I digress.

After the startup turmoil gets cleared away and assuming Microsoft can deliver product on time, the question remains whether even Microsoft all by itself can make a credible play in consumer electronics where cool is just as important as functionality. Looking at the bizarre “viral marketing” video at Microsoft’s promotional site,, suggests that they have a long way to go. Who do music fans want to identify with: some weird guy with a rabbit or the folks rocking out in the iconic white earphones ads?

Finally, speaking of Web sites, Microsoft has two employees “Zune blogging” at Madison and Pine and Zune Insider; and spending a few minutes nosing around the web shows that a Zune ecosystem has already started with sites of varying quality like Zune Nation, Zune Owners, Zune News Site, Zune Zone, Zune Info, and Zune MP3 Player Deals jumping aboard for the ride.

Filed under Apple, Argo, Coopetition, Creative, MTV, Microsoft, PlaysForSure, Portable Media Center, Portable Media Center, Samsung, Technologies, Yahoo, Zune, iriver

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July 7, 2006

What can Microsoft bring to the table to beat the iPod?

Posted by David Hunter at 11:25 AM ET.

Now that the first buzz is over and it’s taken as a given that Microsoft will be offering its own personal media player before before Christmas, it’s time to assess the pros and cons of Microsoft going out on its own to beat Apple’s iPod. One of the more thoughtful press articles in that regard is from Peter Burrows at BusinessWeek Online which starts out with a brief digression:

In mid-June, Jonathan Sasse, president of digital-music-player maker iRiver America, was making the rounds with the press, talking up his latest gizmo, the clix. His message was that this music player, unlike so many other iPod wannabes, had a chance to hit it big and maybe even take some business from digital music kingpin Apple Computer (AAPL).

His reasoning: The clix was created in close partnership with Microsoft (MSFT), which provided the underlying software, and engineers from MTV’s Urge music service, another Microsoft licensee. Microsoft had approached iRiver the year before about working more closely to develop a product to give Apple a run for its money. For nearly four months staffers from the three companies had holed up in Microsoft’s offices in Redmond, Wash., to make sure the product was glitch-free. “This time, it felt like all the pieces really worked together,” said Sasse.

But for all the partnership talk, it turns out Microsoft may have plans to take on Apple with an approach that doesn’t rely on either iRiver or Urge.

Or more succinctly, the printing on the iRiver Clix packages was barely dry when Microsoft’s “alternative arrangement” leaked and that illustrates one of the problems: Microsoft has brought a lot of baggage with it.

Sources instead expect that Microsoft’s device will be able to play songs purchased from other services built around Microsoft’s Windows Media technology, such as Urge and (NAPS). And songs purchased from Microsoft’s new, improved online music service will also likely play on devices made by longtime hardware partners such as Samsung, Creative Technologies (CREAF), and iRiver.

That could leave Microsoft saddled with a web of complex relationships and business models, in which it tries to go head-to-head with Apple—but without Apple’s luxury of not having to worry about keeping its devices compatible with partner products.

As far as more mundane concerns go though, Microsoft’s baggage will actually help. Everybody and his brother has a portable media player these days so it won’t be a problem for Microsoft to roundup design services, components, and manufacturing plus the Xbox crew certainly knows how to act as a general contractor for hardware. As described, Microsoft has the experience with the online music store part of the business as well as the device software from its work with partners and can always hire consultants to provide spiffy user interfaces just as they did on the Xbox 360. Sounds like a slam dunk, right?

But the objective isn’t to just enter the mobile media player business – it’s to take over the mobile media player business and all Microsoft’s experience to date hasn’t slowed Apple a bit. The question then is what does Microsoft uniquely bring to the table that will actually beat the iPod? Frankly it’s a little tough to answer. The Burrows article mentions the rumored Wi-Fi capability of the Microsoft device and a possible handheld gaming device combination, but when you get down to it, the big Microsoft pluses are big bucks and persistence:

No doubt Microsoft has the financial resources to make a go of it. One music industry source says the company plans “to put a boatload of marketing behind this.”

Throwing money at it may be enough to dent Apple’s position, but the unspoken question is whether this is truly the best investment Microsoft could make with the bucks it is going to take. Successful companies often have midlife crises where money from their core businesses gets dumped down rat holes as they try to broaden their reach. So far, Microsoft hasn’t had much luck expanding beyond their client, server and office software base and the consumer electronics business isn’t exactly a day at the beach as the continuing drain on the balance sheet from the Xbox 360 illustrates. But what the heck – Apple did it, so maybe they can too. And then again, maybe not, and isn’t this rather a diversion from the “Live” initiatives that were going to transform the company?

Filed under Apple, Coopetition, Creative, Digital Media, Hardware, MTV, Media Player, Microsoft, New Form Factors, Portable Media Center, Samsung, Technologies, iriver

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June 1, 2006

Microsoft joins Japanese iPod-killer alliance

Posted by David Hunter at 7:12 PM ET.

Tony Smith at The Register:

It’s almost like MSX all over again. Microsoft, Toshiba, JVC, NTT DoCoMo, Creative, iRiver and three other firms have banded together in a bid to prevent Apple’s iPod from completely dominating the Japanese portable music player market.

The nine companies yesterday said they would co-operate to promote Windows Media-based music and video services in a programme not unlike the Plays For Sure scheme Microsoft launched in 2004. The firms will all stress how compatible their respective software, devices and services are and how well they all work with Windows PCs.

(MSX reference explained here.)

It’s yet another group of hardware vendors using Microsoft’s Windows Media in an attempt to crash Apple’s party. There may be a better chance of success here due to the unique Japanese target market. Stan Beer at ITWire:

It is believed that Japan is the perfect market to launch the MP3 player which, given the inclusion of NTT DoCoMo will probably come in the form of a mobile phone. Japanese are avid mobile web surfers.

Anyone developing an MP3 at present would be foolish not to develop it as part of an integrated mobile phone device as mobile downloads are becoming more commonplace. Apple is known to be working on its own version of an iPod phone.

The move by Microsoft appears to be a smart one. With so many Japanese companies involved in the consortium, take up of the new player in the consumer technology hungry Japanese market stands a good chance of success.

The mobile phone form factor isn’t a given (or perhaps not the only one), but Steve Ballmer was touting just that back in March.

I’d be more excited if we hadn’t seen the same scenario before: Microsoft teams up with a variety of hardware vendors and the goods gather dust on the shelf, while Apple goes to the bank. There are still some punters who think that Microsoft’s Xbox crew are secretly working on an all-Microsoft handheld device, but I’m not holding my breath at this stage.

Update 6/3: Bary Alyssa Johnson reports at PC Magazine that this is less than it appears:

Microsoft reps have denied recent rumors alleging that it has partnered with a number of Japanese consumer electronics companies to develop a device to compete in Japan with Apple’s iPod.

“The announcement that came out of Japan this week was simply about the Japanese launch of Windows Media Player 11,” said a Microsoft representative who asked not to be named. “Due to translation issues the announcement was misconstrued to sound like Microsoft was developing a rival to the iPod; that’s just not the case.”

According to Microsoft, the press release (which is in Japanese) actually states that Microsoft announced availability for its new WMP 11 in the Japanese market. The companies listed in the release are companies that Microsoft has partnered with in Japan to ensure a good user experience. These companies have all agreed to support Windows Digital Rights Management 10 for portable devices.

“The companies listed in the Japanese release are device partners,” the representative said. “For example, in the U.S. one of our device partners is iRiver. We’ve partnered closely with them to ensure that their Clix [media player] device runs WMP 11 technology.”

So while there is no formal alliance, it is business as usual with Microsoft providing Media Player to hardware vendors trying to dent Apple’s share.

Filed under Apple, Coopetition, Creative, Hardware, Media Player, Microsoft, New Form Factors, Technologies, Toshiba, iriver

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