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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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2 Responses to “What can Microsoft bring to the table to beat the iPod?”

  1. Microsoft demurs on “iPod Killer” stories -- Microsoft News Tracker Says:

    [...] Microsoft finally commented yesterday on the recent iPod Killer reports as Scott M. Fulton, III describes at TG Daily: In a carefully worded response this morning, a Microsoft spokesperson denied his company’s participation in a demonstration of a portable music device capable of wireless networking to music industry executives, calling a Bloomberg report on Wednesday and a Associated Press report this morning “speculation and rumors.” However, the spokesperson stopped short of denying a demonstration of such a device from someone took place. [...]

  2. More revelations at the Microsoft antitrust trial -- Microsoft News Tracker Says:

    [...] 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. [...]

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