Taking a page from its Xbox playbook, Microsoft Corp. is preparing to release a digital music and video player in time for the holiday shopping season, a direct attack on the market dominance of Apple Computer Inc.’s iPod.
Tired of relying on others to produce a device that uses Microsoft’s software to rival the iPod, Microsoft has decided it would be better off building the hardware on its own, according to a report Wednesday from Bloomberg News.
The Microsoft player would have a similar end-to-end consumer experience as the iPod, in which the hardware, software and an online music store would work together seamlessly. The player also would include wireless Internet capabilities to enable downloads without being tethered to a computer, according to unnamed sources cited by Bloomberg.
“Can Microsoft do the hardware? Absolutely,” said Rob Enderle, principal analyst for the Enderle Group. “And they have the retail channel that would like to help. Some retailers are ticked off with Apple, so they would be looking for someone else” to offer an attractive music player.
Microsoft declined to comment for this story, saying through a spokesman that the Bloomberg report is based on speculation.
“Microsoft does not have anything to announce at this time,” he said.
Nonetheless, people familiar with Microsoft and its offerings said there is little doubt the Redmond, Wash.-based company will get more aggressive in the digital music and video market.
“They did it with the Xbox, and that’s proof to me that they can develop” their own music player, said Allen Weiner, an analyst for Gartner who closely follows the software giant.
The Xbox game console was launched in 2001 and represented a major investment in breaking into a market controlled by a dominant player, in that case Sony Corp. and its PlayStation.
Microsoft does not dominate the gaming market, but the Xbox commands roughly 30 percent to 40 percent of share worldwide, said Enderle. “It’s done pretty well,” he said.
Microsoft officials have been meeting with executives in the music business and in Hollywood to secure content licenses for its new product, Bloomberg reported. Additionally, it has tapped Xbox veterans J Allard and Robbie Bach to direct the music-device initiative.
“This would not be the first time Microsoft has decided it needed to take control of its own destiny with regard to hardware,” Michael Gartenberg, an analyst with JupiterResearch, told Bloomberg. “Not coincidentally, the last time they did that it was in video games, and the guys doing it were named Robbie Bach and J Allard.”
Microsoft has much work to do if it hopes to knock Apple from the top of the digital music business. Apple controls 77 percent of the $4 billion U.S. market for digital music players, according to NPD Group Inc.
In its previous efforts to crack Apple’s dominance, Microsoft developed a software platform used by numerous manufacturers of digital music players. But despite good reviews, those players, including models from Samsung, Creative and iRiver, have not produced a runaway hit to threaten Apple.
Also, Microsoft has made headway in its push to sell music online. In May, it launched the Urge music service in conjunction with MTV. Like Apple’s iTunes site, individual downloads cost 99 cents, but Urge also offers a subscription music service and more than 130 radio stations for $15 a month.
“The Urge offering is considered potentially better than iTunes,” Enderle said.
The challenge for Microsoft is to put all the pieces together, including hardware and software, “to create an interface that is simple to use,” Weiner said.
“Microsoft knows this,” Weiner added. “If you don’t have the mechanism to do this, to make it so transparent for the user, it’s not going to work.”
He cited two examples.
“I just literally bought a video an hour ago,” said Weiner, who was interviewed Wednesday. “I pressed one button, and now it’s on my iPod.
“And does Microsoft have its finger on the pulse of the consumer to create a device as cool as the iPod? My daughter needed new headphones the other day, and she insisted on getting white ones so people know she has an iPod.”
Enderle believes the ubiquity of the iPod could help Microsoft.
“The retail channel is ready. The market is kind of saturated with iPods,” he said.
On top of that, he said, retailers believe Apple favors its own stores for new product releases, and they are frustrated by receiving scant information from Apple on when new products will be available.
Another factor that will determine if Microsoft can dent Apple’s market share is what the next iPod will look like.
Rik Myslewski, editor in chief of MacAddict magazine, believes it will have a bigger and sharper video screen than the current iPod. Also, if rumors prove true, it will be marketed as a device that plays full-length movies, not just music videos and television shows.
However, a new iPod also should be available for the holiday season, he said.
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ebenderoff@tribune.com
