July 21, 2006 2:05 PM PDT

Microsoft's Zune to rival Apple's iPod

update After trying for years to compete with the iPod through an array of partners, Microsoft confirmed Friday that it plans to directly go after Apple Computer with its own rival, Zune.

Confirming weeks of rumors, Microsoft said it will launch music software and players under the Zune brand, though the software maker left plenty unsaid in its confirmation.

"Today we confirmed a new music and entertainment project called Zune," Chris Stephenson, a general manager of marketing for the software maker, said in a statement. "Under the Zune brand, we will deliver a family of hardware and software products, the first of which will be available this year."

The initial device will have Wi-Fi and use a hard drive to store music, Microsoft said. Stephenson's statement also lent some credence to speculation that the company's player will use wireless connectivity to share music with other Zune devices.

"We see a great opportunity to bring together technology and community to allow consumers to explore and discover music together," Stephenson said. A Microsoft representative declined to offer further details, although Stephenson told Billboard magazine that other Zune devices, including a video player, are in the works.

The software maker has posted a teaser Web site, set to the song "Us" by Regina Spektor. Microsoft also noted its move on a blog, Zune Insider, whose author is part of the company's effort.

"So what's Zune?" writes Cesar Menendez, the author of the blog, who says he recently began working on the project. "It's Microsoft's new, holistic approach to music and entertainment. And yes, this year, we'll be releasing a device as part of the project. Under the Zune brand, we're looking to build a community for connecting with folks, all to discover new music and entertainment.

Microsoft is still apparently figuring out just how the wireless sharing will work. In the Billboard interview, Stephenson said the company is looking at several different options, including downloading music directly to a device, as well as sampling music from nearby devices.

Zune-branded devices are apparently only one part of Microsoft's strategy, though, with Stephenson telling the magazine that Microsoft's broader vision is to allow people to play and discover music from a variety of devices including computers, phones and the Xbox 360.

An Apple representative declined to comment on Microsoft's announcement.

This is not Microsoft's first attempt to go after iTunes and the iPod. Until now, though, the company has largely relied on partners to make the players and software that use its Windows Media digital rights technology and tie into the Windows Media Player software built into its Windows operating system.

More recently, the company had tried to modify that strategy. While remaining open to other players and services, the company had been focused on promoting more heavily certain products, such as iRiver's Clix player and the Urge service it helped develop with MTV Networks.

One of the big question marks surrounding Zune is whether any Microsoft music service will work with all of the third-party players out there, such as the Clix and devices from Samsung, Creative and others. Also unclear is whether rival music services, such as Urge, RealNetworks' Rhapsody and Napster, will work with Microsoft's upcoming player.

An MTV Networks representative said the company couldn't say what if any role MTV and Urge would play with Zune.

"We're talking with Microsoft on a number of levels and we can't comment on those discussions at this time," the representative said. The representative said MTV is committed to "nurture and evolve" Urge, which it says has received a positive response since launching in test form two months ago. Urge is built into Windows Media Player 11, with the software available as a download for Windows XP, and it will be an integrated part of Windows Vista when it ships next year.

Dana Harris, a spokeswoman for Napster, said the company isn't worried about competing with Microsoft. "We've held our position as the No. 2 service through the launch of MSN and Urge and a host of others," she said. As far as any device goes, Harris said Napster would welcome a cool product that works with its service, but declined to comment on whether the Zune player would, in fact, work with Napster.

A RealNetworks representative declined to comment.

On the device side, iRiver America CEO Jonathan Sasse expressed hope that the Zune could help raise awareness of non-iPod devices such as the Clix.

"Microsoft is a great partner and we expect continued success moving forward," he said in a statement. "The potential launch of a device by Microsoft does not appear to threaten our relationship in any way."

As a result of its heritage, analysts say Microsoft faces a potential backlash now that it has decided to go it alone.

"This is the first step, and it comes with a sacrifice," said Shaw Wu, an analyst at American Technology Research. "They now must compete with their customers."

Wu also pointed out that Microsoft must do more than just add its brand name to have a winner.

"I think it's yet to be proven that they can come up with a seamless, integrated experience that iTunes and iPod provides today," he said. "They have to create something as fun and easy to use. Everybody else has failed. You have to remember that people have an emotional attachment to their iPods."

Apple has maintained a dominant share of both the music player and downloadable music businesses, selling more than 58 million iPods and more than a billion songs.

CNET News.com's Greg Sandoval and Tom Krazit contributed to this report.

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