November 10, 2006 4:00 AM PST
With Zune, Microsoft heads to the mosh pit
The company, which is parodied as a stiff office worker in Apple Computer's Mac vs. PC ads, is trying hard to build a hip, music-insider image for its Zune digital-music player. The question, however, is whether Microsoft can put that stuffed-shirt image behind it.
At a press event Thursday against a backdrop of diaphanous curtains and candle-lit rooms, mere blocks from rock 'n' roll venues where Led Zeppelin and The Doors once headlined, the Zune appeared shabby in contrast--like someone showing up to a punk-rock concert in a tweed coat.
Video: Soon, the Zune
Steve Ballmer talks about the new media player, emphasizing its wireless capability.
That Zune is a clunky iPod-look-alike that offers little sex appeal underscores one of the most important questions about Microsoft's foray into the music business. Is the software king in tune enough with music fans to coax them away from Apple Computer and CEO Steve Jobs?
Microsoft is up against one of the world's master marketers and expert brand builders in Jobs. He is credited with understanding consumer needs like few others. Consider Apple's clever functionality, such as the iPod scroll wheel and the sleek forms of the company's players. All of it has helped Apple claim a 70 percent market share and win favor of young people from all over the world.
To compete, Microsoft will do more than throw the company's considerable technological muscle behind Zune, which is due in retail outlets Tuesday. In some aspects, Microsoft understands that its size and maturity is a liability. Chris Stephenson, Microsoft's general manager of marketing for the Zune, said Microsoft is trying to foster a start-up mentality within the Zune unit.
"We tell each other, 'Let's think like a band,'" Stephenson said. "What does that mean? That means like musicians we need to think very creatively and in terms of how to improve music for a listener."
Rockers or posers?
Certainly, the Zune executives at Thursday's presentation look as if they could be rockers.
Matt Jubeliner, 25, is Zune's goateed product manager. Terry Farrell, Microsoft's senior product manager, cuts a youthful figure in long hair and trendy tennis shoes--not typical attire at a Microsoft function.
Stephenson, 41, is a veteran music-industry executive who has worked for MTV and was raised in another music hotbed: Liverpool, England. Sounding a lot like one of the Beatles, he outlined how his team will measure success.
"Relevance," he said. "Yes, sales are a measurement, but we know that if we're relevant with listeners and artists and retailers, then we're ready to play with Microsoft. I think right now, we've already achieved some of that. Everybody is talking about Zune. Retailers and the entire music industry are waiting for a legitimate second choice to Apple. Competition is good for every one."
Microsoft helped make itself more relevant when it announced Thursday that it would pay record labels a royalty on Zune sales.
Zune does have some features that are sure to appeal to music fans, including a screen larger than the iPod's, which makes watching video more enjoyable.
Zune has Wi-Fi capability that allows owners anywhere within 30 feet of each other to transmit songs to one another. On Thursday, journalists toyed with the feature and found that the operation was typically a speedy 10 seconds. To protect copyright, the songs will last up to three plays or three days.
Microsoft's music store will also offer more of a personal touch than Apple's iTunes, Stephenson said. Microsoft will feature reviews from a large group of critics whose purpose will be to introduce customers to new performers, Stephenson said.
"Everything we're doing is very authentic," Stephenson said.
Nothing matters more to Microsoft's music hopes than offering a device and music store that offer at least as much as Apple's, analysts have said.
And here Microsoft still has much work to do. The Zune Marketplace has 2 million songs compared with iTunes' 3.5 million. Zune customers won't be able to choose from a comparable library of music videos or TV shows, and some consumers could be put off by the currency that Zune uses.
Zune Marketplace exchanges music for "points." Instead of just paying 99 cents for a song, the typical price for a song at iTunes, Microsoft requires users to pay for blocks of points, the minimum being $5. A dollar is worth roughly 80 points. To make matters more confusing, music prices will vary on Marketplace. Customers will be forced to do some figuring; not a lot of work, but it just isn't as convenient as iTunes.
"We did this in preparation for opening up in overseas markets," said Alan Shen, a Microsoft program manager. "We needed a system that everybody would understand. People will get used to it."
The team handling Zune knows that it won't unseat Apple as the top music site in its first year. Microsoft knows Zune will require refining and is taking a long-term view to music, Stephenson said. He also notes that the company has experience in moving into markets dominated by a powerful, seemingly unbeatable company.
"We did it with the Xbox and video games," Stephenson said, referring to Microsoft's video game console. "In that situation we were up against Sony. This is our chance to change the game in music."
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