Beyond Binary

Microsoft on Tuesday confirmed its plans to take on the iPod Touch with a new, touch-screen Zune that will be able to surf the Web, play high-definition movies, and tune in to digital radio.

The Zune HD, which will be available in the U.S. only starting this fall, features an HD Radio tuner as well as an organic light-emitting diode (OLED) touch screen, Microsoft said. It is based on Windows CE and will use a version of Internet Explorer customized for its touch screen, Microsoft said.

The software maker did not announce pricing or capacity, though it said the device will use flash memory and attempt to take on Apple's high-end iPod models.

"This device is created to go head to head with the iPod Touch," Chris Stephenson, general manager of global marketing for Microsoft Zune, said in a telephone interview on Tuesday. Zune buyers will also be able to play HD content on their TVs via a dock, Microsoft said.

The software maker also said that at next week's E3 trade show in Los Angeles it will announce details on a new Zune-branded video service for the Xbox that will replace the current Xbox Live marketplace for TV and movies. The company didn't announce details or specifically say that content will be playable on both Zunes and the Xbox.

Currently videos purchased via the Xbox can't be played on a Zune, although both stores use a similar back-end infrastructure to serve up content. Over time, Stephenson said the goal is to move toward a world in which content purchased once can be played on a variety of devices.

Microsoft plans to offer the new Zune video service in a number of European markets, in addition to North America.

Microsoft's Zune HD will be released this fall in the U.S. The software maker has not announced pricing or capacity.

(Credit: Microsoft )

As for the Zune HD, Microsoft is doubling down on its bet on a radio tuner as a distinguishing feature. Stephenson noted that the current Zune's FM radio is its second most popular selling point. Adding support for HD Radio, a free over-the-air digital radio technology, represents both a risk and opportunity.

When I misplaced my Kindle last year, I not only lost the device, but also any means of reading several e-books that I was in the middle of.

That all changed on Wednesday. My Kindle is no closer to home, but by downloading the new Kindle app for the iPhone (which also works on my iPod Touch), I was able to recover access to my virtual library. Not only that, but thanks to Whispersync, I was able to start reading right where I left off. Whispersync is Amazon's technology for keeping one's place in a book across multiple Kindles or cell phones.

Although I don't think the "I lost my Kindle" crowd is the target market, I must say it was very satisfying to wake up Wednesday once again having access to books that had seemed lost.

The experience highlights both the pros and cons of the "digital locker" approach taken by Amazon with Kindle content. Although some have criticized the fact that one can't resell or give away their Kindle books, the site does provide other aspects of true ownership. In this case, I didn't need to re-buy anything and as soon as I entered my account information, I had access to every book I had purchased for the Kindle. (Periodicals don't work on the iPhone or iPod Touch.)

As for reading on the iPod Touch (or iPhone), I found it quite acceptable for my 15-minute public transit commute to work. The iPod's small size makes it easy to read on a crowded train. One can even hold the iPod and flip pages in one hand while hanging on to a handrail with the other hand.

Ina Fried's Kindle is still among the missing, but thanks to the new iPhone/iPod Touch application, she was reunited Wednesday with her electronic library.

(Credit: Sarah Tew/CNET)

That said, I'm not sure I won't go out and buy a Kindle 2 eventually. The iPod Touch reading experience, while fine for short bursts, isn't the easy-on-the-eyes phenomenon I had with the Kindle. It's harder to buy books and I can't read newspapers or magazines. Also, I suspect it will do a number on my iPod's battery.

At the same time, I won't be deleting that iPod app even if I do replace my Kindle. The option of reading on my iPod will help for my commute to work and for those trips where I can't bear to carry an extra device.

Ultimately, the end result is likely to be that I will just be reading (and buying) more electronic books. And, in the end, that's exactly what Amazon wants.

With the economy tanking and the holidays looming, Microsoft is hoping to salvage some Zune sales by chopping prices.

(Credit: Microsoft)

The software maker plans to announce on Wednesday a price cut for its flash-based models. The 4GB version will drop to $99, the 8GB model will drop by $10 to $139, and the 16GB model will sell for $179, down from $199.

Microsoft is also cutting prices for several of its Zune accessories. The cuts take effect on Wednesday in the U.S. and on Friday in Canada.

Zune marketing director Adam Sohn said in an interview on Tuesday that the moves were being made to "ensure hopefully we have a good holiday season." The prices put Zune's flash players cheaper than a similar capacity iPod Nano, though Sohn said that wasn't the explicit goal of the price cuts.

"We're trying to take into consideration what the realities of the market are," Sohn said.

The company introduced the latest Zune models, as well as the version 3.0 update to its software in September. Microsoft introduced a few new games and other device features on Tuesday as part of a version 3.1 firmware update.

Microsoft also kicked off a new wave of TV ads on Monday that aim to get more people to download the free Zune software, even if they haven't yet decided to plunk down for a Zune player or Zune Pass subscription.

"We think we need to attack it from both sides," Sohn said. The ads will run in prime time as well as on national cable and online, he said.

SAN FRANCISCO--One of the nice things about Microsoft's new Zune is that it can download or stream songs at a hot spot. The downside: the music player won't work at just any hot spot.

The big limit is that the Wi-Fi locale not only has to be free, but also of the variety that doesn't pop up a browser window before letting users online. That's because unlike the iPod Touch, the Zune has no browser.

To get a sense of just how big a limitation that was, I decided Wednesday to put on my sneakers and head all over town to see where I could and couldn't get new tunes. I was sure I would have better luck than when I went across town two years ago in search of another Zune.

Click on the picture above to see a larger map of all the Wi-Fi places CNET News checked out.

(Credit: Susan Dove/CNET News)

I loaded up the Zune with a few albums and videos the night before. I also selected a few "channels"--essentially playlists programmed by others that get updated on a regular basis. Among the channels I included were Billboard's top Latin hits, as well as one programmed by KROQ--the LA-area radio station I listened to throughout high school.

Apparently, though, I hadn't synced the channels to the Zune, so I had to wait 45 minutes while it downloaded the 112 tracks over my home Wi-Fi connection.

I wrote a blog as the last of the KROQ channel made its way to my Zune. At 9:45 a.m., as the Violent Femmes' "Blister in the Sun" played in my headphones, I walked out the door, and headed to my first stop--the independent Nervous Dog Coffee, one of my personal favorites. The Zune didn't immediately find any Wi-Fi.

Assured by the staff that indeed, there was free and unprotected Wi-Fi, I gave the Zune a reboot. I guessed correctly that you needed to hold down the left-most button while pressing down on its touchpad. Sure enough, that did the trick and I sat down with my chai and started reading that day's copy of The Wall Street Journal.

With nothing but depressing headlines about the financial meltdown, I decided I simply had to listen to R.E.M.'s "It's the End of the World as We Know It (and I Feel Fine)." So I downloaded that using the Zune Pass subscription graciously loaned by Microsoft, along with the player. (The 16GB player will set you back $199, while the Zune Pass costs $14.95 a month.)

With my new party trick working, I walked back up to the counter to show Joe Belen, the coffee shop's ever-jovial owner. I asked him to pick an artist and he opted for Tears for Fears. As I struggled to enter the name using the Zune's scrolling mechanism (it has no keyboard or touch screen) he quipped, "Is that too long? Should I pick Cher?"

Even with a big update, there are still many areas where the Zune comes up short when compared to Apple's iPod.

It's easy to argue that Apple still has the lead in styling, , add-on accessories, and software and compatibility. (Zune works only on Windows PCs.) Not to mention the fact that Microsoft has nothing to match Apple's iPod Touch with its ability to surf the Web and run a wide range of add-on programs.

But there are a couple of areas where Microsoft deserves significant credit. The most important, from my perspective, is that every feature that Microsoft has added to the Zune is available for free to owners of previous generation Zunes.

That's no accident. Microsoft took a battery, size, and cost hit by including a Wi-Fi connection in every Zune when the player debuted two years ago. But by doing that, Microsoft ensured that the devices would have not just a present, but also a future.

Zune's initial use of the Wi-Fi--squirting songs to nearby Zunes--was an extremely limited feature, especially since there were rarely any other Zune owners around with whom to share songs.

The company promised that would be just the beginning. It's taken time--longer than perhaps it should have--for Microsoft to make better use of that feature. But Microsoft has finally added features like the ability to download songs or stream music over Wi-Fi.

And, as I mentioned earlier, these new features don't require existing Zune users to buy a new device.

Adding features to devices it has already sold is good for customer loyalty, but it also helps Microsoft in another way.

With its small market share, it can't afford to leave any Zune owners behind, particularly since many of its features get better as its "social" network of users gets larger.

A new Zune next to an iPod Classic.

(Credit: CNET Networks)

Another area where Microsoft continues to stand out is in subscription music. Subscription music has been an option since launch, but Microsoft has had fewer takers for its $14.95-a-month service than it might like. This release could help change that, by making subscription much more compelling.

Until now, being a Zune Pass subscriber meant that one could download any of hundreds of thousands of tracks, which was nice. But there are lots of people who might not want to go through that much trial and error to find what they like.

With Zune 3.0, Microsoft has made finding new music far easier. One can subscribe to "channels," which are like playlists that get updated on a weekly basis. Some are programmed by Zune staffers, others by radio stations or magazines, and still others are computer-generated. The computer-generated ones can either compile the most popular songs in a particular genre or even make recommendations based on a user's own listening patterns.

There's even a "Buy From FM" feature that lets people download the song they are hearing on the radio. Again, assuming it is one of the 80 percent of Zune tracks that are available to subscribers, a Zune Pass subscriber can download the song for no added charge.

Are all these things enough to make a dent in Apple's market share? That remains to be seen. Especially without a big hardware change, I'm not sure that Microsoft will make massive inroads this go-around.

That said, the company finally appears to have staked out some niches from which to build a base. And as Microsoft has said all along, this is a .

Microsoft, which is officially releasing its Zune 3.0 software on Tuesday, is also announcing a deal to give Zune owners free Wi-Fi access at McDonald's outlets.

The McDonald's deal is important because although every Zune has built-in Wi-Fi, the devices can only access free Wi-Fi hot spots that don't have a browser interrupt. That severely limits the types of public locations from which people can download songs wirelessly.

Many of the Zune's key new features, such as channels and "buy from FM" are most useful when Zune owners have access to a compatible Wi-Fi location. The McDonald's deal, struck with its Wi-Fi provider Wayport, adds nearly 10,000 places where people can access the Zune Marketplace store.

"Wayport is pleased to be working with Microsoft to make it easier for Zune users to access music on the go," Dan Lowden, vice president of business development and marketing for Wayport, said in a statement. "Our ability to enable and manage applications and devices over converged networks creates exciting new opportunities for our clients to attract new customers whose digital lifestyle extends beyond their home and office."

The revamped Zune software, as well as firmware updates for older players, is available for download. As for the new hardware, the Zune will come in 8GB ($149) and 16GB ($199) flash-based models and a 120GB hard-drive model ($249). The existing 4GB flash and 80GB hard-drive models are seeing price chops as Microsoft looks to clear out remaining inventory.

There are a number of businesses where Microsoft is playing catch-up these days. But arguably one where the company starts furthest behind is in the music business, where it decided two years ago to scrap its partner approach and go it alone with the Zune in its effort to catch the iPod.

Joe Belfiore

I had a chance on Monday, not just to play around with the latest crop of Zunes, but also to talk strategy with Joe Belfiore, a longtime Microsoftie who moved over earlier this year to head Zune development. I also followed up with him on Wednesday, following Apple's announcements, to get a few more thoughts. (At the end of this post, I've also embedded my video interview with him from Monday.)

In particular, I pressed Belfiore to talk more about how Microsoft plans to unite its still disparate entertainment projects. Microsoft has talked a great deal about the notion of having your content wherever you are and, unlike many companies, it actually has products for the TV, the den, the living room, the car, and the phone. However, to date, few of the company's services really let you take premium content from one place to another.

Belfiore conceded that is true today, saying that the company has focused on improving its individual device experiences first, but he said the company is putting in place mechanisms to allow a more unified experience over time.

"The video store that is in Zune today is the same...back-end as the video store in Xbox today," he said. "While it is true you can't buy a video on an Xbox today and put it on your Zune, We're not really that far off technologically from being able to offer that feature."

There are a variety of hurdles, he said, not all of which are in Microsoft's hands, such as licensing rights. There's also the issue that the numbers of people with multiple devices, say a Zune and Xbox or Zune and Mediaroom IPTV box, aren't that large.

"As more and more people have more than one of those devices, then the cross-device scenarios become more important, and undoubtedly it is something you will see us do at some point in the not-too-distant future," Belfiore said.

Here's what Belfiore had to say in response to some other questions:

Q: What do you think of what Apple announced?
Belfiore: I think that if I am someone who is going to be shopping for an MP3 player this holiday, after hearing the announcements, I am definitely going to be giving Zune a good look.

Here's how the new Zunes stacked up to Apple's now-replaced third-generation iPod Nano (middle).

(Credit: Ina Fried/CNET News)

I think Apple has continued to do some nice hardware engineering. The colors are attractive; there are some new hardware features. I definitely think from the perspective of software and services that bring the whole experience to life, our offering is very competitive. We see Apple doing a recommendations feature and we've got a recommendation feature that not just recommends things to buy and gives you things from your collection, but aggregates what your friends are listening to...and if you are a Zune Pass subscriber, we'll give you whole songs to listen to without you having to do any work at all. We think from the perspective of the music enthusiast we think that is a great feature where we compare favorably.

Why did Microsoft get in the Zune business? Why is it an important business to be in?
Belfiore: We think the possibilities for creating value for people around how they are entertained...is incredibly important. The potential for doing great things for people is huge. It can affect a wide range of devices, from portable devices that you carry around to devices that are hooked up to your TV to devices that look like what you think of as your PC or laptop today. We aspire to really making people's lives better in the way they are entertained. Being able to create those connections between people and get them content on whatever kind of device it is, we think is important and compelling and worth doing.

When you look three or five years out, should I be able to go to my car, go to an Internet cafe, go to my phone without any preloaded content and be able to access any content that I have purchased or my personal content?
Belfiore: A good theory for us is pretty close to what you just described--where you can sign into the service and all the music that you like is available immediately to you wherever you are. The videos that you like are available to you wherever you are. And you have ways of trying new things and finding new things because your friends, people you respect, people who are pundits or critics in the industry are all available. It's not simply about passively experiencing the same thing over and over again--unless that's what you want--it's also about discovering new things and being engaged with people.

If you think about Xbox Live as an example. For years and years and years people played games by themselves or with two other friends in the same room. Today there's leader boards and badges and reputations and you can be on a headset playing against somebody halfway around the world. It's the same idea as that, but let's do that across entertainment types.

Obviously the device that the most people have with them at any given time is the mobile phone. How do you guys think about that?
Belfiore: The phone is certainly an interesting device for doing entertainment types of things. It's a device we continually look at trying to improve. We don't have any announcements about what we are doing on the phone at this point in time. We're excited about the progress we've made with Zune and stay tuned.

How important is the car as a place for enjoying entertainment?
Belfiore: I think the car is super-important. For me personally, the two places where I listen to music more than anywhere else are (in) the car and running.

There's a lot of work at Microsoft that we've been doing on the car. The Ford Sync product...has been very successful for Ford. What it tries to do is integrate entertainment experiences and communication experiences in a really seamless way that is optimized for you while you are driving. You just talk to it. We definitely see that as an important, highly used environment for entertainment. We think that the products we have today do a pretty good job and there's lots of room for us to keep doing really great stuff.

What made you want to take the Zune job?
Belfiore: I have been a digital media enthusiast for a long time. When J. (Allard) was moving on and they needed someone to help with the creative direction and execution on Zune, I was excited to go be a part of that. I think Zune is a great opportunity for us to do groundbreaking work.

If you had one hesitation, what was the biggest worry or concern?
Belfiore: The truth is, I didn't have much hesitation. Zune certainly faces a difficult competitive situation but Microsoft has been in that situation many times before and it is an exciting place to be.

Here's how the new Zunes stacked up to Apple's now-replaced third-generation iPod Nano (middle).

(Credit: Ina Fried/CNET News)

With Apple's iPod announcements largely out there, I thought it made sense to see how Microsoft's new Zune lineup stacks up.

The good news for Microsoft is that its Zunes are priced right in line with Apple's new iPod Nano and iPod Classic line. From either company, a 120GB hard drive player fetches $249, a 16GB flash model sells for $199, and an 8GB flash model will sell for $149.

The bad news is that once again, Apple has made life harder for Microsoft--adding features like voice recording and "shake to shuffle" to the Nano. Apple's "Genius" feature, while not as expansive as the Channels feature of the Zune, also gets Apple in on the auto-recommendation game.

Apple is also moving ahead on the video front, whereas the Zune didn't make any meaningful advance. The new iTunes features TV shows in HD and Apple is bringing back NBC, erasing the only real video advantage the Zune had.

The new Nano has the accelerometer that's also in the iPod Touch and the iPhone.

(Credit: James Martin/CNET Networks)

And of course there is the iPod Touch. Microsoft has decided to ignore the Web browsing feature even though all its models have Wi-Fi. That means that at the lower end of the market Microsoft has an advantage, as all its models can now download songs over Wi-Fi. But at the high-end, Apple has a player that makes far more extensive use of the wireless connection.

... Read more

I just finished getting my hands on the new Zune players and trying out their new software features, which let you do things like buy a song off the radio and download tunes directly from the device via the Internet.

The latest software update reinforces the notion that Microsoft is aiming the Zune at hard-core music enthusiasts. Outside of music, very little has changed, with the exception of the addition of two new games and Audible audiobook format support. The devices themselves are similar in physical size and shape, adding improved capacity options (16GB on the flash model and 120GB on the hard drive version) as the only changes.

As for music, Microsoft has added several things aimed at making it easier to discover and acquire new tunes. In addition to being able to buy songs directly over a Wi-Fi connection, subscribers to Microsoft's $15-a-month Zune Pass service can also stream music over the Web.

Also new this time around is the notion of channels, which are kind of like playlists that get regularly updated. Some playlists are programmed by Microsoft, and some by outside music authorities like radio stations and Billboard magazine. Still others are generated by the Zune software itself, based on the music each Zune owner is listening to.

And, as noted by my colleague Donald Bell, all of these features will also work on older Zunes via a free software update. On the downside, the Zune still doesn't have a browser like the iPod Touch. That not only means no Web browsing, but also the challenge that the device can only work on Wi-Fi networks that don't have a browser-based interrupt page, something that's common not just on paid networks, but also a growing number of free commercial Wi-Fi networks.

I've included a video I did with top Zune executive Joe Belfiore that shows the devices in action. I also talked with Belfiore off camera about the Zune's broader future. I hope to have that interview up later this week.

Microsoft's just-issued press release has a couple of other tidbits, including the fact that Clear Channel, CBS Radio, and a number of other big radio station owners are supporting a new data format that will make it easier for the Zune's new "Buy from FM" feature to track which song is playing. More than 450 stations will be live at launch with the enhanced data format, Microsoft said. The software can sometimes deduce what song is being played from other types of metatags, but it can also get hung up on the formatting.

Although Microsoft was planning its Zune announcement for next week, I think the leaks that prompted its early disclosure were fortuitous, allowing Microsoft at least one day in the sun before Apple's event on Tuesday.