I tuned into Thursday's conversation between Microsoft's Robbie Bach and financial analysts at CES. Bach is the president of the company's Entertainment and Devices division, which includes Xbox, Windows Mobile, retail channel relationships, and most of the other fun stuff. It also includes the Zune, which, given its lack of financial impact on the company, didn't merit much of his time.
Toward the end however, one analyst (not identified on the recording) suggested that the company's foray into MP3 players had been a waste of time. Today, Microsoft talks about providing software and services on "three screens"--the PC, the TV, and mobile devices. So why did Microsoft make a foray into hardware, which alienated its device-maker partners (remember PlaysForSure?), and probably cost the company tens or hundreds of millions so far.
Bach insisted that music was a required component of the "three screen" experience, and that Microsoft had to be a leader rather than a mere technology provider in this space. If Microsoft hadn't built the Zune, it wouldn't have been able to create the Zune software and Marketplace, which have become pretty solid after a couple false starts. But he admitted that if the company were to enter the space again with perfect hindsight, it would do things differently.
How, exactly? He didn't say. But he did say that regardless of whether Microsoft had built its own MP3 player, it would have changed its relationship with every OEM and "caused just as much disruption." In other words, the Windows Media strategy wasn't working. Consumers didn't want a confusing array of devices and stores and formats and DRM schemes that didn't always work together. They didn't want to think about this stuff at all! They just wanted to rip their CDs, maybe buy a few tracks online, and take all this stuff with them.
My guess: PlaysForSure would have been just as dead. Microsoft would have created a new music brand, a new logo program, new hardware specs for the devices, new client software to replace the Media Player for syncing and library organization (like the Zune client), and a new store that could only be used with this new software and these new devices (like the Zune Marketplace). In other words, there still would have been a clean break between old and new. The only difference is that Microsoft wouldn't have manufactured and marketed the actual Zune devices, and consumers might have had a greater choice of hardware from the get-go. This might have led to quicker innovation--for instance, some forward-thinking OEM probably would have created a touch-screen "Zune" by now.
The only question: after the PlaysForSure debacle, who would have gone along? Which is probably why Microsoft built the Zune hardware in the first place.
Microsoft's annual Financial Analyst Meeting, in which the company goes over its past fiscal year's results and highlights areas of focus for the coming year, is always a good opportunity for tea-leaf reading.
Microsoft's Robbie Bach, head of the company's Entertainment and Devices business.
(Credit: Microsoft)After CEO Steve Ballmer's introductory speech, in which he spent a lot of time talking about Microsoft's online business, efforts to compete against Google in search, and the aborted Yahoo tie-up, Entertainment and Devices President Robbie Bach was up. He talked about nearly everything in his business division. He started with the upcoming Xbox Live redesign. He talked about Xbox games. He spent a long time talking about Windows Mobile and the competition with Apple and RIM, as well as new forms of advertising for mobile phones. He talked about Microsoft's IPTV business, the Surface computing table (which is beginning to appear in real-world deployments), and the company's automotive platform.
Zune? It appeared on one slide, but Bach mentioned it for only about five seconds--blink and you'd miss it. Microsoft's showing the device in a nearby demonstration area, and the company has assured me that they're planning some sort of update later this year. But still--4 percent market share, combined with a new urgency on the mobile phone side, and I've got to wonder how much more effort Microsoft's going to put into the Zune in this upcoming fiscal year.
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