David Carnoy over at Crave has already covered the latest crop of Zune rumors first published by TeamXbox. To summarize: the next portable device from Microsoft could combine a digital media player (like Zune) and a portable gaming device (like Sony's PSP or Nintendo's DS lineup) in a single device with a high-def touch screen. TeamXbox goes a little dreamy with the speculation, suggesting that this gadget might have built-in WiMax and connectivity to the MyPhone data storage and synchronization services that Microsoft announced for Windows Mobile 6.5.
T3's rendering of a Zune-Xbox portable gaming console.
The company isn't talking, but I can easily believe that Microsoft's going to release some sort of combination Xbox-Zune device. Here's why.
Some time in 2007, J Allard--who headed the Xbox business as it was starting up and is credited with much of Microsoft's success beating back Sony in the console space--moved into a new job and disappeared from public view. His job duties include coordinating product development across the whole Entertainment & Devices group (that's Xbox, Zune, Windows Mobile, and Windows Media Center, among other things), and overseeing incubation of new products. I can't imagine he's parked in some pasture somewhere--the guy's too smart and well-regarded at Microsoft, and has actual direct reports. I've heard rumors his team was looking into portable gaming devices but abandoned their plans. I've heard rumors that his team was designing the interface for the "Zune phone." But publicly--the cone of silence has been in place.
Flash-forward a couple years. Beginning in late 2008, Microsoft split the Zune team apart into two: hardware and software-plus-services. (CNET's Ina Fried broke the news in February.) As the TeamXbox article suggests, and Microsoft's rhetoric constantly reminds the world, the company sees software-plus-services as its future. The manager in charge of the Zune software-plus-services is Craig Eisler, and his official duties include creating a new platform for enabling the playback of digital media across Windows, Windows Mobile, and Xbox.
There's the key: Microsoft is taking the Zune software and services and making them the delivery and playback mechanism for digital media across all its products. I wrote about this before, in the context of the Zune Marketplace moving to the Xbox.
But why not integrate in the other direction as well--take gaming to the Zune?
Here's what I think happened. Allard's group has been incubating. Now, the incubation period is done, and the latest reorganization is getting teams in place to churn out actual, sellable products. The first such product would be the Zune HD/xYz/Xbox-Zune device we're hearing about now, which could come out as early as fall 2009. The second such product would be the "Zune phone," manufactured by third parties (probably HTC and LG) and featuring design specs similar to the Zune HD. That will probably have to wait for Windows Mobile 7, which means it won't be out until next year.
Regarding the WiMax speculation--it's not that outlandish. Samsung announced a WiMax touchscreen device in March. TeamXbox notes that the only WiMax phone available now is made by HTC--and guess who's responsbile for manufacturing more than 80 percent of the Windows Mobile phones shipped so far?
Of course, I'm compelled to note that we've heard this all before...more than two years ago, in fact, another publication wrote about a well-placed source who swore Microsoft would announce a WiMax-enabled Zune phone in March 2007. Didn't happen.
Most of Microsoft's announcements Monday at the Mobile World Congress in Barcelona were leaked weeks ago, so there weren't any big surprises.
Now where the heck's the Zune icon on this thing?
(Credit: Microsoft)There's a new mobile OS, Windows Mobile 6.5, that's supposed to be friendlier than the notoriously clunky earlier versions. (ZDNet's mobile maven Matthew Miller is still disappointed.)
There's a set of cloud-based services for synchronizing data like contacts and photos. (Although apparently v.1 will not be connected with the Windows Live or Live Mesh platforms or services, so the vision of unified data sync across devices is still a whiteboard drawing as far as Microsoft products and services are concerned.)
There's a marketplace for Windows Mobile apps. There's a brand change--the phones will be called "Windows Phones," although the OS is still "Windows Mobile." (Confused?) Oh, and the company has finally acknowledged that competing in the consumer space is important, a year and a half after CEO Steve Ballmer dismissed the iPhone as a "$500 subsidized item" that had "no chance" of gaining any significant market share.
Assuming that any of this makes you want to run out and buy a Windows Mobile phone, too bad. None of it's available until late this year.
I'll give Microsoft some credit for envisioning and beginning to build a free alternative to Apple's MobileMe service. And the mobile marketplace is a no-brainer. But Monday's announcements just underscore that Microsoft has no answer to the iPhone.
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There has been much blogorrhea on Tuesday over Apple co-founder Steve Wozniak's offhand comment to the Telegraph that the iPod would go the way of the transistor radio and the Sony Walkman, becoming a cheap and eventually boring commodity product.
iPod? Isn't that the music application for the iPhone?
News flash: it's already there. Sure, Apple will still sell millions of units every quarter, and it might even continue to grow unit sales and revenue for a while. But it's clear from Apple's most recent announcements that the company no longer views the iPod as its main vehicle for innovation--new (old) form factors, colors, and one interesting update are the kind of incremental tweaks you make to a cash cow product line, not the groundbreaking innovations that move markets forward.
Apple passed its mantle of innovation to the first iPhone a year ago, and that's where the action's going to be, from now on--multifunction devices with interesting new interfaces (touch is just the beginning) that act more like tiny computers than single-purpose devices. iPod? That's just another application icon on the iPhone deck.
(And here's something you'll never hear in a presidential debate: I was wrong. Specifically, I was wrong when I suggested that consumers would continue to favor single-function devices and that the iPhone's bet on convergence would sink it. I underestimated the power of the touch screen and Apple's relentless focus on ease of use, which have made the iPhone the first ultraportable computer for mere mortals.)
I appreciate Microsoft's latest Zune innovations, but they needed to be in the product when it launched two years ago. MP3 players are becoming a commodity in which low price overrides new features--especially given how tight consumer spending is likely to be this holiday season. Microsoft isn't into commodities, unless it's got dominant market share, so look for the company to turn its attention to building a more competitive version of Windows Mobile. Zune will live on--as the music playback application for Microsoft's mobile phones.
According to a report in the Hollywood Reporter by way of Reuters, Microsoft is talking to talent agencies and production studios in Hollywood in hopes of licensing some exclusive video content for the Zune. This isn't a first for Microsoft: the company has exclusive Internet-only shows on MSN Video through its MSN Originals program, and just last month the company announced a plan to offer original short movies through the Xbox Live service.
Are these rumors true? I have no idea. Will they help the Zune? Probably not. Exclusive video makes sense for a game console because it's already connected to a TV. But video on a tiny screen doesn't have the same appeal. I can see how an occasional sports highlight or funny video could lighten a commute--assuming you live in New York or some other large city with useful and abundant public transit--but it's not something that's going to convince users to buy a Zune instead of an iPod. Instead, I think Microsoft's best hope is to repurpose the Zune brand into the consumer mobile phone space to present a credible alternative to the iPhone. I'm hearing rumors from lots of sources that the company is well on its way down this path--there might even be a Zune client for Windows Mobile phones in time for the 2008 holiday season.
A quick follow-up to my earlier post about the lack of Zune mentions in Microsoft's presentations to financial analysts today. Mobile market follower James Kendrick blogs that Microsoft is holding its first serious internal meetings to coordinate the development of a Zune phone.
A completely unofficial mockup of a possible "Zune Phone," put together by a fan in the ZuneScene forums.
(Credit: ZuneScene)I don't have any inside knowledge about these meetings, but I don't doubt it for a second. Kendrick's posting, which is based on an unsourced rumor, suggests that any such phone will be based on Windows Mobile 7, will have a touch screen, and will feature connections to Windows Live services.
My guess: there will be plenty of Windows Mobile 7 phones in lots of form factors, and all will feature built-in connections to Microsoft's online services--that's the best chance they have to step ahead of the iPhone, whose MobileMe service is drawing flak even from big Apple fans. At the same time, the company will probably create hardware reference designs for one or two phones specifically designed for consumers, and meant to compete against the iPhone. These phones will connect to the Zune PC client software and Zune Marketplace, but otherwise will bear little resemblance to Microsoft's MP3 player. Touch screens are a must, but Microsoft will probably contract the manufacturing out--just like Danger did with its Sidekicks. (Microsoft acquired Danger earlier this year.) Likely timing will be 2009--I don't think they can get it out this year, unless this project's a lot farther along than Microsoft's letting on.
A few days ago, I posted about Instinctiv's Shuffle application for the iPhone and iPod Touch. It's an interesting piece of software that addresses a growing problem for some discerning listeners--how to get a meaningful playlist without having to program it song by song--but it only works on so-called "jailbroken" devices.
Instinctiv's FAQ alluded to problems that made it impossible for it to use the iPhone software developer kit (SDK), but I was curious to hear more, and Monday I had a chance to talk with Instinctiv co-founders Justin Smithline and Peter Brodsky.
As Brodsky put it, "Apple's not really releasing an iPhone SDK." To paraphrase his explanation, the iPhone runs Mac OS X. Apple could simply have allowed developers to write applications to that platform--that's more or less how jailbroken apps work--and let the developers figure out how to distribute them. That's the traditional software development model.
Instead, Apple is trying assert tighter control over the iPhone by allowing only code-signed applications to run on it. The only way to get your application code-signed is by participating in Apple's iPhone Developer Program. Which requires--among other things--developers to use the new SDK.
Developers can download the SDK for free to see whether they're interested in applying to become an official iPhone developer. But Instinctiv says the SDK was useless to them because it doesn't provide a way for applications access the music library. (One of many restrictions it imposes.) According to the Instinctiv co-founders, this is not about protecting users from badly written apps--it's possible to write an "approved" app with the SDK that degrades performance on the iPhone--but is being done strictly for business reasons.
I'm not a developer and am not qualified to evaluate this claim. But even if it's correct, so what? Apple spent a lot of time and money creating the mobile phone that everybody wants, and absolutely should be able to control the user experience, enforce exclusive arrangements with its carrier partners, and extract fees from third-party application developers.
But this strategy works only as long as there's no viable competition. Right now, there are plenty of other mobile platforms that third-party developers can write applications for--Symbian (which Nokia recently bought in its entirety and turned open source), RIM's Blackberry, and Microsoft's Windows Mobile just to name three. But those platforms either have inherent flaws--the Windows Mobile UI comes to mind--or the devices they're used on don't have the combination of style and features that the iPhone is becoming known for.
Google's taking the opposite approach of Apple, building its Android mobile phone platform on open-source software such as Linux and promoting it heavily to third-party developers. Instinctiv is bullish on the platform, and has already designed a version of its Shuffle app for Android.
But I'm pretty skeptical about Android's chances of changing the world. When buying a phone, are consumers really looking for a large choice of applications? No. They're looking for a cool phone that does a few things very well, and a service provider that offers reasonable service in the widest possible range. The iPhone has the edge in hardware design, it has most of the features and applications that most people want, and while AT&T's service isn't perfect, neither is anybody else's. Android might have been great five years ago, going head to head against Symbian and Windows Mobile in their infancy. But competing against the iPhone's unified array of hardware+software+online services will be a tough task for any company.
How long have we been reading these Zune Phone rumors? Microsoft still hasn't officially announced any plans to build an iPhone, but yesterday's corporate reorganization clearly points that way.
This mockup of a smartphone UI appeared in a June 2006 Microsoft patent filing.
(Credit: Microsoft patent application)Microsoft has reason to be worried. After about five years of plugging away with Windows Mobile, Microsoft's managed to create a reasonable competitor to Research in Motion for e-mail-enabled phones. But that's about it. In contrast, Apple launched the iPhone in June 2007 in the U.S. and by Q4, it was already the number-two provider of smart phone (or "converged device") OSs in the U.S., with 28 percent market share--ahead of Microsoft's 21 percent and behind RIM's 41 percent. Worldwide, despite an October European launch and a smaller global footprint than its competitors, Apple managed to reach 7 percent share worldwide, just behind RIM's 11 percent and Microsoft's 12 percent , although all of these folks are bit players compared with Symbian's 65 percent share. (All numbers courtesy of a February 2008 report by Canalys.)
Microsoft's acquisition of Danger has already been the subject of much speculation on CNET and elsewhere, so I won't spend too much time pondering how long it will be until Microsoft kills the Sidekick and its Java-based OS (as long as it takes to build a Windows-based version) or guessing about the acquisition price ($500 million sounds high, but possible given the premiums Microsoft has been offering lately).
The interesting part is buried in yesterday's press release announcing the latest Microsoft reorg: the company has appointed Roz Ho to lead the Danger integration. Ho has spent the last few months in an unspecified "special projects" role under J Allard, Mr. Zune himself. But before that, Ho was the longtime leader of Microsoft's Mac Business Unit, which means there's probably no Microsoft executive more familiar with Apple. Connect the dots and they spell iPhone.
So how will Microsoft go about it? My guess is they'll whip out some sort of Zune client software for the current iteration of Windows Mobile as a stopgap measure, while simultaneously building a completely new device that combines a consumer-oriented UI, mobile services, and an associated hardware reference design. They will probably brand it as a Microsoft product (like Zune and Xbox), instead of merely licensing the software (Windows Mobile) or software+reference design (the short-lived Portable Media Centers). Sidekick's manufacturing partners, Sharp and Motorola, might be involved. Timeline: probably not until 2009, although the Windows Mobile Zune client could come out this year.
Microsoft's mobile phone strategy and its digital media strategy often seem to be in different worlds. For mobile phones, the company has focused primarily on the Windows Mobile OS, a few mobile applications (Outlook being the most useful one), and--more recently--online services such as Live Search that can be used on many mobile platforms, including (gasp) the BlackBerry (the No. 1 competitor that Windows Mobile has in its sights).
For digital media, the company first pursued its partner-driven approach, promoting the Windows Media Platform for both online stores and devices, and then went with the end-to-end approach of Zune. At times, there's been overlap--for example, Verizon uses the Windows Mobile platform to power its VCast service, and there is a version of the Windows Media Player for Windows Mobile. (Does anybody use it? I have no idea.) But there hasn't been any big coordinated effort to push digital media on the Windows Mobile platform, and certainly nothing resembling the all-in-one experience of the iPhone.
On Monday, Microsoft announced its intent to acquire Musiwave, a provider of digital music services--downloads, ringtones, and so on--to phone carriers, mostly in Europe, although Canadian provider Telus is also a customer. The official release name-drops several Microsoft brands that could make use of Musiwave's services, including MSN, Windows Live, Windows Mobile and--yes--Zune.
So is this going to drive the long-rumored Zune Phone? I doubt it. It looks like this possible acquisition was driven by the Windows Mobile group, which still believes that the best long-term business model for Microsoft is to sell platform software and services to as many carriers and handset makers who will buy it. Zune and Xbox aside, Microsoft still doesn't have the DNA of a hardware company--it would prefer to sell huge volumes of broad-market, horizontal software. The margins are higher, the cross-pollination with its other pure-software businesses is more effective (if Outlook Mobile worked only on Microsoft-built phones, how would that help the company sell more e-mail servers to corporations?), and there's no dominant handset maker that threatens another core Microsoft business (unlike Xbox, which responded to the threat that network-connected game consoles would cut into consumer PC sales, and Zune, which responds to the iPod halo effect on Mac sales).
Two possibilities seem more likely to me than a Microsoft-built Zune phone. One, Microsoft could offer Musiwave as a turnkey service for operators to add mobile music services quickly and easily--the carriers get to retain control of the billing relationship with the consumer, which they're loath to give up, and Microsoft sells infrastructure software (Windows Server, for example) as facilitating technology.
Or, Microsoft could in fact be building a Zune client for Windows Mobile, or for various mobile platforms (as they did with Live Search). In that case, Musiwave might provide some sort of necessary technology to make the Zune Marketplace available via third-party carriers. Although I can't imagine the carriers being too happy about that, it's better than losing customers to the iPhone.
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