Mixed reaction to Microsoft Zune 'iPod killer'

Analysts have given mixed reactions to Microsoft's Zune iPod rival, plans for which were officially confirmed today. 

Michael Gartenberg, at Jupiter Research, believes that Microsoft faces three challenges with Zune: creating a technically competent challenger; creating a lifestyle device; and creating a platform.

Gartenberg argues that producing a competent challenger to the market is the easiest task.

Apple has already shown what the market wants and, by focusing solely on music and video and omitting game functionality, the Zune is going to be easier to market.
On the lifestyle front, Microsoft could have a problem. Despite following the lessons learned with Xbox by creating a separate brand distanced from Microsoft, Gartenberg wrote on the Jupiter Research blog that it is going to be "hard to create the same level of cachet that Apple has with the iPod".

Microsoft must also recognise that the iPod is more than a standalone device, and has many official and third-party accessories.

"No doubt [Microsoft] will work hard to make sure that they fill some of the gap directly with first-party stuff, but this is one area where consumer choice goes a long way in making the platform a success," wrote the analyst.

Gartenberg is largely positive, however. "When Microsoft decides to enter a market, you cannot ignore the impact it will make," he said.

"It is likely that by force of will, and spending lots of money on marketing with a high cost of acquisition on new users, they will capture some market share."

However, Carl Howe, at Blackfriars Communications, disagreed that money can buy market share.

"Microsoft spent in excess of $10bn on MSN, and it has not really made a dent in Yahoo or AOL," he wrote on the company blog.

"And it's working on similar results with Xbox 360, where it lost $1.3bn last year promoting a platform on which it loses more money the more units it sells.

"Now we know why Microsoft notified Wall Street that it was going to be spending more money this year. This programme has red ink written all over it."