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Microsoft takes on Spotify at E3 with Woodstock music service

Poor Zune. What chance did Microsoft’s little media player and its attendant digital music and video store have in the face of the crushing monolith that is Apple and iTunes? In all the ways that the Xbox brand, the Xbox 360, and Xbox Live have succeeded over the past eleven years, Zune has failed. The company already stopped making actual Zune handhelds. Now it’s time, finally, for the Zune Marketplace itself to die. (Microsoft announced in February that it would discontinue the Zune and Windows Live brands once Windows 8 rolled out.) From those ashes rises Woodstock, Microsoft’s new digital music service.

The Verge reported on Wednesday that Microsoft will unveil its new digital music service for Xbox, Windows Phones, and Windows 8 PCs at the E3 expo in June. This service in the same Spotify-style competitor that rumors first hinted at back in February. While the service will make an appearance at E3, it will not be commercially available until later in the year when Windows 8 releases.

Woodstock will be integrated at a fundamental level with Facebook, letting linked friends share songs and playlists. It’s also said that Woodstock will offer a service akin to Apple’s iTunes Match that lets users “scan and match” their libraries of digital music, automatically identifying those songs in their Woodstock accounts.

Microsoft isn’t commenting on the rumors about Woodstock, but this information jives with Microsoft’s media strategy in recent years. The company has aggressively expanded its different entertainment options on the Xbox, branching off predominantly into television. This year alone, Microsoft started offering HBO Go, Major League Baseball Channel, and Comcast’s Xfinity on demand video service. The push into multimedia has been working as well. Xbox marketing and strategy head Yusuf Mehdi said in March that Xbox owners are spending an average of 150 hours per month watching television and just 84 hours per month playing games. The Xbox finally lived up to its destiny as a living room entertainment hub and not just a game machine.

Music is a very different beast than television though, and Microsoft faces a steep uphill battle in convincing users to embrace its new service. Old Zune Pass subscribers will naturally make the leap, but how will Microsoft lure away Spotify’s users? Since it will likely continue selling individual tracks as downloads too, does Microsoft believe it can somehow break Apple’s 70% control of the downloadable music market? Is the Xbox brand that powerful?

Just over a month to go until E3. Plenty of time for Microsoft to answer those questions.

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