Microsoft Zune HD: Close But No Cigar

Microsoft Zune HD

When Microsoft and Apple first started competing, Apple was differentiated by having a few products that did a comparatively few things very well. When Steve Jobs came back to Apple (which had clearly drifted from those roots in the 90s) he took the company back to having a few products that did fewer things but all of them very well and, particularly for the iPod, this made the market for them.

But, if you look at the new Zune against the iPod line, it is almost the reverse of the typical Microsoft and Apple formula. Apple has a broad range of products that do a lot of things, while Microsoft has basically one design that does a few things better than Apple does. And, strangely enough, Microsoft is competing for around 10 percent of the Market while Apple is approaching 90 percent, depending on whose numbers you believe.

Apple Defines the Market

In one clear way, the analogy works, and that is that Apple currently defines the portable media player market much like Microsoft continues to define the PC market.

Apple currently has a line of products all of which work with iTunes, and some of which work with Apple’s accessory infrastructure – the shuffle is the exception.

Currently, because the camera and FM radio didn’t make it into the iPod Touch, the iPod Nano is arguably the top iPod this year with video recording, FM radio with pause, and a size that makes the fitness features really stand out.

Granted the iPod Touch remains its premium offering, and with it, you get access to the iPhone application store and, largely because you don’t have to deal with AT&T. I’ve generally thought the iPod Touch was a better product than the iPhone was – you get most of what you want, and you can keep your preferred carrier and phone. Be as it may, the application store is also a defining part of the iPod line, though it isn’t available for most of the iPod products. This product is also the closest to the Swiss Army Knife approach that Microsoft generally takes to the market and yet this remains perhaps the most desirable product in the class at the moment.

But, since Apple defines the market and does a good job focusing folks away from line inconsistencies (cameras, FM and Wi-Fi), Microsoft or any vendor who wants to play in this Apple defined market has a lot of difficulties because the features aggregate. A typical reviewer now may want to see a camera, FM radio, application store (with games), and iTunes-like support in any challenger. It’s not fair, but there isn’t anyone with authority that says it has to be. As a result the bar isn’t just high, it is impossibly high.

The Zune HD

The Zune HD falls between the iPod Nano and iPod Touch in specs, while exceeding both in some key areas (but missing a camera) though it is now priced closer to the iPod Touch. Where it stands out is in three areas: it has built-in subscription-based music (all you can eat for a monthly charge), it has the best display currently on the market (also the most expensive), and it has a high-definition FM radio. It is a very attractive product and, uncharacteristically for a Microsoft offering, extremely easy to use. It actually outputs high definition (720p) video thanks to the Nvidia Tegra graphics system and HD videos on the device will actually look good on a HDTV. I’d like this feature better if TVs in hotel rooms gave you access consistently to the HDMI port (and they don’t).

For a price comparison the iPod Touch is $199 for 8GB (there is no 16GB), $299 for 32 GB and $399 for 64GB .The iPod Nano is $179 for 16GB, the Zune costs $219 for 16GB and $289 for 32GB. It’s a little more than the Nano, with similar memory and a little less than the iPod Touch, with similar memory at the high end.

Like the Nano, it has some unique 3D games and applications (Project Gotham Racing: Ferrari edition, Vans SK8, Pool Service and Audiosurf Tilt) coming from the early use of its application store called the Zune Marketplace (similar to the Xbox version). Additional applications on the horizon include Twitter and Facebook, for Zune, but this is still a long stretch from the massive number of applications available for the iPod Touch.

Much like it is with iPods and an Apple store where you can get things like engraving for free, the best place to buy a Zune is from Zune Originals, where you can get custom colors and apply custom etched art and text. Like the iPod, it has accessories that work with it, but it won’t work with the existing iPod accessories iPod users have, or most cars with built in docks.

In a market defined by a line with a rich ecosystem, it is a single well-differentiated product with a more limited ecosystem.

Nicely Differentiated, but so What?

If this were a competitive market, then the Zune would be a product that fit into a niche between the iPod Nano and iPod Touch, standing out in some key areas like sound and video quality and subscription service. But this is a market owned by Apple, and to compete in such a market you have to break the hold the dominant vendor has on it. The new Zune doesn’t do that. So, for the small non-iPod crowd, this is a kick ass product, but for the iPod majority it probably isn’t even that interesting. In this case, Microsoft may want to take a page from Apple’s Mac vs. PC ad campaign, and make changes to understand how to move better against Apple.

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