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Microsoft Taking Long View with Zune

At its annual day-long meeting for financial analysts in Redmond yesterday, Microsoft executives tried to put positive spins on its current business directions, attempting to allay concerns Windows Vista will arrive late and be adopted slowly and that Software as a Service (SaaS) is a viable business model for the future. And Microsoft also revealed it doesn’t expect it’s forthcoming line of Zune digital media devices to swiftly conquer the market, leaving all others trembling in fear. It also declined to show or demonstrate a Zune device to analysts: a surprise, considering Microsoft says it will reach the U.S. market this fall.

Robbie Bach, president of Microsoft’s Entertainment and Devices Division, made the company’s first public comments since Microsoft confirmed the existence of the Zune project last week. “This is something that’s going to be a three-, four-, and five-year investment,” he said, noting that development and marketing costs for Zune were already projected into the hundreds of millions of dollars. The first Zune device is intended complement Microsoft’s other digital media products, including the Xbox 360, Windows Media Center Edition, and online operations like MSN, Windows Live, and Xbox Live.

Bach touted community aspects of the Zune platform: “When you go to any music site today, what do you do? Well, today, you can buy music, but it’s hard to meet your friends there, it’s hard to share music there, hard to share music experiences there, hard to find out information about your favorite bands, and what they’re doing, and where their next concert is, and how you can get there. That whole community aspect, which is what we do on Xbox Live, absolutely applies in other entertainment spaces as well.”

With the Zune, Microsoft risks alienating partners by competing directly with other hardware makers. And, rather tjan sticking with its own PlaysForSure initiative/propaganda, the Zune will take an Apple-like approach to digital media, where Microsoft supplies the hardware, software, and service. Microsoft’s CEO Steve Ballmer said, “For better and for worse, there’s no other company that would be attempting to get into that business at this time. Nobody else has the optimism, nobody else has the financial resources, and you might say nobody else, you know—well, let me just leave it at that.”

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