Microsoft expects Zune catchup to take five years

Stan Beer
Friday, 28 July 2006 06:35

Your IT - Home IT

Microsoft, which expects its entertainment and hardware division to continue losing money until 2008, admits that its Zune music player will take years and cost hundreds of millions of dollars to make an impact in the music player space.

Robbie Bach, president of Microsoft's entertainment and devices division, believes that it may take Microsoft up to five years to get into the music player business.

However, Bach acknowledges that the cost will not be as great as it has been thus far with Xbox because Microsoft loses money on the subsidized game consoles whereas the Zune hardware is profitable.

That said neither Bach nor anyone else at Microsoft have revealed how the company plans to attack the issue of the huge existing installed base of iPod users, whose music cannot be legally transferred to other players.

There have been suggestions that Microsoft may buy Zune users by subsidising the transfer of music from iPod players.

However, with 50 million iPods in the market by the time Zune is released, the cost of transferring music would be prohibitive even for Microsoft.

There has also been some speculation as to whether Microsoft can make Zune compatible with iPod music. It is hard to see how this could be done with a proprietary system like iPod.

There have also been suggestions that the moves in Europe, led by France, to force Apple to make iTunes music available for all MP3 platforms, will push Apple into opening up its system and this would help Zune.

Although Europe is a huge market, Apple may leave it rather than sacrifice the business model that is behind its success.

This may be Microsoft's way into the market. It has the money and profile to compete successfully on a level playing field in Europe, especially if Apple was no longer a player.