While it has been rumored for some time, Microsoft has now officially confirmed that it is developing a digital media player, code-named Zune, that will compete with Apple’s iPod. According to media reports, Microsoft officials are looking at the portable digital media player as an important piece of the puzzle that links all Microsoft-enabled devices.
Chris Stephenson, Microsoft’s General Manager of marketing for MSN Entertainment Business said, in relation to the Zune project, "Whether it’s a portable media device, or a phone, or the Xbox or Media Center PC, the idea is you can access your entertainment from anywhere."
Specific details of the product have yet to be released but what has been confirmed is that the digital media player will contain a hard drive and Wi-Fi capability enabling users to view and share play lists while on the move, something that iPod users, to date, are not able to do.
While the record labels have welcomed increased competition in the digital music market, Apple’s dominance of the sector is unlikely to be challenged for a while. Apple’s current market share in the US is over 75%, and recent data from NPD Group shows that the most popular MP3 unit on the market in 2006 is Apple’s 30GB Black Video iPod.
Digital music player penetration has grown markedly over the last 12 months, according to Solutions Research Group, but there is still considerable upside to the market for new entrants like Microsoft, with less than 30% of the population currently owning a player.
Demographic data from Arbitron/Edison Media Research shows that iPod/MP3 owners skew toward males aged between 25-44 but MP3 owners are quickly moving beyond the classic ‘early adopter’ demographic.
Apple’s success in the digital music market has been built on the iPod/iTunes combination. iPod users have been prepared to forgo audio quality and certain usage rights for the convenience and user-friendliness of Apple’s service. If Microsoft is to take market share from Apple it will need to match everything that Apple has to offer as well as offering greater flexibility in price and usage rights. Microsoft’s experience in the video gaming market with its X-Box product will help ensure it comes to market with a strong offering of both hardware and content.