It's no secret - the Zune could be better than the iPod and still languish as an also ran for years. iPod has a huge marketshare, a solid brand, and a following whose passion would be the envy of most terrorist organizations. The "second mover advantage" sweet spot time has come and gone. iPod is firmly established, and "feature parity and a bag of chips" won't win any marketshare. The Zune WiFi feature is a good example - it's a cool feature, but it's been written off as to heavily locked down by DRM restrictions; the iPod doesn't have any WiFi and the Fairplay system is pretty restrictive. My point is that features alone won't beat brand loyalty.
Microsoft needs to change this game to win.
Michael Elgan presented a pretty good answer to this problem in Computer World today in "Zune: So you want to be an iPod killer". The basic idea - Zune should beat iPod the same way Windows beat Mac OS, by providing an open platform:
After all, the Mac is more elegant than Windows, but most people prefer Windows. And that's how Microsoft can kill the iPod: Make the Zune more like a Windows PC. [...] Microsoft will never beat Apple at its own game. But the reverse is also true: Apple can't win at the Microsoft game. If Microsoft turns Zune into a media-optimized, extensible mini-PC that really works, the iPod is as good as dead.
Crazy? Not so much.
The Zune already runs a stripped down version of Portable Media Center, which is based on Windows CE 5. They've already announced plans for a Zune phone, which would undoubtedly leverage their experience with the Windows Mobile platform. The Zune 1.0 may run a stripped down OS, but the hardware has tons of potential.
Microsoft brings a lot more to this game than the chip lead and a history for taking over markets through their system of relentless refined releases. They bring a tested mobile operating system, a great development environment (Visual Studio) and platform (.NET), and legions of developers. Zune will never beat iPod as another music player, but it can definitely win if it's a great music player that happens to be as hackable as a PSP.
To do that, they'll need to do three things:
- Make it hackable
- Keep it small and cheap
- Keep music companies reassured that the hackability won't jeopardize their DRM
Make it hackable
Well, the hardware is great, and the base operating system has what it takes. This seems like the easiest part.
Keep the Price Point Low
Part of the reason the Portable Media Center thing never took off was the high price and big size. These things were out way before the iPod, but they were big, expensive beasts. iPod took off because it was cheap and tiny. The best way to do this is probably through - you guessed it - incremental upgrades, Microsoft's bread and butter. The best way to keep the price point of electronics low is by taking advantage of economies of scale, and to do that you need marketshare. This makes the Zune 1.0 (price and features) make a lot more sense, if you look at it as the first version of a 10+ year strategy - its primary goals need to be in building the market base, and building the store selection (which is best done with a demonstrated marketshare).
Keep the music companies on board
Apple and Microsoft don't add DRM to their products because they want to, they do it to get the music companies to provide the music for their stores. I've had plenty of exposure to the music industry to know how they work - it's all about getting the most money they can get for their investment. Forget that we all know it's futile and ignorant (the same music they wrap in DRM goes from CD to the filesharing networks without a struggle), they're playing a numbers game and trying to slow their decline by making it a pain in the neck to copy music. Fine, I buy used CD's and rip them to MP3.
So keep with me when I say that it's good for all of us if Microsoft and Apple throw the music execs a DRM bone.
Well, the hardware Zune runs on is a Trusted Platform, meaning it has a TPM crypto chip which can prevent unauthorized modification of the software. I think that's good news, as long as Microsoft plays this smart. The trick will be to open the Zune platform up enough to get developers interested, and just locked down enough to keep the music companies on board.
An extra card up Microsoft's sleeve - they don't have to advertise just how hackable the platform is. It would be great to make it officially modifiable via Visual Studio, but they can just document the parts of the platform which the music industry won't mind.
To see where the Zune will go, look at the Xbox
Well, sure, the Zune's being run by J Allard, the same guy who runs the Xbox team. I'm really talking about the general Xbox product strategy, though - get one out there to build marketshare, get a very nice follow on version, and then work on opening it up to developers.
What do you think?