Zune: mPod or iClod?

Microsoft_argo_playerThe incredible pace of innovations at Microsoft continues.

As the graphic at right imply, the new MP3 player from Microsoft essentially looks like an iPod, but with a bigger screen.

They called this latest in their series of original ideas the "Zune," but I prefer the name given it by Wired:

"Prior to Friday’s announcement, some were calling the new device the "mPod"
(Microsoft + iPod) killer. But given Microsoft’s typically tone deaf approach to
usability and Apple’s market lead it will be a miracle if its next nickname
isn’t the "iClod" (iPod + clone + awful)."

I don’t think that many people would agree that hardware or software or user experience or customer service is their strong suit; Business methods are Microsoft’s forte.

Here’s a run down on the Zune’s rumored features:

  • It would have wireless Internet capabilities, for downloading tracks
    directly to the device, according to Bloomberg

  • The device could be launched by Christmas, although the company reportedly
    hadn’t yet briefed key retailers as of last week, casting some doubt on that
    schedule, according to The
    New York Times

  • Led by Xbox executive J Allard, the project, code-named "Argo," reflects a
    broader strategy that would extend the Xbox brand into a variety of
    digital-media products, according to The
    Seattle Times

  • Microsoft may be considering giving people free alternative copies of tracks
    they’ve purchased from the iTunes Music Store, for use with the Microsoft
    device, to help convert iPod users, according to some reports.

  • The final product name may be the "Zune," according to Gizmodo.

How do those guys at MSFT keep thinking these things up? Its astounding!


UPDATE July 25,2006 3:30pm

By popular demand: The parody — done by Microsoft’s own marketing team — of how MSFT would have marketed the iPod:


Microsoft IPod ‘Killer’ Is Doomed
Eliot Van Buskirk
Wired, 02:00 AM Jul, 24, 2006

Microsoft’s "Argo" / Xbox wireless portable media player
Ryan Block
Engadget, July 10th 2006 4:52PM

Microsoft Dubs Upcoming MP3 Player ‘Argo’ and Mimics iPod’s Design
David Silverberg
DigitalJournal.com, July 10th 2006 4:52PM

Tracking Microsoft’s portable media device
Todd Bishop
Seattle Post Intelligencer, July 11, 2006 9:20 a.m.

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What's been said:

Discussions found on the web:
  1. Si commented on Jul 25

    Barry is that what it actually looks like? If so it says a great deal about microsoft. Invention or originality?? Scary that a company with that much loot could just be so, so, well crap.

  2. steve j commented on Jul 25

    Man you Apple zealots are taking this news really hard aren’t you?

  3. devo commented on Jul 25

    Hopefully it’ll have all those great iPod innovations:

    Easily scratched – check. Overpriced – check. Pathetic battery life – check. Music management softare that crashes all the time – check. Locked in, proprietary DRM – check.

    I project a winner.

  4. debbie21 commented on Jul 25

    When are we going to see your response to Altucher’s 52 week low analysis? It looks like you were wrong.

  5. Si commented on Jul 25

    Steve, really not a apple zealot. Just happen to think as a potential investor that a company such as microsoft should try and come up with something new, especially when you consider the amount of cash they have to throw at a project.

  6. Bynocerus commented on Jul 25

    Remember all the buzz surrounding the Dodge Neon when it first came out? Remember how people were calling it the “Japan Killer”? How’d that turn out anyway?

    Tell me the design of this thing is a farce. I know Mr. Jobs can afford some pretty good IntProp attorneys, and if this is what the I-Clod is going to look like, something tells me they’re about to get even busier.

  7. fiat lux commented on Jul 25

    “Zune” is a terrible name.

  8. Barry Ritholtz commented on Jul 25


    I wrote up a post questioning his findings at RM — I am now in the process of trying to replicate what he backtested.

    I remain unconvinced by his methodology or findings — it simply contradicts too many other studies I’ve seen (and hence, why i am trying to replicate his findings)

  9. babycondor commented on Jul 25

    I agree Zune is a terrible name, I like xPod better because it’s funny.

    I never got on board the iPod train because of the proprietary music format. Almost all my music library is in wma format. Converting it would be a pain, and why should I have to?

    I predict a win for MSFT on this one if it manages to avoid the pitfalls enumerated by devo. That being said, its real competitors are Creative and iRiver, not Apple.

  10. Alaskan Pete commented on Jul 25

    Re: 52 week lows. The guy used the Naz100 which has a survivorship bias via it’s very construction. What’s more likely to fail…a mega cap, or a small cap?

    Re: This iClone: Does it take AA batts, or only a built-in rechargable. That’s my sticking point. I take long backcountry trips and all my headlamps, GPSs, etc take AAs. I can’t recharge in the woods. Would have bought an iPod long ago if they offered a model that uses AAs or AAAs. My main home machine is an IBook, and I really like apple products.

  11. BDG123 commented on Jul 25

    Ok, iClod is hilarious. You get an A+ for originality. I would really like to see Apple succeed in this space and become a dominant player long term. Unfortunately, I believe we’ll look back on MP3 players as we looked back on the Apple Newton as a very crude single use device that started the transformation into digital content. And, as such, Apple’s fortunes and future are far from guaranteed.

    I wouldn’t want to work under Jobs’ brow beating abusive management style but I relate to his perfectionist tendencies and desire to deliver tremendous industrial designs and quality to the market place. He has to do something unique here which endears Apple to all content providers and do it before it is too late. That time has not passed but at some point it will.

    That means he needs to open iTunes or open Apple’s content formats or publish specs to be copied for portable content systems or something. If Apple has to compete against a “defacto” standard opened up for others to copy, they will surely succeed via their ability to innovate and their superior brand management. I fear he will hold on too long to a proprietary environment and repeat his most major of faux paus which ultimately cost Apple hundreds of billions in profits. ie, Apple could have been Microsoft and instead it’s a pimple on the arse of Microsoft.

    I hope Jobs realizes this. It is obvious to me but not necessarily obvious to him. People tend to respond similarly to behavioral patterns and Jobs is very stubborn as many successful people are. Let’s just hope he has the personal insight to recognize his shortcomings (and we all have our own) and rise above them.

  12. Sam commented on Jul 25

    RE 52 week lows: James also doesn’t say how many times you would put on the trade. For instance, take QCOM over the past month. It first made a 52 week low on 6/27. Since then it has made 8 new 52 week lows on a closing basis. Do your end up putting this trade on a total of 9 different times, and if you do, how do you manage your money since most people have a limited pool of capital.

    I have a feeling this strategy while good in theory and when you backtest, is very impractical to impliment for any type of trader.

    The other problem is that if you did this for CSCO back in 2001, you would have been blown out of the water, since the first trade would have been down close to 66% in 3 months.

  13. babycondor commented on Jul 25

    “Business methods are Microsoft’s forte.”

    As in, copying Apple’s GUI and calling it “Windows.” And look where that got them.

  14. BDG123 commented on Jul 25

    oops, forgot to include the link to MS’s zune viral marketing site.


    Microsoft needs an overhaul of its viral marketing talents. This site sucks.

  15. Wondering commented on Jul 25

    Do you ever bash google because they weren’t the first search engine? Apple for not inventing the GUI (or the portable music player for that matter)?

    Face it, Microsoft’s strategy has always been to crash the party just when things are getting good, and it’s served them very well.

  16. Jim Bergsten commented on Jul 25

    Back when dinasours roamed the earth, I was involved with the development and sales of what was basically a $100,000+ primitive Power Point machine. It was created by a huge company’s military electronics division for purposes we can’t discuss here. The civilian product in question was a “guns to butter” project — it made presentation slides. The company thought it would be a good idea to sell both the machine and service to New York ad houses.

    So what they did was to send their military sales people to tell 60’s hippie art directors that this machine was going to put them and their people out of a job — how many did they want to order, please?

    Guess how many sold?

    This shouldn’t come as a shock to anybody, but Apple and Microsoft are completely different businesses, cultures, serving completely different markets.

    MSFT is (and I don’t care how often this has been said or how much hair Cody is going to pull out if he hears this yet again) following the old IBM model of watching somebody else prove a market and then move in and take it over.

    All well and good, IF IT’S MICROSOFT’S MARKET.

    Enterprise business software is, “cool” culture isn’t.

    Hardly matters. MSFT will eventually spin off this nonsense and go back to their core competence. Apple will have moved way on to something else that is perceived by the cool as the new cool (is “cool” still “cool”?)

    And, the commodity cell phone providers will have subsumed all of this portable media stuff.

    Bet anybody a nice dinner I’m right.

    Jim B.

  17. Doug H commented on Jul 25

    Anybody else note that Zune rhymes with loon, as in looney….

  18. bynocerus commented on Jul 25

    Altucher’s blog eliminates survivorship bias by including all the companies that have been deleted over the years. What he does not do, apparently, is quantify how many times you would have bought the same stock making a fresh 52 week low.

  19. Rajesh commented on Jul 25

    Notice that the rumored feature list does not include one item on how the primary function, i.e. listening to music, is enhanced. Typical Microsoft overload with scant attention to detail on any particular function.

  20. Michael C. commented on Jul 25

    >>>Altucher’s blog eliminates survivorship bias by including all the companies that have been deleted over the years. What he does not do, apparently, is quantify how many times you would have bought the same stock making a fresh 52 week low. <<< He doesn't give every data point or system spec, but let's give him credit for the analysis. Also, Barry was pretty general himself saying buying at a new low was bad. As I stated in a previous thread, I think the biggest problem is that he used the Nasdaq 100. There are over 2400 stocks on the Nasdaq. But I do think the system of buying at a new low works given certain parameters, much like the Dogs of the Dow strategy works over time. The most important parameter of any system that goes against the trend is where you set your stop loss. Add in some fundamental analysis & market sentiment, so maybe buying at a new low does have an edge. Or maybe not. I don't know. I do know I would never use such a strategy regardless.

  21. paul commented on Jul 25

    How long will it take before the first security patch is released? No doubt if enough are sold, someone will find a way to use the wireless to steal music, force you to listen to theirs, or use the screen to display spam…

    If they were really serious about this, they would be releasing details about the music store (MSNtunes?) , all the great deals they’ve inked with the labels, what kind of exclusive deals will be available, etc.
    How about some info on what the DRM will allow you to do and not do.
    Maybe there’s no music store – just another way to play mp3s? And the point would be… what?

  22. M.Z. Forrest commented on Jul 25

    Microsoft and Apple are very difficult companies to compare, because they really are different. Apple is a consumer goods company. They have a couple of niche commercial markets, but their big money is made in the consumer market. Apple attempts to maintain high margins on their products, even computers, whereas competitors don’t.

    Microsoft is a business services company. The only areas they have made serious money is by being in OEMs (Dell, Compaq, IBM, etc.) and in products they can sell in lots of 50 and above. Dell and the other computer OEMs have probably sold more licenses for office than all the Microsoft saleman combined. Their Xbox and media sites have all done poorly, because Msft isn’t made to do it well. Even in the specialized software market (single license >$25,000) Msft is a second tier player.

  23. Sherman McCoy commented on Jul 25


    The reason crap like this comes from the bowels of Redmond is the work environment there. Does Mr. Smarty Pants engineer go to Redmond with his great ideas anymore, ready to change the world? Hardly. He goes there for same reason people work at P&G- gonna work those 30, calmly and without excitement get the nice financial rewards, and then retire in style. Smarty pants with real smarts are going to Google or change-an-industry biz’s like Zillow.

    So, back to the question, how does this crap surface: Well, imagine management telling an uninspired, uncreative workforce that they have to come up with an MP3+whatevea player to complete with the iPod. So the happy employees do, and they do a competent job, but with no pizazz, no style, no uniqueness…

    Management style creates the manner of thinking at Microsoft, top-down… It’s broken-Windows theory, my friends:


  24. GMF commented on Jul 25

    This thing is going to be a joke.

    It looks like garbage & will no doubt have a convoluted and cumbersome software UI.

    The ONLY way MS could make this a wanted item is to have this play any of the increasingly common lossless formats (flac or shn) – that’s the best thing MS could do to set this piece of junk apart from all the other piece of junk mp3 players out there.

  25. debbie commented on Jul 25

    thank you barry

  26. a commented on Jul 25

    I would argue the UI will be good. If it’s being developed by the xbox team then I’ll take a cue from their dashboard UI which is genius. All they need to do is capitalize on the iPod’s shortcomings as outlined by Devo. Removable battery Microsoft! Are you listening? And I’ll add drag and drop music transfer too please. Then I’ll buy one.

  27. M.Z. Forrest commented on Jul 25

    I guess I just don’t get why Microsoft doesn’t just whore someone else’s product and collect a royalty. There are people (no laughing please) that would buy an mp3 player just because it had Microsoft’s name on it. They do it with keyboards and mice. Why not here?

  28. jonnie-o commented on Jul 25

    Apple would not be wise to dismiss a Microsoft hardware effort. Microsoft does have a hardware business, and in general, their hardware is quite good. If the device:

    1) Records in MP3 or WMA format,

    2) Allows viewing of video/DVD files and includes DVD menu navigation,

    I will buy one *and* software to make DVDs on a PC. Currently I use an iMac, but the iPod is worthless to me since it doesn’t feature 1 & 2 above.

  29. Dano commented on Jul 25

    I’d hit it.

  30. Don Dodge commented on Jul 25

    Hardware, software, UI, and customer service are not Microsoft’s strong suit? You are kidding right? Have you tried the XBox, or XBox Live 360? It is awesome!

    Software and UI? Microsoft has more happy users than any software company on the planet. The new UI and user experience for Office 2007 and Vista is amazing. I think users will love it.

    Customer support at Microsoft is world class. Developer support, MSDN, and discussion boards are the best in the business.

    There is always room for improvement in all areas. Software is never done. It continually evolves to meet customer needs.

    Apple didn’t invent the music player. Google didn’t invent search. Red Hat didn’t invent Linux. I wrote a blog entitled “Innovate or Imitate…Fame or Fortune”. It is an interesting story about early innovators in many different technology fields who won early fame. The “Fast Followers” or imitators took innovation to the next level and won the fortune.

    I have experienced this personally. I was director of engineering at AltaVista, the first web search engine. We were eclipsed by Google. I was also VP of development at Napster. Too early again. Apple’s iTunes came years later and won the fortune. You would be surprised how many times this happens. Read this blog if you want to learn more about early inventors versus fast followers. http://dondodge.typepad.com/the_next_big_thing/2005/10/innovate_or_imi.html

  31. M.Z. Forrest commented on Jul 25

    I’m not here to rip Msft’s products. They make a decent market. I’m purely talking business and for all the greatness of the XBox, it is a loser. MSN is a loser. Their enterprise software still primarily sits in the midmarket. They have great difficulty competing in the top end against IBM, Sun, Oracle, and SAP. I wouldn’t invest a single dollar in Microsoft as a consumer goods company. I would invest money in it as a commercial services company. They dominate the small to mid-market business demo, and that isn’t going to change anytime soon.

  32. paul commented on Jul 25

    To elaborate a bit on my earlier comment, you can’t have an iPod killer that doesn’t also include a iTunes killers and music store killer as well.

    It’s not just the iPod hardware that makes the product successful; it’s the slick music library management in iTunes and an amazing catalog of reasonable priced music at the store.

    Even if the mPod has batteries you can replace and a screen that doesn’t scratch as easily, those will not win adherents if the software sucks, the store is clunky and the catalog is weak.
    Again, if they aren’t going to have a store an music catalog in a non-Apple format, what’s the attraction here over a Sony or a dozen other mp3 players? The DVD navigation menu might be nice but isn’t an iPod killer.

    The chance of MSFT having the hardware, software and music content to really take on Apple is pretty remote.

  33. Barry Ritholtz commented on Jul 25

    Hey Don,

    I appreciate your enthusiasm for the product as an engineer and a Microsoft employee.

    Xbox gets great reviews for its UI, design etc. It raised the ante in the entire space. Its a terrific looking machine, and the gameplay is great.

    All this is a given, however, as the company has poured literally billions of dollars into its development. That’s before we discuss the money losing subsidy built into the cost of the Xbox.

    My perspective is somewhat different than yours, as I run an investment firm. So I want to know what the company is getting back for all these sunk costs — what is the ROI, and how does this fall to the bottom line?

    With some fancy accounting, you can show how the Xbox product line is a break even — but the truth is its been a giant money loser. Will Zune be the same? We will find out soon enough.

    I find it intriguing that MSFT is willing to subsidize these big losses in spaces that are dominated by other companies. Think about the self inflicted wounds from the Netscape battle and the costs of Xbox. We have yet to see the fallout from Zune.

    If I can anthropomorphosize microsoft, its as if a jealous rage seizes the firm when it sees another outfit having a success, making money. Bizarre

    Microsoft does a number of things very well. From an investor’s point of view, muscling into a new consumer product line in a cost effective and profitible way sure aint one of them . . .

  34. Don Dodge commented on Jul 26

    My view is that it depends on your investment time horizon. If you think short term, a couple quarters or even a year, then the Xbox, Zune and MSN Search do not make any sense. If you think long term, 5 years or more, then they do.

    I agree that it would be much cheaper to get into these markets sooner before a dominant leader emerges. But, games (Xbox), web search (MSN Search) and music (Zune) are huge long term markets. Remember, the PC operating system business is 25 years old and still going strong. I think games and music will be huge multi billion dollar businesses for a long time to come.

    Very few companies can afford the up front investment and cash flow losses for the first few years to enter these markets. That creates a natural barrier to entry. Microsoft can afford to do it. The long term payoffs will be huge.

    BTW, the Xbox group just turned cash flow positive, and maybe even profitable. I need to check on this. No funny allocation accounting either. How many years did it take? Three, four, five? I don’t know exactly. But, I do know that games (Xbox) will be a very profitable business for the next 20 or 30 years. I think search and music fit the same profile. This makes good investment sense to me. It all depends on your investment horizon.

  35. arghhh commented on Jul 26

    I don’t understand how people can think iTunes is a great piece of software. That thing is dog turd. It crashes all the time and it’s so damn cumbersome and slow. I dont understand how people think Microsoft’s software is bloated. This is piece of crap is the epitome of bloated. I hate having to use it with my iPod. If Microsoft’s next media player works well with Zune I’ll switch.

  36. clueless commented on Jul 26

    I guess in your world there is no such thing as competition? No one copies anything and you have one source for everything. Brilliant.

  37. oy commented on Jul 26

    What is it with you Apple nuts. As a consumer what do you have against more competition? What could be more irrational that to hope that another company’s products suck? Schadenfreude is petty.

  38. Barry Ritholtz commented on Jul 26

    Competition is good.

    Microsoft’s history is one of thwarting, not encouraging competiton. And one of the tools they use is the Vaporware announcement.

    Let’s see if this is out for Xmas 2006 holiday . . .

  39. noemail commented on Jul 26

    I don’t understand your peeve with MS not encouraging competition. Everything about iPod screams lockin – DRM, accessories that only work with an Ipod, preinstalled car accessories that only work with Ipod, a single music store to buy content, non-licensing of Fairplay to other hardware manufacturers, non incorporation of other software codecs (Windows Media, Real). Apple clearly is doing everything to discourage competition. If anyone thinks for a second that if Apple and Microsoft switched places in their monopolies, that Apple would behave better, then they are crazy. I’m worried about another tech monopoly here. That’s why I’m happy Microsoft got into the console business and now the music player business. This is good for consumers.

  40. Wandas11 commented on Feb 20

    I wish everything was open surce just so the consumer could build something that really will be useful.

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