Analysts: Zune shows promise, but it's no iPod

Now that Microsoft has announced that its new Zune media player will be available for sale this holiday season, the question becomes: How will it fare in the sales race with Apple Computer's incredibly popular iPod?

At least one feature -- a pricing model that involves charging one fee for all the songs users want to download via the upcoming Zune Marketplace music download service -- will be welcomed by consumers, who can't get a similar deal from Apple's iTunes Store, said industry analyst Ted Schadler at Forrester Research. The price for those downloads has not yet been set.

Also getting attention are the Zune's built-in FM radio receiver and wireless capabilities, which will allow Zune users to "beam" songs to one another. Apple's iPods don't have those features. On the other hand, while FM reception and beaming features are nice, Schadler said, they are probably not "must-haves" for users.

"I think it's a good, credible alternative [to the iPod] because it's got soup to nuts," Schadler said. "A lot of things about this make it a very good head-to-head competitor against Apple."

Apple has a huge head start, which can't be overcome easily by Microsoft or anyone else, he said. "Apple's got the brand and the market momentum," Schadler said. "If you just bought a car with an iPod connection, you're not going to buy a Zune."

But if consumers like paying one fee for all the music they can download, that approach could be a big motivator, he said. And if Microsoft offers downloadable movies for the devices and Apple is slower out of the gate, that could also make a difference. "Those are the kinds of things that matter," Schadler said.

The first Zunes, which were announced on Thursday, will allow users to play music, videos and photos on a screen and offer 30GB of storage capacity. The Zunes will come in three colors -- black, brown and white.

For Microsoft, the battle won't just be to sell Zunes, but also to gain enough users to solidify its own digital rights management technologies in the marketplace, Schadler said. "This is very much about controlling and being a player in the next generation of computing," he said.

Shawny Chen, an analyst at Current Analysis, said that based on the appearance and features of the Zune, she doesn't expect any change on the media player battlefield any time soon. "It's just not as sleek and sexy as the iPod, and that's one of the reasons that iPods have been so successful," Chen said. Carol Baroudi, an analyst at Hurwitz & Associates, agreed.

"Microsoft's problem is that for many people, it's not about design -- it's about brand," she said. "You have to get that it's not just about functionality. The iPod is cool."

Baroudi called the Zune "too little, too late." Extra functions like FM radio and wireless beaming to other Zunes are "not going to be enough" to successfully take on Apple in the personal media player market, Baroudi said.

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Todd R. Weiss

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