Microsoft: Forget ZunePhone, we're aiming for Zune (on) TVs

It's hoping Zune Marketplace can challenge rival iTunes

Neither executive elaborated. Matt Rosoff, an analyst with the independent firm, Directions on Microsoft, thinks that Microsoft will bring the Zune Marketplace to its XBox Live service. The latter already delivers online games and streaming Netflix movies to the 28 million owners worldwide of XBox 360 consoles.

This would be "a no-brainer that they've been talking about forever," he said.

Meanwhile, Michelle Abraham, an analyst with In-Stat, thinks that Microsoft will integrate the Zune service into its Mediaroom software.

Microsoft sells Mediaroom to cable and telecom operators, who use it to create on-screen menus of available channels, shows and services for TV service subscribers. Though not well-known, Mediaroom is used in more than two million homes, according to Microsoft.

One potential problem, said Abraham, is that the Zune Marketplace sells TV shows for download. That could conflict with cable operators' efforts to sell shows via Video-on-Demand (VOD) or Pay-Per-View, or upsell their subscribers to premium subscriptions, she said.

Both agreed that Microsoft is unlikely to build its own television set-top box.

"I think they'd rather sell you an Xbox as a media device and then hope you'll buy at least a few games for it," Rosoff said.

Microsoft is doing other things to push the Zune Marketplace as a video download destination. Earlier this month, Microsoft announced plans to start producing original shows downloadable for free via the Zune Marketplace. The first will be a comedy series featuring episodes that run between three and five minutes

Microsoft has no plans to abandon the struggling Zune media player, but may bring out new devices later this year. Coming Zunes may boast improved video, speculates Rosoff, such as the ability to project video onto a screen, something cellphone maker LG has already demonstrated, and which Microsoft Research has also been testing, albeit in larger devices.

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