Apple Blocks Zune With Multiple Barriers

(MoneyWatch)  Microsoft's introduction of the new and improved Zune music player as a rival to Apple's iPod couldn't come at a worse time -- for Microsoft.

Microsoft was already late to the party when it first introduced Zune in 2006, but then again, Apple wasn't an early entrant either, and Microsoft had to believe it could do to Apple what Apple had done to the likes of Creative Technologies, Rio, iRiver, Gateway and others. Trouble was, no one cared about the features Microsoft trumpeted for Zune, like the ability to share songs with other Zune users (perhaps, as tech wags liked to quip, because no one had any friends who owned a Zune).

Today's new Zune also has a bunch of nifty features (including high-definition video output) that may or may not play better with the general public. But regardless, Microsoft is facing a set of formidable barriers to entry that may preclude it from ever emerging as a competitor to Apple.

• The first is the cool factor. The essence of cool is hard to define, but it's pretty easy to see when something is considered uncool. The Zune is one such item, and it's hard to imagine Microsoft ever winning back those consumers who wouldn't touch the first edition of Zune with a ten foot pole. Microsoft has arguably succeeded in putting a dent in Apple's cool factor for Macs and Google's verb factor when it comes to search, but music players aren't as much utilities as accessories. Unless someone with real street cred with the young and the hip, like Cobra Starship, starts talking about its world-beating sound quality, Zune will always play second fiddle to the comparable Apple product;

• Second, it looks like Microsoft is going to have to wait in line for NAND memory chips, making it very difficult for Zune to compete with higher-capacity iPod and iPod Touch devices. Apple's huge purchases of those flash memory chips, which I discussed earlier this year, mean that other OEMs will have to wait in line and, in the event some inventory becomes available, will have to pay higher prices on the spot market, thus eating into margins.

• Finally, Apple has already started changing the nature of the game, shifting the focus from stand-alone music player to multitasking-capable device. Apple understands, perhaps better than anyone, that consumers don't want to carry multiple devices in their pockets, especially when they're out and about, having fun. Cell phone, music player, browser and social network navigator all in one -- does that sound like something Apple already sells? Meanwhile, Microsoft still maintains that it won't add telephone features to its Zune, but concedes that it may add Zune features to some forthcoming telephony product.

Matt Rosoff, an analyst with Directions on Microsoft blogged his disappointment over a number of other ways Zune HD fails to measure up, including:

the complete lack of a competitor to Apple's App Store for the iPhone and iPod Touch. There will be applications, including games, but Microsoft will release them directly to users through the Zune Marketplace or within software updates. There are no public APIs for developers, no distribution model, and more surprisingly, no immediate plans to connect to the Windows Marketplace for Mobile, Microsoft's app store for Windows Mobile phones, which launches on October 6.

To which I'd add that Microsoft's recent agreement to ship a mobile version of Office on Nokia smartphones is the clearest signal yet that Microsoft sees the handwriting on the wall when it comes to Windows Mobile. Can Microsoft rescue its failing mobile operating system franchise with a failing MP3 player? Unlikely.