Microsoft Counting on a Twist to Make Zune Shine in Shadow of iPod (original) (raw)

Nov. 13, 2006

The hoopla was still swelling around last November’s debut of the Xbox 360, Microsoft’s latest entry in the game-console wars, when some on its development team began turning their attention to conceiving a new product.

Their discussions led to the rough outline of a device that might do for portable music what the new Internet-enabled Xbox was poised to deliver to gaming: connected entertainment.

Tomorrow, after committing hundreds of millions of dollars, Microsoft is scheduled to release that device, Zune.

It was, its makers say, an idea brought to fruition by a 230-member team in a creatively fervid overcrowded office space near the software giant’s sprawling campus in Redmond, Wash.

At a glance, the Zune looks like yet another aspiring iPod rival.

It is a digital music and video player, priced at $250, with a slightly larger screen than that of many competitors, an FM radio tuner and a 30-gigabyte hard drive that can store thousands of songs and pictures and hours of video. Its hefty rectangular body can be dressed in white, black or even a muted brown.

But the Zune can do something that no other player, including the iPod from Apple, can claim: it can locate other Zune players and wirelessly exchange content — music and pictures, for starters — with a few touches of a big shiny button.

“A lot like Xbox, the idea that really initiated the project was broader than the product itself,” said J Allard, a co-creator of Xbox and a Microsoft executive who oversees the Zune product line as corporate vice president for design and development. “This was just a steppingstone.”

Mr. Allard said Microsoft had made a decade-long commitment to investing in innovative ideas like those that produced the first Xbox in 2001 and the Zune — suited not only to the PC and the workplace, but also to people’s leisure time.

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Chris Stephenson, a marketing manager, with the Zune portable media player, on sale Tuesday.Credit...Annie Marie Musselman for Microsoft

“Technology will have a huge impact there,” he said. “There is really a transition that is not only analog to digital, but digital to connected.”

But Microsoft also finds itself in another familiar position, entering a hardware arena dominated by a competitor. For the Xbox it was Sony and its still-leading PlayStation franchise. With the Zune, it is Apple and its iPod franchise, which has 90 percent of the market for digital music players costing $200 and above, industry analysts say.

“Without a doubt, this is a huge mountain to scale,” Sean Wargo, director of industry analysis for the Consumer Electronics Association, said of the challenge of competing with the iPod and lesser-known media players that have “crept beyond early adopters and into the mainstream.”

Still, with fewer than half of American households owning a portable digital music player, “there is definitely a lot of room,” he said.

The question is whether the Zune’s singular innovation — the wireless sharing feature — is enough to distinguish it. Mr. Wargo said the big draws for consumers generally are the extent of a player’s library of content and how easy it is to add and manage content on the device.

But late last year, with social networking and community building becoming more popular, Mr. Allard said “we thought the time was ripe” for a portable player that could share content and create communities around music.

In effect, Mr. Allard and his team were challenging a behavior that started with the arrival of the Sony Walkman cassette player in 1979, a behavior that generally equates portable music with private listening.

Chris Stephenson, general manager for global marketing of the entertainment business at Microsoft, said he does not think of the Zune’s mission as trying to reverse a trend, but to build on one.

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J Allard, left, and Bryan Lee, leading members of the Zune development team, which included many people who had worked on the Xbox 360 game system.Credit...Annie Marie Musselman for Microsoft

“We’re adding that aspect of people sharing music,” said Mr. Stephenson, a music veteran and a former vice president for marketing at MTV Networks in Europe. “We’re adding to the digital music model what was fundamental to music. People love to share music.”

He said the evidence was abundantly clear online, from social networking sites like MySpace to underground peer-to-peer music-sharing sites. “What we are actually doing is identifying a cultural mean.” He posed a question: What if the Zune could help turn armies of music pirates into legitimate music promoters?

“We want to let people listen to music the way that they do,” he said.

At the core of the Zune is its built-in Wi-Fi feature, which also adds to the device’s overall bulk and weight (and energy consumption). In a demonstration, Scott Erickson, senior director of product management, explained that a Zune user must give the unit a name. The name appears almost instantaneously on the screens of other Zunes within range.

Songs, entire albums (with album art and other information) and whole playlists can be selected and wirelessly transmitted to any Zune within range. Users are prompted and given a chance to accept or deny the transfer; senders can also be blocked.

Songs take about 15 seconds to transfer, but transferred songs can be played only three times in three days before theydisappear, Mr. Erickson said. Digital photographs, however, can be transferred in a couple of seconds and do not expire. Pictures can also be passed along in a daisy chain of Zunes, he said.

Toshiba worked with Microsoft to develop the player and will handle the manufacturing. Microsoft created software, also called Zune, to manage and purchase content on personal computers. (Microsoft executives said the Zune would not be compatible with Macintosh computers at introduction.)

To get the device to market in time for the holidays, the first members of Zune’s team moved in to some vacant space in the Xbox complex in January.

“There were no walls and no barriers,” recalled Bryan Lee, corporate vice president for the entertainment business at Microsoft. “That was the physical aspect and emotional aspect.”

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A central button allows a user to transmit content over the air to another Zune owner.Credit...Elaine Thompson/Associated Press

By the summer, the rapidly expanding team outgrew its first home and moved into a 73,000-square-foot former dance studio known as Bear Creek. There, the cubicles popped up like mushrooms amid mirrored walls and ballet barres where face-to-face collaboration became the rule, said Mr. Lee, who worked from a table rather than an office.

“We went from zero to 60 miles an hour in no time flat,” Mr. Allard said. In the beginning the project was code-named Argo, for the ship in Greek mythology that carried Jason in his quest for the golden fleece. The workers, a third of them drawn from the Xbox 360 team, referred to themselves as Argonauts.

The first days of working on Zune were like working in a start-up company, he said — but one with very deep pockets.

The rapid expansion did not come without problems. One was power consumption. There were hot summer days when the team had to decide between lights and air-conditioning, Mr. Allard said.

A series of brownouts prompted the team to switch from desktop computers to notebook PCs that could be charged elsewhere and operated by batteries. Against the din of construction, the team, Mr. Lee said, had to work out a number of issues.

Among them was building PC software specifically to work with the Zune rather than relying on existing software like the Microsoft Media Player series and its PlaysForSure technology. (PlaysForSure is designed to accommodate a variety of digital players, manufacturers and online music services.)

“We had to look at trade-offs,” Mr. Lee said, “at what we can do to make sure we provide the best experience for consumers today and grow that experience very rapidly over the next few years.” He emphasized that a guiding principle of Zune was keeping it “simple and consistent.”

Would the Zune ever be able to connect to the Internet? Could someone walk into a Starbucks and use the connection there to download a song?

Mr. Lee answered without hesitation: “Probably, one day.”

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