Inbound Thinking

Microsoft recently announced, and before that leaked, the Zune brand of media devices, and personally I’m excited about it. Why am I excited? In a word, competition.

I love Apple, and I love the iPod and that is exactly why I’m excited to see Microsoft enter the market. Not to watch them fail like some of you might be hoping, and trust me that won’t be the case due to the sheer amount of cash they can throw at the problem.

They entered the gaming market with an XBox that cost drastically more to make than the retail price and I expect they’ll do the same with Zune devices. Just have a look at the list of features:

• 400 Mhz DPS processor
• WiFi capability
• 30GB or 60GB hard drives
• 3.75-inch screen
• Accompanying media store
• Provide all existing iTunes purchases for free
• Gaming capability
• Community networking
• numerous rumoured features (VoIP, Satellite Radio)

There is no way that Microsoft can produce this device and still price it competitively, unless they eat some of the cost. Again, looking at the XBox, they make money selling games, not boxes. With Zune they’ll try to make money selling songs, games, videos, and anything else the players can handle.

My point is that Zune is bringing a lot to the table in a market that is completely dominated by Apple. Interestingly, the Cupertino monster has a history of telling consumers what they want, when it becomes available from Apple. When flash-memory based players hit the market Apple said consumers want hard-drive based iPods, and that they did until Steve Jobs pulled a nano from his pocket and declared flash-memory king. Jobs also openly espoused that video was irrelevant on a music player, until the 5G iPod played video.

I’m hoping that Apple doesn’t try to steer the market away from all the features Zune will provide. And this is most likely not the case. Steve Jobs predicted in January 2006 that Microsoft would enter the market with an mp3 player. Apple is not surprised with the Zune announcement, and hasn’t been sitting around waiting for Microsoft to point the way. I hope Apple has been innovating and pushing the limits of their iPod line. I hope to see a new line of players rolled out at Job’s Keynote at WWDC, on August 7th.

Whether or not Apple drops new iPods boasting some of the same features as Zune, is irrelevant. What is important is that there will be another player on the field of end-to-end digital media products. This will force down prices and encourage innovation, and the winners will be the consumers with more choice and better value.

Full disclosure: I am an iPod owner, Microsoft Windows user and Microsoft shareholder.