Is Microsoft Still Trying to Challenge the iPod?

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If the rumors are true, Microsoft is gearing up to release a new Zune and take another stab at the portable media player market. Engadget and Technologizer say that the new model will be released later this year, and will probably have HD capabilities. A spokesman for the Zune team declined to comment on the specific rumors, but told the Standard "we will deliver progress this calendar year on both hardware and software."

Could the new model be enough to take on Apple's iPod family? The chances don't look good, even if Microsoft adds another feature that differentiates its product from Apple's.

Consider this: The current Zune lineup already offers FM radio reception and a subscription music service. Custom Zune casings offer quirky artistic coolness as opposed to Apple's stark, monochromatic design aesthetic. Amazon product listings are packed with 5-star user reviews from happy Zune owners.

Yet people are still not rushing out to buy them. Zune sales dropped in the second quarter of fiscal 2009, even as the iPod continued to surge. At one point in November 2007, the Zune hit #1 atop Amazon's bestselling products list. But a quick check Monday morning of Amazon's electronics rankings showed the Zune 8 GB model at #782, the Zune 4 GB player at #682, and the Zune 120 GB model at #134. The highest-ranked Zune was the 120 GB "Gears of War 2" special edition, which came in at #127. By comparison, Apple's 8 GB iPod Touch held the #4 slot, the 16 GB iPod Touch held the #7 slot, and the 120 GB iPod classic held the #8 slot. A Nano and the 32 GB iPod Touch also made the top 25.

The most obvious leap Microsoft could make would be a Zune phone. Most of the features on the Zune and iPod are quickly being adopted by smartphone manufacturers. The market for standalone portable media players will likely shrink, as more manufacturers offer an integrated phone that can play music and videos, surf the Web, and run simple apps and games. Instead of trying to steal iPod customers, Microsoft might do better to target the resurgent BlackBerry -- and the iPhone.

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