August 11, 2008

Zune Turns To Hollywood For Exclusive Content

Microsoft Corp. is turning to Hollywood to give its Zune portable media player a competitive advantage against Apple's iPod.  

In recent months, Microsoft executives have entered discussions with production companies and talent agencies to exclusively license original video programming for Zune.   

Although the company dismissed rumors that the device, which has struggled to gain widespread market adoption, would follow iPod in adding communications capabilities, Microsoft said it is in an "exploratory phase" to enhance existing content licenses with Zune-only material.

But instead of turning to traditional sitcoms and other formats, Microsoft is looking for unconventional content to capitalize on Zune's social networking platform, said Richard Winn, Zune's director of entertainment development.

"What we would be looking to do with any form of original content is the added component that Zune could provide that iTunes or any competing service couldn't," Winn told the Associated Press.

Exclusivity could mean either securing content that would be available only on Zune, or syndicating content that would first appear on Zune before moving elsewhere with Zune branding. 

Finding some point of distinction is critical for Zune if it hopes to achieve anywhere close to iPod's marketshare.  In May, Microsoft reported the sale of only 2 million Zunes since the product's launch in November 2006.  In contrast, Apple reportedly sells 3.5 million iPods each month.

However, the iPod does not have exclusive content.   Becoming the only hand-held media player with exclusive programming could either reinvent Zune or serve as a last-ditch effort to prevent its extinction.

Rumors abound that Microsoft may discontinue Zune.  Robbie Bach, the company's president of entertainment and devices division, fueled speculation last month by scarcely mentioning Zune during a discussion with analysts.

However, Winn said Zune is not in danger of extinction, and that the device plays a crucial role in Microsoft's implementation of an interconnected ecosystem where content flows flawlessly among all the company's platforms, including Xbox.

In fact, Winn said the Xbox console is what inspired Microsoft's novel approach to Zune.   The popular "Halo" video game franchise helped establish Xbox as a remote multiplayer game, as opposed to single-player mode.  Winn sees Zune redefining video consumption in much the same way, from the traditional private experience to the foundation for a more shared pursuit.

Zune Social is a central part of the strategy.  Among other capabilities, the social networking software informs fellow subscribers of the last song consumed.    Winn said the characters in an original program could potentially have playlists that could automatically load into users' devices, something that would broaden connections between users and content.

"The thing we've all been looking for is, 'What can we do that is a little more interesting than just looking at a piece of video?' " Winn said.

The plans are a significant departure from those in place at Zune's initial launch as a music player two years ago.  However, similar to Apple's iPod enhancements through the years, Microsoft has improved Zune's capabilities with the introduction in May of a video marketplace with content partners such as NBC Universal and MTV Networks.  And gaming capabilities are also being added to the platform.

The latest move looks to add content not available with iTunes, and to use Zune Social to augment the content that is available.   Microsoft has already started experimenting extra features to the video game "Ninja Gaiden II" and the NBC series "Heroes."


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