From Argo To Xbox Music: The Birth, Life, And Death Of Zune

Posted by on June 11, 2012 at 6:49 pm

On the morning of May 11th, 2012, Robbie Bach stood before the Northwest Entrepreneur Network while a PowerPoint projection burned bright behind him. The 50-year old former Microsoft executive was graying at the corners while a “Hello, my name is…” sticker began to peel off his shirt. “If I had hindsight, 20-20, and could do Zune over again,” he started, “we would skip portable media players completely.” As the former head of Microsoft’s Entertainment & Devices division and 22-year vet, Bach had been invited to give a presentation on intrapreneurship – in which startups are formed inside an already-existing company – and how it was used to create Xbox and Zune under his watch. While one brand had taken off and become Microsoft’s key to the living room, the other’s attempt to ‘kill the iPod’ had failed miserably, despite gaining a cult following and introducing features that changed how many of us experience music. While Microsoft may be sunsetting the Zune brand now, there’s still a lot to learn about Microsoft’s musical foray. This is that story.

The iPod lineup at the time of the Zune's November 2006 launch. (L-R) iPod, iPod Nano, iPod Shuffle. Photo Credit: Wikipedia

Steve Jobs Rising

It’d be difficult to tell a story about the creation of Zune without getting acquainted with the iPod, Apple’s dominant MP3 player brand. Launched in 2001 and compatible only with Mac computers with Firewire ports, the player was a very clever piece of hardware that utilized new 1.8″ hard drives that Toshiba had developed for a market that didn’t exist yet. Encased in a pearl white and metal casing, the iPod utilized a moving scroll wheel (later, a touch-based one) that served a novel scrolling interface on a relatively large 2″ monochromatic display. The iPod would set the standard for MP3 hardware for years to follow, ignoring the plethora of buttons that plagued devices at the time, going so far as to omit a power button (which sent me for a trip when I bought mine in the fall of 2002). But while the iPod hardware had many of the markings of a success story, its ecosystem (or rather, lack thereof) and price held it back from significant sales numbers for the first three years of its life. At that time, Apple was earning its bread and butter on blooming computer sales following the introduction of the iMac, a computer/monitor all-in-one. Despite popular belief, the introduction of the iPod to Windows owners (in 2002) nor the arrival of iTunes (in 2003) were significant enough events to make the iPod a success.

Meanwhile in Washington, Microsoft was devising an alternate scheme to bring MP3 players to the masses.

Building The MP3 Player Standard…

By 2004, the digital music market was still wide open, with MP3 players comprising a small portion of all portable audio sales, and the biggest players wanted in. Apple had launched the iTunes Music Store in October of 2003, but wouldn’t sell a billion songs for nearly two years. Companies like Archos, Creative, and iRiver had been building players all along, but the early aughts weren’t for purely digital music yet. With the arrival of faster internet speeds and easy-to-share programs like Napster and Limewire, acquiring music was easier than ever. Banking on this trend, manufacturers like Sony and Philips built MP3 decoders into their CD players, allowing users to burn hundreds of songs onto a disc for relatively cheap. (Who cares how the music was obtained, right?) The prospect of a device that hosted the songs natively without any external media was still out of the reach as many were still too pricey and too complicated. After all, even Windows-based iPod owners needed to dole out for a relatively uncommon Firewire card to use the player. Microsoft, well into the successful reign of Windows XP, wanted their OS to be the nexus for not only MP3 player hardware, but a variety of MP3 services as well.

Thus, PlaysForSure was born.

The idea was simple: using Microsoft’s own Windows Media Player, included in every copy of Windows, you plugged in your PlaysForSure device and it just worked. Services like Rhapsody, Microsoft’s own MSN Music, and offerings from Wal-Mart, AOL, and Yahoo were available by installing plug-ins into the Media Player software. Hardware makers no longer needed to devise their own end-to-end solutions using the PlaysForSure specification which included DRM-encrypted music that couldn’t be moved to any other device and easy plug and play support. Microsoft was also looking forward with not only music, but also video capabilities with Portable Media Players (PMPs), something that wasn’t represented well on the iPod’s small monochromatic screen. Short of offering direct-from-studio rentals (remember these were early days) Microsoft standardized the transfer of video to the player, developing a new Portable Media Center OS to make PlaysForSure implementation even easier. While not mandatory, several companies took advantage of it, including Creative with its Zen Portable Media Center. The Portable Media Center OS was a variant of Windows Media Center, Microsoft’s attempt to capture the living room with a variant of Windows XP that utilized bright colors and a remote-friendly interface (that would eventually become Metro) to turn your computer into a TV tuner/DVR/media manager all in one.

The Creative Zen Portable Media Center, an early PlaysForSure device. Yeah, it was big.

But it was a lack of standardization beyond Microsoft’s PlaysForSure nexus that would really begin to eat at Microsoft’s attempt to galvanize the MP3 player industry.The iPod was finally winning the war and in the latter half of 2004, their growth was on a tear. While only equipped with one hard drive-based model in a few sizes, the iPod began its dominance with reduced prices, iTunes as standard software, the Music Store as a legitimate location to purchase music after a long battle with the recording industry, and a very flashy ad campaign. By August of 2004, Apple claimed 58% of all digital media player sales, erupting to 82% a mere two months later. It was this stranglehold that forced other companies into a defensive. While SanDisk did well in the flash memory player space before the iPod Nano and Shuffle arrived, and PlaysForSure held strong as an alternative to the Apple player, their marketshares began to dwindle with each page flip of Apple’s playbook and every passing month. “Do you feel you have choice in this space,” a Microsoft VP would later ask customers, to which they’d reply, “Yes, we have a lot of choice, you can get a Shuffle, a Nano, a Video iPod…”

That executive was Bryan Lee, and we’re going to get to know him next.

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