Do-Over: Microsoft Tries Again With Zune HD

The Zune has always been the underdog of the portable music market.

Initially rolled out by Microsoft in 2006, it was positioned as a wannabe iPod killer—and was promptly squashed by Apple’s popular system. Now the Zune HD, a redesigned, flashier version of the system, is hitting retail shelves. Can Microsoft make a bigger impact this time around?

Zune 2009
Zune 2009

The landscape for portable music is a much different one than it was when the first Zunes hit shelves. Today, the iPhone is the hot new device—and the iPod is increasingly turning its attentions to things other than music.

Sales of the traditional iPod are down 16 percent year-over-year through August, according to NPD Group. (The iPhone and iPod Touch are not included in those categories.)

Apple’s trying to revive the market with the addition of a camera to the iPod Nano—but Microsoft hopes that slump in iPod sales will present an opportunity for the Zune HD.

“The more that the iPod Touch has gone down the path of everything but a music player, the more that has given us a good opportunity to come in with these new features and get people to give us a second look,” says Brian Seitz, marketing manager for the Zune.

Of course, the Zune HD does much more than play music. It’s equipped with a bright 3.3-inch OLED touch screen and is capable of putting out high definition video to user’s television sets (via a separate dock). It also comes equipped with an HD radio receiver and Internet browser (via WiFi).

More importantly, perhaps, it also works with a wider assortment of devices. The original Zune only communicated with the PC. The Zune HD will synch with PCs, TVs and the Xbox 360.

That last item is notable, since Apple made it very clear during its Sept. 9 press event that it intends to become a competitor in the mobile gaming space.

Several games, including “Project Gotham Racing,” which was a hit for the original Xbox, will be ported over to the Zune HD by the end of the year. It’s a limited selection—and Microsoft stops short of calling the Zune HD a portable gaming device—but Seitz notes that the gaming focus could increase in the future.

Mostly, for now, the Zune will focus on running the video store on Xbox Live, increasing the store’s total product lineup.

While the iPod is the biggest threat, it’s hardly the only music player on the market. Sony has recently introduced a redesigned Walkman with many of the same features as the Zune. And Archos unveiled a new device today that could give the Zune HD a run for its money.

The Archos 5 Internet tablet offers music and HD video playback, as well as Internet browsing, a GPS and a wider assortment of Apps, thanks to the system’s use of Google’s Android operating system.

There have been 220 million iPods sold to date, compared with only 5 million Zunes. It’s a sound thrashing, and Microsoft is trying to discourage people from using the phrase “iPod killer” this time around.

“I think we’ve always been about doing things a little bit different in the music and video space,” says Seitz. “I don’t think, contrary to the hype that was built up, that realistically the goal was ever to erase the iPod.”