Microsoft Seeks to Share in Portable Music Market

REDMOND, Wash. — Two questions confront Microsoft Corp. as it prepares to launch its answer to Apple Computer Inc.'s hugely popular iPod.

First, how badly do the 79% of Americans who don't already own a portable digital media player want one?

And second, will they want one made by Microsoft?

The software giant best known for its Windows operating system and Office productivity suite said Thursday that it planned to start selling its Zune player in time for the holidays -- potentially posing the most serious challenge yet to Apple's dominance in portable entertainment.

"Right now it's not an iPod killer. It's not even going to give iPod a headache," said Michael Gartenberg of Jupiter Research. "But down the road, to discount Microsoft or to underestimate them would be extremely foolish on Apple's part."

Although it's jumping into the portable entertainment market five years after iPod debuted, Microsoft has lots of experience building the back-end software used by virtually every online music and video service except Apple's own iTunes Music Store.

Zune shares many of the functions of the iPod, but Microsoft seeks to differentiate its player with a wireless feature that zaps songs and playlists between devices.

Also working in Microsoft's favor is its demonstrated willingness to spend billions of dollars to establish itself in new markets -- a strategy it employed with considerable success in the video game industry. The same executive team behind Microsoft's Xbox video game console is also behind Zune.

"In some ways, it's like the Pong or Model-T of digital music. We're just getting started," said J Allard, Microsoft's vice president of design and development. "The number of people who listen to music versus the number of people that own an iPod -- that's not daunting at all."

Apple holds a commanding 76% market share for digital music players and sells 88% of all legal music downloads. And, this week, Apple turned up the heat on the competition, announcing new versions of its iPods and adding full-length movies to the music, television shows and music videos already sold through the iTunes store.

Apple declined to comment on Zune.

People familiar with Microsoft's plans said Zune would be released in mid-November. Microsoft has not said how much the device will cost.