Apple won’t be the first casualty of Zune

Posted by: Aaron Pressman on September 14, 2006

“Zune says there is no choice; you get a Zune device, you hook it up to the Zune service, and it just works.”
-J Allard

There are a lot of questions remaining about Microsoft’s new Zune project after today’s official unveiling, perhaps most importantly how much will you have to shell out for the new player and the new music service. But from an investment analysis viewpoint, one big question got answered loud and clear – Zune will be incompatible with all of the existing players and music services Microsoft previously supported. J Allard, in an excellent interview with the blog Engadget, stood his ground as he was repeatedly pressed on the contradiction of “Plays for Sure” and Zune. Like I said back in August, I think this means companies like Creative (Symbol: CREAF) and Sandisk (SNDK) are going to take the big hits this Christmas, not Apple (AAPL). Shares of Sandisk and Creative are up a bit today after the big Zune news while Apple is unchanged.

The most interesting part of the Zune announcement, I thought, was the focus on sharing and discovering new music. Zune will let users share songs wirelessly and the online component will be oriented towards building communities around music. I think the weakest part of the iPod ecosystem is uncovering new music. Ratings have been tacked on to iTunes but it’s not as easy to find connections to new music as on, say, emusic.com.

I got a little taste of the future in the Seattle airport a few weeks ago when I was using my laptop with wifi on. My iTunes software found other iTunes users around me and let me browse their playlists. I couldn’t directly play on my laptop tracks that others had bought from the iTunes store (as Zune will allow) but since I was also online, I could go to the store and hear samples of the songs. You can’t do even that browsing with just an iPod and you will be able to do it with Zune. It does beg the question of what impact wifi usage will have on battery life, but there are a lot of specific questions like that that weren’t answered today.

Update: Some bloggers got up close and personal previews last week and are posting their impressions. I thought this one on the stereogum blog was especially informative.

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About

Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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