Microsoft's portable digital media device - watch out Apple?

By redlined on Thursday, January 26th, 2006 comments

Microsoft hasn't decided if it will go ahead. But sources inside the company and at its partners say Microsoft has put together a team that's considering the business end of an initiative to unseat Apple's iPod by releasing a Microsoft branded portable digital media device. Hardly original.

Each year, Apple extends its lead in digital music. In 2005, Apple's share of portable media devices sold in the U.S. grew to 67% from 52% in 2004, according to NPD Group.

With $39.8 billion in annual sales, Microsoft isn't particularly interested in increments from the digital media device business or online music. It's after a spot in consumers' living rooms. The more consumers purchase iPods, the more they'll buy songs and videos from iTunes, and the various iPod accessories to play music and video around their house. That in turn convinces more entertainment companies to partner with Apple.

What would it look like? Xbox boss Peter Moore says any Microsoft media device would have to leverage the company's most significant consumer strength, video gaming. "It can't just be our version of the iPod," says Moore, who nonetheless would not confirm that Microsoft is considering making such a device. So in addition to playing music and videos, a Microsoft device would include games. Microsoft would probably use the Xbox brand to market the gadget. "I think the brand is an opportunity," Moore says.

As BusinessWeek puts it, "If the new device comes with the Xbox brand, most consumers will view it as a game player, like Sony's PlayStation Portable. That might limit its appeal, since the portable gaming market is much smaller than the one for digital media."

If Microsoft decides to go ahead with a portable games machine the next few years will be very interesting indeed for portable gaming.

Will Microsoft really do it? It has abandoned efforts over the years to make everything from computer speakers to PC-connected telephones. Time will tell.

Source: BusinessWeek.com