Can Microsoft compete with iPod?

KAI RYSSDAL: Well, you knew this one was coming. Microsoft has decided it wants in on the world of digital music. The software company's reported to be developing its own music and video player to compete with Apple's iPod. Microsoft's already in the consumer electronics business. Its Xbox game console's a best seller. But Annie Baxter reports today's news is about more than what you hold in your hands.


ANNIE BAXTER: Microsoft is dismissing the buzz as rumors. But music industry analyst Aram Sinnreich of Radar Research says it's basically inevitable. But he says Microsoft isn't following in Apple's footsteps exactly.
ARAM SINNREICH: Apple is selling music because they make money from selling iPods. Microsoft doesn't really care about selling devices. What Microsoft really wants to do is make its software the dominant software in the marketplace.

That would be its copy protection software that would be bundled with the new gadgets. Sinnreich doubts Microsoft will actually have much success in this venture. He says Microsoft lacks the marketing and design zest for hardware that Apple has demonstrated with its sleekly designed iMacs and iPods.

But Wall Street Journal personal technology columnist Walt Mossberg says Microsoft might be able to tackle those problems by cultivating what Mossberg calls Microsoft's own "little apple."

WALTER MOSSBERG: It's the X-Box group, which makes the X-Box 360 game console, and which makes that product very much the way Apple makes its Macintosh computers and iPods. They make the software, they make the operating system, they make the hardware, and they make the Web service that goes along with it.

Mossberg says it's unclear whether Microsoft can indeed knock the iPod off its throne. But he says it's only a matter of time before Apple, which has well over 70% of the music device market, will have to give up some portion of its pie.

I'm Annie Baxter for Marketplace.

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