Zune and PlaysForSure

by F.

The Economist piles on:

Microsoft’s traditional approach is to stay out of hardware and concentrate on making software, such as Windows, which it licenses to as many hardware companies as possible. Competition turns hardware into a low-margin commodity, but Microsoft, as owner of the software standard, makes a fortune.

In recent years, Microsoft tried to use the same approach with consumer technologies. It developed music and video software and invited gadget-makers to build hardware around it, and other firms to build compatible online stores to sell content. This “flat out didn’t work,” says Matt Rosoff of Directions on Microsoft, a specialist research firm. In the case of music, Microsoft’s PlaysForSure software proved flaky: not all music from all stores would play for sure on all players, and the iPod remained unchallenged.

So Microsoft has ditched the idea of providing enabling software to other firms in favour of Apple’s approach of doing everything itself. Its first move in this direction came with its Xbox games consoles, in which hardware, software and an online service are tightly coupled. (The Xbox division also reports to Mr Bach.) Zune is much more controversial, however, because Microsoft’s pre-existing hardware and service partners are left high and dry. “I’ve never seen a business so blatantly screw its business partners,” says Peter Sealey, a professor at Berkeley’s Haas School of Business.