Microsoft's Online Store More Buzz Than Music

Microsoft(MSFT Quote) is once again playing the role of the late 800-pound gorilla in a crowded-but-nascent market. This time it's online music, and Microsoft's launch of a Web-based music store Thursday is expected to initially play backup to longtime rival Apple's(AAPL Quote) hugely popular iTunes site.

But while iTunes has been instrumental in selling Apple's iPod portable music player, and consequently the revival of Apple shares, MSN Music, Microsoft's long-anticipated music store, is actually far less important to the world's largest software maker than recent buzz suggests.

According to analysts, other upcoming music-related software launches by Microsoft are far more important to the company's long-term goal of extending its dominant Windows operating system from the office into the home and even while mobile. The product launches are:

• Windows Media Player 10, a beta version of Microsoft's next media player software, expected to launch later this week along with the MSN music store.

• Janus digital-rights management software, which will enable users of online music subscription services to listen to songs on portable players for the first time. Janus is expected to debut this fall.

• Portable Media Center handheld devices that use a version of Microsoft Windows to play recorded TV, movies, home videos, music and photos transferred from a PC with Windows XP. They are expected to debut this fall.

"Clearly again, this issue is about Microsoft expanding its technology base to both PCs and portable devices," said Mike McGuire, research director in the media group at Gartner G2.

That has been a goal of the software behemoth for the past several years. Through its money-losing Xbox video-game console, its more recently launched Media Center PC and its upcoming release of portable players, Microsoft is trying to make its operating system as ubiquitous in the home as it is in the office. And with consumers increasingly focused on digital entertainment in the home -- from photos to music to movies -- controlling digital media is a logical next step for Microsoft.

"Basically, in the next 10 years the technology for home entertainment is going to be turned upside down," said Piper Jaffray analyst Gene Munster, who has an outperform rating on Microsoft. One way for Microsoft to make sure it's part of that transformation is to provide content behind the technology, Munster said. (His firm hasn't done banking with Microsoft.)

"This idea of consuming and using music on your desktop is becoming a significant part of what people do on their computers, and Microsoft doesn't want to be left out," added Josh Bernoff, a principal analyst with Forrester Research. But "it is far more important that Windows media becomes standard than their music store becomes the leader, because controlling the future of digital media ... is probably one of the top forward-looking objectives of the Microsoft Corporation."