Microsoft Getting Under Apple's Skin

"People want to send a band up to the top of the charts ... in ways they haven't been able do before," she said.

Gentes didn't go into details on how the service would work. But according to Enderle, one of the ideas behind the service is to allow artists to set up their own song playlists that consumers could download, mix up and pass around. They'd be able to pass on the songs -- or, potentially videos or other media -- directly to other users over a peer-to-peer wireless connection, he says.

"This could be really cool; it's sharply different from what Apple's offering," he says.

But a key part of this vision -- and Microsoft's possible success -- is for Zune to be a subscription-based service, according to Enderle. That would help Microsoft to clearly differentiate Zune from iTunes, potentially allow them to convince those who might be reluctant to switch from iTunes because of a heavy investment in iTunes songs, and would allow consumers to pass around playlists with no extra charge, he notes.

Subscription services have long been touted by analysts as the eventual winning business model in digital music. However, to date, such services have found little traction with consumers.

As for the Zune hardware, Gentes offered few details on how Microsoft would attempt to distinguish it from Apple's iPod and other devices. As has been rumored, the company is planning on adding a wireless antenna to the device, she said. That could potentially allow users to download songs directly to the Zune device itself rather than having to sync their devices to a computer after downloading a song there. However, Gentes declined to say whether the first-generation Zune device will include a wireless antenna.

Although Microsoft plans to release a family of Zune devices over time, the company expects to have just one device ready by the holiday season this year, she said.

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