Investors Not So Attuned to Zune Debut

The unveiling of the device at least gets Microsoft in the music-player game, regardless of what investors do.
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Microsoft

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launched its rival portable music player on Tuesday, the Zune, throwing down a glove to the reigning digital-music king,

Apple

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.

But after weeks of hype, the debut had little effect on either company's shares. Microsoft dipped 16 cents in Tuesday trading to $29.09, and Apple, meanwhile, was off 13 cents to $84.22.

The Redmond giant is selling the 30-gigabyte device for $249 in three colors: black, white and brown. Like Apple, Microsoft touts its own music store, the Zune marketplace, where music shoppers can download songs a la carte, a la Apple, or for $14.99, get a monthly subscription for unlimited music, as long as the customer keeps paying the fee.

The ability to share songs wirelessly between Zunes -- something that iPods cannot do -- is one of the features Microsoft is touting, though a neighbor can only listen to the song three times within three days, but cannot purchase the song on the device itself.

The Zune also has an FM tuner and a larger screen than Apple's video iPod.

"Zune is all about changing the game to make music more social, and at launch we are just scratching the surface of how wireless technology is going to enable social interaction in the future," Bryan Lee, corporate vice president of Microsoft's entertainment business, said in a statement.

Still, the Zune is heavier and bulkier than the iPod, and its form factor "may be where the iPod was two years ago," says Mike McGuire, an analyst with Gartner.

The music catalog is smaller, customers can't buy videos yet to take advantage of the bigger screen and there is only one device in three colors vs. other vendors that have a larger product line.

"I think what we're looking at here is a starting point for them. It's a work in progress," McGuire says. The sharing feature is "neat," he says, but McGuire predicts that the limitations on the sharing, built in to appease the music industry, will be "less than interesting" to potential customers.

The sharing feature does not distinguish between MP3s ripped from CDs, songs sold in the Zune marketplace, free promotional MP3s and songs available through a Creative Commons license (some of which can be shared freely). The restrictions are the same, he says.

"They just didn't want to be accused of providing a way of ...

copyright infringement," McGuire says. It's "not quite as efficient as P2P

file sharing, but it's kind of the same thing."

In another effort to appeal to the labels, Microsoft

struck a deal with

Universal Music Group

to give a portion (reportedly $1) of each Zune sale to the music company, in addition to its regular payments for songs sold. Microsoft said it would offer the same deal to other record companies.

And while Microsoft is following Apple's lead by offering an integrated device and music service, it hasn't worked so well for consumer electronics heavyweight

Sony

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,which, despite inventing portable music, has been unable to change the market dynamic with its MP3 players and compatible Sony Connect store, McGuire says.

Adding to the competition is

RealNetworks

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, which links its Rhapsody music service with the No. 2 portable music player seller behind Apple,

SanDisk's

(SNDK)

Sansa players.

"It's an enormous challenge," McGuire says. "It's not like

Microsoft is just going up against a software provider or a hardware provider. They're going up against a cultural icon."