“Last week, Microsoft officially announced details of its new Zune consumer brand. The September 14th announcement came two days after rival Apple announced a refreshed iPod family, updated iTunes software for Windows and Mac OS X, and a revamped iTunes Store (now the ITS; it is no longer ITMS, as “Music” has been dropped from its name) that now supports movie downloads. The verdict? The soon-to-arrive Microsoft device and its accompanying Zune-branded ecosystem will not slow the iPod juggernaut. Zune, in its initial 1.0 incarnation, will be a dud,” Tom Rhinelander writes for New Rowley.

Rhinelander covers many aspects of Zune, iPod+iTunes, and more in a comprehensive article.

Rhinelander concludes, “As for Microsoft, Zune 1.0 will be seen as a flop. Like the Xbox, Zune will cost Microsoft hundreds of millions of dollars, with no near-term profits. Basically, Zune will be a financial loser for Microsoft for some time, despite how Apple has shown that the digital content market is extremely profitable (at least for devices).”

Rhinelander writes, “And unlike the Xbox, Microsoft shouldn’t rely on Apple to damage its own future market position as Sony appears to be doing with its next-generation PS3 console. Zune 2.0, evolving and emerging sometime next year, will attempt to fix the launch flaws, but Zune won’t really take off until PlaysForSure offerings disappear and the digital content ecosystem becomes a clear two-horse race.”

Full article here.
This is a very interesting article which prompts one question: What if PlaysForSure offerings don’t “disappear” because Apple licenses selected players into the iPod+iTunes family with FairPlay DRM?

As we’ve said from the start, if Zune gains any meaningful traction, Apple can change the game instantly by licensing FairPlay. The first online service to get a FairPlay license will quickly become the number two downloadable media seller next to iTunes, as they will have content that plays on what should be over a hundred million iPods, not to mention Macs, which are currently excluded due to Microsoft’s Windows-only PlaysForSure (and Zune) DRM. Likewise, the first device maker to get a FairPlay license will quickly become the number two digital media device seller next to Apple.

One would safely assume that Apple can draw up the licenses at very favorable terms and companies will still jump at the chance to participate in the iPod+iTunes ecosystem. Surging Mac sales (and sales into new markets, ie. “iTV,” “iPhone,” etc.) will more than make up for any iPod and iTunes revenue losses engendered by FairPlay licensing (remember, this licensing won’t happen for quite some time).

Apple can quickly and effectively make Microsoft Zune a very remote island that will have no chance of competing or generating meaningful revenue for Microsoft. The result will be that Apple controls the standard and owns the best-known brands while still selling the device(s) (iPod family) and the online content service (iTunes Store) that started it all. Microsoft would have no recourse and would shut down the isolated, unprofitable Zune brand.

Related articles:
Microsoft’s underwhelming Zune a ‘viral DRM’ device – September 18, 2006
SanDisk teams with RealNetworks against new common foe: Microsoft Zune – September 18, 2006
Creative does Apple’s dirty work by immediately attacking Microsoft’s Zune – September 17, 2006
Motley Fool’s Jayson: Microsoft’s ‘just plain ugly’ Zune a meager offering, not an iPod killer – September 15, 2006
What’s in a name? ‘Zune’ a French-Canadian euphemism for penis or vagina – September 15, 2006
Crave at CNET: ‘Microsoft Zune, all the excitement that brown can bring’ – September 15, 2006
Microsoft’s Zune underwhelms – September 15, 2006
Enderle: Microsoft Zune ‘a design mistake’ – September 15, 2006
Microsoft hypocrisy exposed with Zune: What ever happened to ‘choice?’ – September 14, 2006
Analyst: Microsoft Zune with fake scroll wheel ‘hardly an Apple iPod killer’ – September 14, 2006
Analyst: Microsoft Zune won’t spoil Apple’s biggest iPod Christmas ever – September 14, 2006
Microsoft unveils Zune 30GB player, Zune Marketplace; declines to disclose prices – September 14, 2006
Analyst: Microsoft’s Zune an ‘underwhelming’ repackaged Toshiba Gigabeat; no threat to Apple iPod – August 30, 2006
Microsoft confirms brick-like Zune to be made by Toshiba – August 25, 2006
Microsoft Zune is chunky brick made by Toshiba – August 25, 2006
Microsoft to spend hundreds of millions, several years on Zune trying to catch Apple iPod+iTunes – July 27, 2006
Zune: Apple cannot lose. Microsoft cannot win. – July 26, 2006