Xbox Portable?

Rumors has been spreading that the software giant Microsoft is considering developing its own portable-media device. Rumors of the new hardware are circulating after nearly four years in which Microsoft and its partners have been unable to mount a successful assault on Apple’s iPod and the corresponding iTunes store.

Despite reports to the contrary, Microsoft will neither confirm nor deny any plans for a digital-media player of its own. A Microsoft spokesperson did confirm, however, that the software developer has undergone a company-wide reorganization in addition to restructuring its Entertainment and Devices Division, which includes the Home and Entertainment group as well as the Mobile and Embedded Devices group.

Nitin Gupta, an analyst at research firm Yankee Group, said that, unlike previous unsuccessful efforts from Sony and other device manufacturers, Microsoft’s efforts might create a viable alternative to the iPod, but the company will have to overcome challenges that Apple was able to conquer with its integrated iTunes software.

Chasing Apple

Gupta said that portable-media players on the market now offer users an experience consisting of several components. First, there is the device itself, then the software, and finally there is the online service. Apple has an integrated solution that provides all of those components, Gupta explained.

Heretofore, Microsoft has tried to create a marketplace in which its partners provide those components separately. That approach, said Gupta, has created integration problems, particularly between the digital-audio players and the different online services. Users do not have the assurance they need that the different combinations of devices and services will deliver a comprehensive experience, Gupta said.

“Most people using these devices are not technical experts,” he said. “They don’t want to try to guess what device works with what online service. That’s an integration issue — just making it work. The other issue is marketing.” According to Gupta, each of the online services and devices competing with the iPod-iTunes empire has been marketed in silos, while Apple has been able to deliver a clear and concise message to music enthusiasts.

Microsoft’s recent partnership with MTV to create the Urge music service could give the company a leg up, especially if it collaborates with MTV in marketing a cobranded media device.

If the company can come up with a portable version of its Xbox 360 console that offers gaming, video playback, as well as audio capabilities — and also is stylish — it will have a much greater chance of success. If Microsoft launches a player of its own, it will be going after a younger crowd, and its success with the Xbox will help in that effort. If it can offer gamers the ability to play their favorite games and listen to their favorite tunes on a portable device, it would be really attractive.

Microsoft will have to think very long and hard about this. If they started working on it seriously, it will be at least holiday 2007 before we see a device. It’s a big risk, but if they were able to do it, they would get a leg up on Sony, if not Apple.

Microsoft needs something akin to Sony’s PlayStation Portable (PSP) to compete against the iPod. It would be wise if Microsoft could find a designer along the lines of Jonathan Ive, the brain behind the iPod, and spend as much time on the design and user interfaces as it does on the technology.

apple, Ipod, microsoft, psp, sony, Xbox 360

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