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Edition: U.S. Article Comments (0) Save Email Print Reprints Most Popular Most Shared Bad news for record lottery "winner" 16 Feb 2010 Rate hike furor shows delicate task ahead for Fed 19 Feb 2010 Tiger Woods case puts spotlight on "sex addiction" 19 Feb 2010 Dutch government falls over Afghan troop mission 1:51am EST Microsoft phone system hits reset on digital music 19 Feb 2010 FDA reports says Avandia can hurt heart: report 19 Feb 2010 Cleveland deemed most miserable city in USA 18 Feb 2010 Service at sword point at "Ninja" restaurant | Video 19 Feb 2010 Government was told of Toyota claims in 2004: insurer | Video 19 Feb 2010 For Apple suppliers, loose lips can sink contracts 17 Feb 2010 SPECIAL REPORT Inside Apple's fortress of secrets Inside a walled city in South China and amid intense security, employees are provided with dormitories, canteens, recreation facilities, even banks, post offices and bakeries. The goal? Keep Apple's secrets. Full Article Apple's iPad e-book store to use DRM: report Mobile operators unite to fight Apple app store Microsoft phone system hits reset on digital music Antony Bruno Fri Feb 19, 2010 11:34pm EST Related News Microsoft may end up resorting to M&A in mobile Fri, Feb 19 2010 Microsoft may end up resorting to M&A in mobile Fri, Feb 19 2010 Nokia, Intel team up in phone software race Mon, Feb 15 2010 RPT-MOBILE FAIR-WRAPUP 3-Nokia, Intel team up in phone software Mon, Feb 15 2010 Microsoft launches mobile software overhaul Mon, Feb 15 2010 DENVER (Billboard) - It's been more than six years since then-Microsoft CEO Bill Gates admitted that Apple caught the company "flat-footed" in the digital music market and directed his team to make up for lost ground, according to recently surfaced internal e-mails. Technology | Music | Media To date, Microsoft's effort to address the digital music market has largely focused on its Zune player and Zune Pass subscription service, which have won favorable reviews but few customers. But with the recent unveiling of its Windows Phone 7 Series operating system at the Mobile World Congress conference in Barcelona, Microsoft hopes to reboot its struggling digital music strategy. Even the well-received Zune HD device, introduced last fall, hasn't been enough to convince music fans to convert to the Zune Pass. The company says it has sold only 3.8 million players since 2006, and NPD Group estimated in November that it has a 2 percent share of the U.S. portable media player market, compared with 70 percent for Apple's iPod. So Microsoft has made it a priority to expand the Zune service to other platforms. In November, it added the Zune's video service to its Xbox Live network, consisting of more than 20 million worldwide users of the Xbox 360 gaming console. Since then, Zune communications director Jose Pinero says the number of daily HD video downloads and streams has doubled. Now, Microsoft plans to use its Windows Phone 7 platform to bring Zune to mobile customers. "Anybody who gets a Windows Phone 7 Series phone is going to get a Zune within that device," Pinero says. INTERNATIONAL PUSH The most immediate impact this has is to expand the Zune service to countries outside of the United States and Canada, which are the only markets where the Zune is sold. While Microsoft will continue to sell the original Zune player in the States, Pinero says it doesn't plan to expand it to other countries, instead relying on the mobile phone software to bring the Zune service to those markets. For this strategy to work, Microsoft will have to turn around its equally struggling mobile phone business. According to technology research and consulting firm Gartner, Windows Mobile handsets rank fourth in worldwide smart-phone sales, at 7.9 percent, as of third-quarter 2009, down from 11 percent a year earlier and behind Nokia, BlackBerry parent Research in Motion and Apple. But those rankings remain fluid, as analysts expect global smart-phone sales to double in the next three years. "There's certainly opportunity for Microsoft and other players in this market to grab share in the smart-phone space," says Sue Kevorkian, an analyst at tech market research firm IDC. Early reviews of Windows Phone 7 have been positive, with its simple interface and clean design winning high marks. But handsets featuring the new technology aren't expected to hit the market until the 2010 holiday season. By that time, Apple is expected to release an updated iPhone. Zune will need to do more than piggyback on an innovative new mobile phone platform to generate the kind of momentum needed to elevate itself from the status of also-ran. It must compete with rival mobile music services sure to be created for handsets using Windows Phone 7, and the company hasn't yet detailed how developers will be able to integrate Zune functionality into their applications, if at all. Answers to those questions are expected in March at Microsoft's annual Web developer conference, Mix. Zune will also need to increase its footprint to encompass more than mobile technology. That includes adding the music service to the Xbox Live network, as well as taking a larger stake of the subscription market and expanding that lackluster model beyond its current state. Forrester Research analyst Sonal Gandhi estimates the entire U.S. music subscription market totals just 2.5 million users, and that includes not only Zune, Rhapsody, Napster and MOG, but also eMusic and those paying for the premium tiers of such streaming services as Pandora and Live365. While Microsoft's recent moves may lend an important boost to Zune, the company will have to look beyond the subscription model if it is to have much of an impact on overall digital music revenue. Technology Music Media Add a Comment More from Reuters Government was told of Toyota claims in 2004: insurer DETROIT/LOS ANGELES (Reuters) - The largest U.S. auto insurer alerted regulators earlier than first believed about a worrying trend of accidents involving Toyota Motor Corp vehicles, while the Obama administration's top transportation official said on Friday he would not relax pressure on the carmaker. | Video Obama unveils new fund to address housing woes | Video Dutch government falls over Afghan troop mission Hedge fund SAC was accused rabbi's extortion target: source FDA reports says Avandia can hurt heart: report Blackstone, Hilton lenders agree on debt: source » More Top News The regulator and his mousetrap You probably don't know cyber sleuth Daniel Hawke, but he's got a secret weapon that's helping the SEC take down the rogues of Wall Street. Full Article Manhattan's economic crimes bureau Court says Stanford must stay in jail Corporate Crime Vancouver 2010: Winter Olympic Games Hockey, speedskating and Alpine skiing dominate the schedule during weekend action as the Winter Games continue in Vancouver. Full Coverage Olympic lingo has been "sick" Olympics Notebook: Vancouver 2010 2010 winter olympics © Copyright 2010 Thomson Reuters Editorial Editions: Africa Arabic Argentina Brazil Canada China France Germany India Italy Japan Latin America Mexico Russia Spain United Kingdom United States Reuters Contact Us Advertise With Us Help Journalism Handbook Archive Site Index Video Index Analyst Research Mobile Newsletters RSS Podcasts Widgets Your View Labs Thomson Reuters Copyright Disclaimer Privacy Professional Products Professional Products Support Financial Products About Thomson Reuters Careers Online Products Acquisitions Monthly Buyouts.com Buyouts Europe: Buyouts Conferences: Venture Capital Journal EVCJ International Financing Review International Securitisation Report Project Finance International PEhub.com PE Week Thomson Reuters is the world's largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms. Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests. NYSE and AMEX quotes delayed by at least 20 minutes. Nasdaq delayed by at least 15 minutes. For a complete list of exchanges and delays, please click here.

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