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Zune Moves Beyond Music

6 May, 2008 By: Erik Gruenwedel

Microsoft Corp. May 5 said its Zune online service would begin offering TV programming for its Zune portable media player, the PC and the Xbox 360 game system.

Zune is expanding its video store to include more than 800 downloads of popular television shows from Comedy Central, Funimation Entertainment, MTV, Nickelodeon, Starz Media (including Manga Entertainment), Turner Broadcasting, Ultimate Fighting Championship and VH1.

Episodic programming, which starts at $1.99 (similar to Apple Inc.'s iTunes), offers NBC Universal content (not found on iTunes), including “The Office,” “Heroes” and “30 Rock,” among others.

Other programs include Comedy Central's “South Park”; FUNimation's “Afro Samurai” and “Witchblade”; MTV's “The Hills”; Nickelodeon's “SpongeBob SquarePants”; Sci Fi Channel's “Battlestar Galactica” and “Eureka”; Starz's “Ghost in the Shell” and “Street Fighter”; Turner Broadcasting's “Metalocalypse” and “Robot Chicken” (both of Cartoon Network); UFC's “The Ultimate Fighter and “Fight Night”; and VH1's “Rock of Love” with Bret Michaels.

Zune does not offer movie downloads.

“Partnering with Zune will allow us to develop innovative content offerings for their customers, including flexible pricing and packaging options beginning this fall,” said JB Perrette, president of NBC Universal Digital Distribution.

Rob Enderle, principal analyst with Enderle Group in San Jose, Calif., considered the deal an advantage for Zune. He said Zune has a superior platform for video than the iPod due to its ability to support more video formats and faster transcoding.

“Now they have programs that iPod won't get,” Enderle said. “Music remains the major driver for the product class and Apple out markets Microsoft, but this is now one thing that gives Microsoft an advantage. Not a big deal, yet, but it could become one. “

Microsoft also upgraded its music offerings for Zune to make it easier to find tracks and music videos from its catalog of 2.5 million songs, 4,000 videos and 3,500 audio and video podcasts.

Despite the inclusion of TV programming, Ed Woo, analyst with Wedbush Morgan Securities in Los Angeles, said Zune would be hard pressed to make much of an impact in portable entertainment.

“Trying to play catch-up with Apple, which has such an iron grip on the portable music market, is hard to do,” Woo said. “[Zune] is a good player, but Apple had a significant head start and has a loyal customer base.”

He said TV networks and studios have little problem disseminating content across multiple and often competing channels such as Hulu, Amazon's Unbox, iTunes and Zune, since each contribute incremental revenues and are not detrimental to existing TV advertising and DVD sales.

“Zune could have been the player,” Woo said. “But It's hard is to make up, especially to somebody like Apple. They have the momentum.”

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