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At SuperSite for Windows Paul Thurrott comments on Zune 2:

And while Zune 2.0, as I think of it, is obviously not good enough to suddenly push Microsoft’s device beyond the iPod, it may just be good enough to help it snag some market share and move things forward. You never know.

“You never know.” An interesting conclusion. Even Microsoft’s second loudest cheerleader out there isn’t quite sure if the company’s second attempt in five years to unseat Apple will succeed.

How can that be? Microsoft has more money, ambition and a clear need to break down Apple’s dominance in digital music than any other player out there. It has stated its desire and willingness to do anything to get there many times. It gave a per-box bounty to music label Universal. It even moved the Zune team under J Allard’s XBox division, presumably to get it as far away from Windows as it’s possible at Microsoft.

Unfortunately for Microsoft, the XBox has been a bottomless money pit. The company has been reported to have lost over $6 billion to get a foothold in the game machine industry. In FY 2006 alone, XBox 360 development and launch costs exceeded $1.25 billion. Some business model for Zune to follow!

This is how it’s done

Think of what Apple, Microsoft’s adversary for market and mind share, had to do to enter a highly competitive market with unit shipments in the hundreds of millions. Apple had to “reinvent” not just what a cellphone is, but define what a mobile convergence device could be. It ushered in a new form factor (extremely thin, huge high-density screen), new interface (multi-touch), new business model (no direct carrier subsidies, revenue sharing, unlimited data plans), new apps (YouTube, visual voice mail, full-function web browser) and so on, all tightly integrated in a jewel of a gadget that more than a million people snatched up in less than 80 days.

Apple surely did not enter the phone market with a “You never know” attitude. The iPhone wasn’t just “good enough.” As evidenced by the praise it got even from the executives of chief rivals Motorola and Nokia, in just a few months it has managed to put a fire under the ‘smart phone’ segment of the mobile industry. Unless something extraordinary happens, it’s highly likely that the iPhone will soon be a market leader in that segment.

Incrementalism to nowhere

Under Steve Ballmer’s reign, Microsoft’s failures in most consumer-centric markets (XBox, Media Center, Zune, Tablet PC, UMPC) is strongly indicative of its inability and unwillingness to out-think its competitors and take significant risks.

There can be no better evidence of this incrementalism and dogged pursuit of mediocrity than Zune 2. Microsoft had Apple in its cross-hairs for the last 3-4 years as a potentially lethal threat against its digital media format, DRM and distribution dominance.

After so many recent debacles (Zune, Urge, PlaysForSure), Zune 2 is the answer to Apple’s threat? What strategic design reframing of the problem has Microsoft exercised here? Matching iPods spec for spec with virtually identical form design, functionality and pricing down to the dollar?

Parsing of Zune 2′s feature list against similar iPods the way Thurrott does is a meaningless exercise. Zune 2 has to not only match the iPod but has to significantly exceed it to redefine competition rules to make a dent. Being “good enough” is not going to be good enough. Microsoft is dealing with a company willing and able to terminate the most successful digital music player in history (iPod mini) at the height of its run with another product line (iPod nano). A few feature disparities won’t tilt the scales here.

Apple needs more imaginative competition, Zune 2 ain’t it.

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