AS SOON as they had the call from Microsoft’s headquarters in Washington state, the record company executives knew something huge was about to happen.
Microsoft’s developers and marketers wanted to show the LA music moguls something new, and they wanted to do it in person. Appointments were made. Flights were booked. Within hours, rumours were zinging through cyberspace — the music industry not exactly having a reputation for discretion. Before long, Microsoft’s top-secret new gizmo had an unofficial nickname: “the iPod killer”.
The meetings took place last week. Since then, no music executive has dared break their non-disclosure agreement to talk publicly about what they were shown. Nevertheless, two vice-presidents at one of the big four music companies gave a personal debriefing to Eric Garland, chief executive of the online music research firm Big Champagne.
“I sat them down right after the Microsoft presentation and said, ‘So come on, dish the dirt’,” Mr Garland told The Times. “One just gave me a jaded look and said, ‘Yawn’. Then the other said, ‘Double yawn’.”
This reaction should not be confused with failing to take Microsoft seriously: the software company has successfully amassed the world’s largest fortune with products that have often underwhelmed critics. And although Microsoft is not strictly a manufacturer, when it decides to make gadgets, it does so on an epic scale — as Sony found out to its cost when the PlayStation games console came up against the Xbox.
This week, further rumours surfaced about the iPod-killer, the most interesting perhaps being its internal code name: Argo, in honour of the warship used by the Greek mythological hero Jason (or so claimed The Seattle Times). The report also said the device was being developed by the same team that brought the Xbox to market and might be part of an entire line-up of digital media players sold under the Xbox brand.
Many in the industry think that Steve Ballmer, Microsoft’s chief executive — known for shouting so loud at meetings he injured his vocal chords — has smelled blood at Apple Computer, which is reportedly having problems getting its new line-up of iPods ready for Christmas (Apple has not commented). Mr Ballmer’s cunning plan? To skip ahead to the next generation of devices by offering a rival player that can download songs from “hot spots”, such as the wireless networks in Starbucks coffee shops. Mr Ballmer has an added incentive to succeed: he wants to prove himself now that Bill Gates has signalled his retirement to devote his life to philanthropy.
Taking down the iPod, and Apple’s co-founder Steve Jobs with it, would show that Mr Ballmer was Mr Gates’s equal.
Those who have seen the Microsoft device say its cleverest trick is the ability to hook up to wi-fi networks and share songs with other nearby Microsoft players. If you sat next to someone in Starbucks, for example, you could listen to their record collection free.
Alas, because of fears over music piracy and lawsuits from record companies, there will almost certainly be no facility to keep the music when the other player moves out of range.
Microsoft is already in a position to offer music to users over the internet, having forged a partnership with MTV, the music television broadcaster, to launch Urge, an online music store. It is thought Microsoft is also looking at ways to allow users of Apple’s iTunes to transfer their music to a Microsoft equivalent without charge.
So far, neither Apple nor Microsoft have said anything publicly about the “iPod killer”. But Apple investors are already spooked and shares in the company are at a nine-month low after a series of negative analysts’ reports on Wall Street.
Credit Suisse First Boston this week gave warning that the company may forecast revenues of as little as $4.6 billion (£2.5 billion) for the last quarter of the year, compared with hopes of $4.9 billion. Why? Because it is allegedly cutting back on shipments of its current generation of iPods to make way for the new ones in time for Christmas.
On top of that, many Apple fans had been hoping for the ultimate iPod before Christmas: a widescreen version featuring a display that would take up virtually the entire device, and touch-screen controls instead of the iconic iPod scroll-wheel. There was even talk of wireless Bluetooth headphones. But no one is sure that Apple can pull this off in the immediate future.
Kasper Jade, publisher of AppleInsider.com has more bad news for Apple obsessives: a change of so-called “system-on-a-chip” suppliers might delay the new range of iPod Nanos that are expected to have a recessed screen (to avoid scratching), better casing and up to eight gigabytes of memory.
Phil Leigh, founder of the internet research company Inside Digital Media, believes Microsoft has no choice but to act: “They have simply got to offer an alternative to the iPod. It’s similar to what happened with video games and the Xbox.”
But slicing the Apple will not be easy. Apple controls about 80 per cent of the market for music players and about 75 per cent of the market for legally downloading songs. And songs downloaded on to an iPod cannot be transferred to a rival device, and vice versa. The formats are as incompatible as VHS and Betamax and, just like the video wars of the 1980s, there will be only one winner.
So who will win the battle of the Christmas gadgets?
Messrs Garland, Jade and Leigh — and the music executives — are betting on Apple, putting Microsoft in the unusual position of underdog. Said Mr Garland: “Microsoft are going to spend uber-bucks on this product, so by the time Christmas comes, you can’t do anything or go anywhere without being confronted by images of it. No one else in the history of this industry has had the budget to get that kind of product visibility in such a short time.
He added: “Having said that, the real way to kill the iPod is to disregard the iPod, to do something that defies comparison. The very description ‘iPod-killer’ is already a concession. If you’re mentioning the competition in your product description, you’re losing the battle.”
WISHLIST FOR A NEW MP3 PLAYER
Other media
Games, video, internet . . . extending the Ipod-killer’s breadth of functions would put it up against Sony’s PSP and top-end mobile phones, as well as the iPod.
