Microsoft And Apple: Two Cool Dangers.

Microsoft’s gamble and Apple’s pinnacle of success. The next 18 months will make a fool of one or the other. Which is it?

On the one hand, Microsoft is betting they can put a dent in Apple’s iPod juggernaut with the Zune media player. Yes, it’s total vaporware, but it comes with a unique angle.

It’s a huge gamble for Microsoft with a big upside, and a very small downside. For now.

On the other hand, Apple is reaching pinnacle position, that elusive tipping spot within an industry where everything a company does is good, everything the competition does is wrong.

For Apple, every new product or change is a gamble for success. The upside is nominal but the downside is huge.

There is danger for each as both Microsoft and Apple battle for a place in your living room.

Microsoft’s angle is different than Apple.

The Windows maker moved into the living room with Windows Media Center, a much hyped version of Windows with media player tools and a TV channel tuner.

Success? Hardly. Even Microsoft could not find an easy way to move media, music, movies, photos, from the PC to the TV.

Microsoft’s Xbox has had greater success moving into the living room, but at great cost.

The Xbox division is losing billions of dollars, as Microsoft subsidizes the box and the game industry.

Any additional failures of Microsoft’s entry into the living room to control your media (that whole digital hub thing; music, movies, TV shows, photos, etc.) won’t do much more than raise an eyebrow or two.

Why? Microsoft’s string of failures in the consumer arena is long, and Vista only adds more fuel to their burning fire.

Zune is a long shot, but one worth taking. Why? Losing billions of dollars is not a major issue for Microsoft’s credibility. They’ve been doing it for years in their media ventures.

What is great about Zune? So far, the package itself is pure ho hum personified, but it’s also vaporware, as the product isn’t ready for sale.

When customers can finally buy Zune, they’ll find that Microsoft has cleverly set the stage for failure. Not failure to differentiate, but potential failure in the marketplace against the iPod ecosystem.

Set the stage for failure? Whose failure? That’s the gamble.

Zune’s approach is community based. The brickish player looks like an iPod that’s taken too many steroids, even down to the fake click wheel.

But Zune will let users communicate with other Zune users via a wireless interface. Users can connect, send music and photos to each other within the wireless range.

That sets Zune very much apart from the iPod culture which is sync it, store it, play it. Zune will do that, and create a sense of community with those who want to share, presumably, the MySpace crowd.

Zune’s online music service, dubbed Zune marketplace, will offer a few million songs, but no movies or TV shows initially. Music can be purchased, and subscribed to with a monthly Pass.

That’s different than Apple’s iPod model which let’s you buy and own your music. Sort of.

Here’s the gamble. If Microsoft fails, so what? It’s just another in a long string of consumer-based marketing and product failures, and, importantly the can afford it.

If Zune begins to take off, even slowly and steadily, and hits a steady increase in sales while Apple’s iPod sales hit a plateau going into 2007, which is highly likely, Apple gets a black eye in the marketplace.

Why? Because Microsoft’s Zune caused the iPod to tumble. Think about the ramifications. Apple’s iPod sales will plateau and most signs are pointing in that direction.

If Zune sells enough, and that level is somewhat arbitrary, they can crow that their media player dented Apple’s gravy train; to mix up a few metaphors.

Apple would be forced to innovate by copying Microsoft’s music subscription model, and perhaps add wireless peer-to-peer features to the iPod.

That’s a very cool scenario. It’s Microsoft’s gamble, but with little to lose. It’s Apple that may be most vulnerable.

Of course, if Apple’s rumored iPhone hits the streets in early 2007, and 10-million people want one, including me, then all bets are off.

The second cool thing is Apple’s current and future position against the PC makers, and I include Microsoft in that group.

What a difference a few years make.

Look what’s happened. Apple has been reborn, slowly, steadily, purposefully-- in sales, marketplace charisma, cool, chic, and with profit, market share, and multiple markets.

Just a few years ago, Dell, HP, Sony and friends, Microsoft included, were basking in the light of completely owning a huge, steady, cash cow market.

PCs were everywhere and Apple was nowhere. What happened?

IBM sold their PC business to China’s Lenovo. HP lost vision, fell into a tailspin and started selling iPods instead of, well, inventing stuff.

Dell’s on the ropes. They’re missing both revenue and profit projections quarter after quarter, and the stock keeps going lower and lower. The company is worth less than Apple these days.

What of Microsoft? Vista, Longhorn et al, is three years late to market and still not on the viewable horizon. Where Vista goes, the PC market goes, and both are going nowhere. Fast.

Meanwhile, Apple has become the darling of technomediapundits everywhere, sales and profits and marketshare are up for the new Macs, which run Intel chips like everyone else’s PCs.

Macs even run Windows. Suddenly, the iPod halo effect is spreading like a virus, and PC users are switching, and doing so with abandon.

What of the Wintel world? Sale, boring, unimaginative, just like the PC in Apple’s clever TV commercials.

Apple is generating all the excitement. All of it. No one else knows how to spell cool.

That’s danger number two. Dell, Microsoft, HP, and the crowd can afford to stumble, trip, even fall down in the market place. Who cares?

Apple? The company is on such a roll, moving so quickly, that even a minor stumble-- a drop in iPod sales, lower than expected profits, slow growth in market share, a few virulent viruses for OS X, anything-- could send the company’s stock and high flying status to the floor.

Apple’s upside isn’t much, because the company has done so much in the past five years. It’s been a complete resurrection and overhaul, so to speak.

For everyone else, there’s no downside. They’re beaten up already.

The danger of two cool things is that sweet combination of a little success by Apple’s nemesis which makes them look less than invincible, and a stumble here or there by the Mac maker which could be earthshattering.

(Editor’s Note: reprinted by permission from Kate MacKenzie’s article in NoodleMac)

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