Zune, for those who don’t know, is the device that Microsoft is soon to make that will try to dethrone Apple’s iPod. We wrote up an article on Zune and the rumours swirling around it here.

Steve Ballmer, Microsoft’s CEO, gave a speech at Microsoft’s Financial Analyst Meeting 2006. Here are some interesting excerpts that he stated about Zune:

I got asked a lot of questions about Zune over the course of the last week or so, and people want to know why, what, this, that.

I think it’s probably fair to say there’s no other company, for better and for worse, there’s no other company that would be attempting to get into that business at this time.

Nobody else has the optimism, nobody else has the financial resources, and you might say nobody else—well, let me just leave it at that.

Very true. Even though many companies have tried to take down Apple it either hasn’t worked or their ideas have been ideally the same as Apple’s so Apple has always remained on top. I do agree that there really isn’t a lot of optimism. Is Microsoft taking a big risk here?

And yet I’m excited about what we’re doing, and yet I know we have a long haul, I know it’s not all about the device, that the device is just one of a set of tuners that we need to work with our partners to provide for our community entertainment services, but it’s important.

Microsoft then seems to have a larger vision. It’s not just about building a device. There seems to be a bigger picture, a bigger vision.

Robbie Bach, Microsoft’s President, Entertainment & Devices Division, also stated some things about Zune:

Finally, one of the things that we just announced last week is a move into the music and video space in portable entertainment, something we call Zune. I want to spend a few moments here talking about Zune and give you a little bit of context.

I think the first thing to understand about Zune is that we are taking a more integrated approach to this. Microsoft will be involved in the hardware, in the software, and the services. We think that’s important to produce the number one thing that has to happen in this marketplace, which is a great customer experience. And we have to tie those things together in some ways like we have in the Xbox world, where in the hardware, software, and Xbox Live service we have tied things together in a great experience.

It is something that is going to take time. If you want to think about the investment timeline for this, you have to think this is not a six-month initiative and somehow in six months we’re going to have captured the marketplace. This is something that’s going to be a three, four, five-year investment horizon. We have to look at it that way.

We have to invest in it that way. We will start with one product this fall in the United States. We will expand next calendar year into broadening the product line, as well as broadening the geographies we cover. So, it is something that we’re going to invest over time.

Wow! So, Microsoft does then understand that it will take a while to beat Apple. It can’t think that they can quickly provide a device that is a winner.

What he also mentioned was that the first device will come out in Fall 2006. . so that’s kinda neat to know. Back to Bach:

We think of this in the hundreds of millions of dollars in terms of investment over time. So, it’s not of the same scale financially because of the way the business model works. But from a strategic perspective, it’s very important. It’s important for us to have a play in this portable entertainment space in particular relative to music and video, because, as you’ll see in a moment, it really completes out the story of what we want to do.

I’ll also point out that we’re not just introducing Zune to do the same thing that other people do. We think there are real advantages to what Microsoft has to offer here. I think the number one thing I would point to, and I talked about this briefly earlier, is community.

When you go to any music site today, what do you do? Well, today, you can buy music, but it’s hard to meet your friends there, it’s hard to share music there, hard to share music experiences there, hard to find out information about your favorite bands, and what they’re doing, and where their next concert is, and how you can get there. That whole community aspect, which is what we do on Xbox Live, absolutely applies in other entertainment spaces as well.

And so we think community is a fundamental part of what has to happen here, and a place where we have real experience, both from our Xbox experience, as well as from our Windows Live and MSN experiences, where we can drive some very exciting things here.

Pretty neat. So, Microsoft won’t unleash a device, they want to radically change the way we view music and how we receive it (I call that a vision). Continuing on…

We also think discovery is key. Figuring out new ways for people to find their favorite music, certainly, but in some ways more importantly their favorite video. Video now is not just a list of things that are produced by Hollywood, it’s video that’s produced by individuals around the world. It’s family videos. It’s friends’ videos. It’s funny community videos. It’s user-created content.

And so figuring out how you help people discover the world of what they want, and then enabling them to share it with their friends are two sort of sides of the same coin that are secret to what we have to do with Zune and the services that we’re going to drive there.

And then the third secret I’ll say is looking at Zune as part of our broader picture. You know, in the case of Apple, they have certainly an iMac business, they have their iPod business, and they’ve sold a few things in the home that compete with Media Center, although the numbers there are actually quite small. Look at our business: We have a burgeoning IPTV business that we think is going to grow and be successful in the home.

We have Media Center in over 14 million units and growing around the world. We have Xbox 360 in place and growing around the world. We have Xbox Live, MSN, and our Windows Live initiatives expanding. Put all of those things together, and then take Zune and put it in the context of that. It enables us to complete the picture.

It enables us to have the full entertainment and connected entertainment experience that we want to have. And so that’s why Zune is important, and it is a way we’re going to differentiate ourselves, because the experience of having Zune in that connected environment is going to be a dramatically better experience than you get just from having a portable music player.

Summing Up

We learned a couple things from all of this:

• Zune is not just a media player
• Zune will be integretate into the home and be part of a bigger picture
• Zune will be out this fall
• Zune will focus on community
• Microsoft knows that Zune won’t be an early success, but will take time