Microsoft investing big in Zune

REDMOND, Wash. — Microsoft's plans to offer an iPod competitor could take up to five years of investment, but the spending is worth it in part because it will help the software maker's broader entertainment agenda, a company executive said Thursday.

Robbie Bach, president of Microsoft Corp.'s entertainment and devices group, told financial analysts that the company's planned Zune product line will require millions of dollars in investment and will not pay off immediately.

"This is something that's going to be a three-, four-, five-year investment horizon," Bach said at a daylong meeting on the company's Redmond campus.

But Bach said Zune is key to Microsoft's overall entertainment ambitions and will capitalize on — and tie into — the company's other entertainment offerings. These include the Xbox video game console, Microsoft's television technology and the media-focused version of the Windows operating system that lets people do things like record and watch live television.

"We're not just introducing Zune to do the same thing that other people do," Bach said in an apparent reference to Apple Computer Inc.'s market-leading iPod music and video player and iTunes store.

Microsoft has been working for years to break into consumer electronics with such products as software to record live television and play games. It has had some success, particularly with the Xbox and its highly popular online game service, Xbox Live.

Bach said Microsoft hopes to create a similar sense of community with Zune that it has with Xbox Live, allowing users to share music playlists and video, and learn about things like upcoming concerts.

Microsoft has offered few details about Zune, which is expected to be in stores this fall. It's expected to be tied to a content service.

The software maker faces tough competition from Apple's iPod and iTunes. Other hardware manufacturers, including Creative Technology Ltd. and Samsung Electronics Co., offer portable media players using Microsoft's software, although they've had little success against Apple. Microsoft has poured resources into its money-losing video game business, particularly with the launch of its Xbox 360 late last year. Bach said Thursday he hopes the games business will be profitable in Microsoft's fiscal year ending in June 2008.