Can the New Zune Beat iPod?

"Microsoft, the scourge of the planet," writes Apple CEO and cofounder Steve Jobs in his new memoir, "has been chasing me for 30 years, copying everything I do." Wait, no, sorry. That observation actually appears in "Options," the forthcoming memoir of Fake Steve Jobs, based on the popular parody blog that lampoons the quirky, wildly successful Silicon Valley tycoon (and iPod Prometheus).

Still, given the news out of Redmond, Wash., this week it's hard not to see the fake Jobs's point: Microsoft is relaunching the Zune—its clunky flop of an iPod competitor—this holiday season. They unveiled two new redesigned players in hopes of making inroads in the portable media device market, introduced a revamped software client, and launched a social networking companion Web site. (Without a trace of irony, the first band they selected to feature on their social site is called VHS or Beta.) Zune's prices are comparable to Apple's: The 4GB model will retail for $149, the 8GB for $199, and the 80GB for $249. Initial reviews have been guardedly optimistic, a definite improvement from Zune's debut in November 2006.

But are Microsoft's improvements enough to eat into Apple's lead? "This is a really nice evolutionary step for Microsoft," says Michael Gartenberg of Jupiter Research. "They have some fairly compelling devices in terms of features and functions. They've got some stuff in there that Apple doesn't have in theirs yet. But none of this makes a difference if they can't get the message out." He points out that he brought his own Zune to Microsoft's Vista operating system launch event earlier this year and failed to find another person there with one. "If you cant find a Zune at the Vista launch, where can you find one?" Microsoft did not return NEWSWEEK's calls to comment on this story.

Not even Microsoft chairman Bill Gates appeared able to stay on message this week. "For something we pulled together in six months, we are very pleased with the satisfaction we got," he told The New York Times. He might as well have said, "You'll be stunned by how little our new product sucks!" Not the tone you want to adopt when your competitor's device has become a cultural touchstone, gracing the cover of magazines (this one included).

Apple made 69 percent of all MP3 players sold during the second quarter of this year, according to the market research firm NDP Group. Just 3.1 percent were made by Microsoft, landing it in third place behind Sandisk, whose priced-to-sell players comprised 11 percent of all devices sold.

But just because it's the most popular kid in the class doesn't mean the iPod is without serious flaws—or serious detractors. The digital-rights management scheme built into its iTunes music store drives music lovers bananas, and it is cost-prohibitive to swap out dead or dying iPod batteries, which have a habit of dying after a couple of years.

Such frustrations led technology and marketing consultant Grahm Skee to start the Web site AnythingButiPod.com two years ago. "The whole thing came about as a joke and it kind of turned into my job," he says. Today the site's forum has 25,000 registered contributors, many of them obsessive when it comes to their players of choice and very specific about the sundry demerits of the different iPods.

Skee owns, he says, almost every MP3 player available. "The first version of the Zune was half baked," he says. "They just wanted to get something on the market." Skee, who has consulted with Microsoft and other devicemakers, speculates that Microsoft appears to have replicated what it did with the Xbox 360—rushed to market, learned from crabby customer feedback and kept tinkering away to improve it.

And yet, Microsoft hasn't been able to make the Zune hip. "My son has an iPhone and several iPods," says Robert Scoble, an influential tech blogger and former Microsoft mouthpiece. "We have a Zune; it's just not cool enough. It doesn't have the killer feature. Something I can show my friends and say, 'Hey, check this out'." Scoble says Gates's own remarks suggest the company is approaching the market from a defensive position: iPod users have the occasional nasty habit of becoming Mac converts. "If iPods were all Apple was doing, Microsoft wouldn't care," he says.

The end result is that being a Zune fan can be a lonely undertaking. Nathan Webb, editor of Zunescene.com (15,500 registered forum members), may not know anyone outside of his immediate family who owns one—"I don't have any [friends] that own a Zune," he says. But the Mead, Colo., mechanical engineer is still going to buy two of them when they hit stores sometime in mid-November. "I didn't hardly sleep on the night they made the announcement," he says. "I tried to go to bed after updating the site but I couldn't. I was too excited for it." No doubt, a sentiment Gates can find encouraging. But it's unlikely to keep either the fake Steve Jobs or the real one awake at night.