Microsoft in fresh assault on digital music

Microsoft yesterday took the wraps off its second attempt to make a dent in Apple's dominant position in the digital music business, a year after its first salvo fell far short of offering a serious challenge to the iPod.

At the same time, Bill Gates, chairman, sought to forestall any doubts about Microsoft's willingness to keep taking losses in its pursuit of Apple, as he promised there would be more future generations of Zune, the software company's digital music technology.

"We're very committed to this," Mr Gates said, adding that the Zune player had a central role in a 10-year plan to build a digital entertainment business. "There's a long way to go to achieve the full vision."

Microsoft said it had sold about 1.2m of its first-generation Zune players, which were launched last November. That compares with the more than 100m iPods in the six years the Apple player has been on the market.

"We've been down this path before, people said we were crazy to take on Sony," said Robbie Bach, president of Microsoft's entertainment and devices division. He added that the company believed that the latest version of Zune would establish it as the clear number-two to Apple by the end of its current financial year, which ends next June.

For the second generation of the Zune, scheduled to go on sale in North America in mid-November, Microsoft said it would offer two new players based on flash memory to accompany a hard-drive player with a bigger 80 gigabytes of memory. That echoed Apple's segmentation of the portable music market with its iPod nano.

In its second attempt to establish a big market for Zune, Microsoft doubled down on its earlier bet that the best way to make headway against Apple lies in building a social experience around its music players, for instance by letting users share music with each other.

The company said it had relaxed restrictions in the first generation of players, which had limited the ability of users to share songs with each other wirelessly and proved unpopular with customers.

It said it would launch a test version of a new social networking service linked to the Zune, which would encourage users to sample each others' music, potentially generating sales at a redesigned online store.

While the first Zune players - rushed to market in just six months last year - were designed and made by Toshiba, the second version has been designed from the ground up by Microsoft and will be made by Flextronics.

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