A friend of mine sent me a link from the Chicago Sun talking about how the Zune was a total failure. This got me thinking as to why Microsoft even wanted to enter a space that is clearly dominated by Apple. Does Microsoft just want a piece of the hardware business? I doubt that, I don't think Microsoft wants to piss off their customers, the hardware vendors. So why then would Microsoft create Zune?

My going theory is that this has nothing to do with audio players and everything to do with CODECs. Back in the late 90's, early 00's Microsoft was winning the web video war for a little while and even got their VC1 CODEC into the HDDVD and BluRay spec (not sure that's 100% official yet though, probably is.) For a bit it looked like Microsoft was going to make millions or possibly billions on their VC1 line in the form of WMV and WMA everywhere. No one really paid attention to AAC and MP3 was creating nothing but headaches for the music industry. Remember, Microsoft can get money for every CODEC sent out the door on the hardware side, so with high definition DVDs hitting the marketplace in a few years they stood to gain big time.

Enter Apple. With one little player and one piece of software they turn the music industry upside down and with it Microsoft's plans of CODEC domination. While users still have MP3s, many now unknowingly rip their audio into AAC, the default audio CODEC for iTunes. MPEG 4 AVC (or h.264) is starting to take hold, which is also what Apple embraces in the QuickTime side. Since QuickTime is installed with every version of iTunes it's very simple to get MPEG 4 AVC content out there now, not so much with VC1. Multiple players can play MPEG 4 now, but how many can play VC1? Does anyone really care about VC1 anymore, since the iPod can't play it anyhow? If VC1 starts to lose ground, that can mean millions if not billions of lost revenue for Microsoft. Hey, at least they still have the web streaming platform to fall back on.

Enter YouTube. YouTube is the first big video sharing site to really prove the worth of Flash Video. The use of embedded QuickTime, Real and Windows Media have almost gone away overnight. Everyone who's anyone uses Flash video now, completely shoving aside WMV and WMA.

So where does that leave the potential money that Microsoft was going to make on VC1? It's not online. If I'm reading the reports correctly TiVo and others such as Cisco (Scientific Atlanta) are adopting MPEG 4 AVC, not VC1. In my opinion we just watched billions of dollars fall through Microsoft's hands because of Apple and YouTube (more Apple and mostly iPod.)

I believe Microsoft came out with Zune not to counter the iPod hardware but to make WMV/WMA relevant again. To be more precise they had to counter the iPod to make their CODEC relevant, but they don't care about the hardware itself, they care about the CODEC, and that's the exact opposite of Apple. Apple's iPod plays many different CODECs, just none of Microsoft's offerings. Apple wants users to buy their hardware and they use their software to get to you. If Microsoft can get their CODEC back into the masses they can then control the rights to use that CODEC and rights to manufacture hardware that can decode their CODEC. Controlling rights = charging money. It's big, big money and big, big business (see MPEG 1, 2, 4 for examples of this). Microsoft can't afford for the Zune to fail. They have too much at stake here. Apple didn't make a huge impact with the 1st generation iPod, it wasn't until they made it work with Windows that it really took off. So too will be the path of Zune. Don't get me wrong, I don't like the Zune, but I also think Microsoft has a lot of fight in them and they know that they can't afford to lose this war, but they can afford to lose a few battles.

Maybe I'm wrong. It could be that Microsoft, a software company, is worried about Apple and hardware. They have done it before with the XBox 360. The living room is the last place this war will be fought and the XBox 360 may be part of Microsoft's salvation. The XBox 360 can download and play HD content right on your HDTV. Microsoft has had Windows Media Center out for a while, and it's still very short of what a media center should be, even with Vista. Apple's coming out with iTV and it has the slight possibility of truly killing VC1 once and for all. Of course Apple's iTV product only does downloads and has no CableCARD slot or digital satellite support, so I still need two devices to get all my media.

Right now it's anyone's game. Combine the Zune with Media Center and the XBox 360 and we have a possible road to getting VC1 back on the track to success. The Zune won't be enough though. For Microsoft to win the living room war they are going to need to open up the XBox 360 and Media Center to downloads from any videocaster, just like Apple does with iTunes. Right now I can't get TE content onto an XBox or MCE, but I can get it onto iTunes, an iPod and an iTV. Based on this I'll be compressing using h.264 and ignore Microsoft until they decide to become relevant again.

I'm just speculating and trying to look at this a different way. I could be right or very, very wrong.