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Zune to Pursue Original Content

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Microsoft executives have been making the rounds at talent agencies and production companies in recent months in hopes of licensing exclusive original video programming for the portable media player, which has struggled to get traction in the marketplace.

While Microsoft has denied persistent rumors that Zune would expand into communications a la Apple's iPhone, the company confirmed being in an "exploratory phase" regarding supplementing the TV content it already licenses from studios with Zune-only fare.

But rather than just stock up on traditional formats like sitcoms, Zune is looking for nontraditional programming that can capitalize on the device's social networking platform, according to Richard Winn, director of entertainment development at Zune.

"What we would be looking to do with any form of original content is the added component that Zune could provide that iTunes or any competing service couldn't," Winn said.

Exclusivity could mean either locking up content that only appears on the Zune platform or syndicating content that appears on Zune first before moving elsewhere with Zune branding.

Finding some point of distinction is becoming paramount for Zune as it strives to come anywhere close to the market share iPod has amassed among portable media players. In May, Microsoft said that just 2 million Zunes had been sold since the product's launch in November 2006, whereas Apple reportedly averages 3.5 million iPods sold per month.

But the iPod has no exclusive content. Becoming the only hand-held device to boast exclusive programming could represent either a bold reinvention of Zune or a last-ditch effort to stave off extinction.

Microsoft has long been dogged by rumors that Zune would be scrapped altogether. Robbie Bach, president of entertainment and devices division at Microsoft, raised eyebrows last month among Microsoft watchers by barely mentioning Zune in a session with analysts.

But Winn said Zune is in no such danger. Rather, the product plays a key role in Microsoft's buildout of an interconnected ecosystem where content seamlessly flows among all company-owned platforms like gaming console Xbox.

It's the gaming console that inspired Microsoft to think differently about Zune, Winn said. He cites "Halo," the popular video game franchise that helped establish Xbox as a tool for remote multiplayer action as opposed to single-player mode. Similarly, Winn sees Zune as poised to redefine video consumption from the traditional solitary pursuit as the backbone for a more communal experience.

Key to that strategy is Zune Social, which connects Zune users through social networking software that, among other capabilities, lets fellow subscribers know the last song consumed. By Winn's thinking, the characters in an original program conceivably could have playlists of their own that could automatically load into users' devices -- deepening connections between users and content.

"The thing we've all been looking for is what is that we can do that is a little more interesting than just looking at a piece of video," Winn said.

It's a far cry from When Zune launched nearly two years ago as a music player. But Microsoft has broadened its utility just as iPod has, introducing a video marketplace in May with a few select content partners including NBC Universal and MTV Networks. Gaming also is slowly being added.

Now Zune is looking to not only add programming that iTunes doesn't deliver, but also take the same programming it does and supplement it with Zune Social. Microsoft already has begun experimenting with adding extra features to video game "Ninja Gaiden II" and NBC series "Heroes." Last month, headwear designer New Era signed a deal to create limited edition caps, podcasts and events tied to Zune.

Shahid Khan, senior partner at Interactive Broadband Consulting Group, doesn't think Zune's new content strategy is going to move the needle much. While he notes Web portals are best served landing exclusive content that can be sampled for free, a hardware manufacturer doing the same essentially is asking consumers to take a leap of faith that plunking down hundreds of dollars for Zune will be made worthwhile with value-added content with which they aren't familiar -- and pay extra to see that content. Licensed TV shows cost $1.99 per episode.

Khan believes Microsoft is going to think even bigger if it wants to rejuvenate Zune. If not more competitive pricing for the device itself, he suggests a subscription VOD model that would entitle subscribers to as much video as they could consume for a set price during a given period.

"If anyone could pull it off, it's Microsoft because of the amount of investment they can put into it," Khan said. "They need something radical to push the video on Zune."