Microsoft's Zune to face challenges in Canada

Microsoft Corp.is bringing the Zune, its answer to the iPod, to Canada, but the media player's initial launch will be hamstrung by the lack of an accompanying download store.

The company on Tuesday announced the Zune player will be available in stores here on June 13, making Canada the first country outsidethe United States to get the device.Theonline Zune marketplace, wheredevice owners can purchase music and video content, however, won't be available on launch.

Redmond, Wash.-based Microsoft announced on Tuesday that it was adding episodes of popular television shows, including The Office,South Park and Battlestar Galactica, to its U.S. online marketplace.

Thereare a number of factors that need to be sorted out before the online store can be made available here, said Elana Zur, product manager for Zune in Canada.

"We need to do what makes sense for Canada," she said. "We want to make sure that rather than rushing it, we develop the model that makes the most sense for the market."

Providers of downloadable content often need to negotiate separate rights for theU.S. and Canada, which often results in offerings arriving some time after their U.S. debut. For example, Microsoft launched television and movie downloads over its Xbox Live video game console in the U.S. back in November 2006, but they didn't make it to Canada untilthis pastDecember.

Download caps imposed by ISPslimit sales

One of the issues facing Microsoftis thedownload limitations being put on subscribers by internet service providers. Canadian ISPs have recently moved away from unlimited download plans and begun capping how much customers can download. That poses a problem for providers of downloadable content because it limits how much they can sell, Zur said.

"That's an example of one of the factors that makes this a really different market, so yes [it's a problem]," she said.

The other issue Microsoft faces is the dominant position enjoyed by Apple Inc., which owns more than 70 per cent of the global market for digital music players. Microsoft needs to first establish itself as a viable alternative, then show people the advantages of its device, she said.

"Part of the competitive strategy is making sure we're at least equivalent in the consumer's mind, that we're a compelling offer in comparison to iPod," Zur said."The next step is to say how we're better and different."

The Zune is similar to the iPod in many ways in that it plays music and video and displays photos. Microsoft's device, however, has FM radio and Wi-Fi networking, which allows users to share songs among themselves.

Microsoft has entered and succeeded in new markets that have been dominated by strong players before, such as video games, Zur said. When the original Xbox was released in 2001, the video game market was dominated by rivals Sony and Nintendo. Now, the Xbox 360 and Nintendo's Wii are duking it out for top spot in the console wars.

"People were like, 'How are you going to take on these competitors?,' and look where they are now,"Zur said.