Innovation isn't enough to challenge the iPod

By Antony Bruno

DENVER (Billboard) - In early December, a bombshell hit the consumer electronics world: Barack Obama was spotted using a Zune.

A seemingly innocuous Philadelphia City Paper blog post reporting the news sparked a firestorm throughout the online tech community that came to be dubbed "Zunegate." Message boards lit up with indignation over the fact that the tech-savvy president-elect -- who has used an iPhone, iPod and various Macs -- would have such an unhip device. The furor grew to the point where an Obama spokesman felt compelled to issue a statement confirming that "the president-elect uses an iPod."

The fact that not even the potential endorsement of a cultural icon like Obama can remove the tarnish from Microsoft's Zune speaks volumes about how difficult it is to break through with a viable competitor to Apple's iPod and iTunes store. And that's bad news for a music industry that desperately needs new services and partners to expand the digital music marketplace.

Zunegate occurred just months after Microsoft introduced new music discovery features that garnered rave reviews. But that praise was largely forgotten by the time the Obama "scandal" erupted.

According to several experts in consumer psychology and brand strategy, the problem is not one of innovation, but of image. Apple's brand is so entrenched in the public consciousness as the arbiter of cool that any challenger faces a far greater task than simply matching its design and execution.

"(The Zune) might be a terrifically engineered product, but no one believes that Microsoft is capable of that kind of innovation that speaks to the right brain, and Apple has leveraged that famously in its recent ads," said Anirudh Kulkarni, founder and managing principal of Customer Value Partners, a customer relationship management firm in Fairfax, Virginia.

Apple spends millions of dollars in advertising defending its dominant position in the digital music market. The closest anyone has yet come to competing with it is Amazon's MP3 service. But given Amazon's status as a pioneering giant of online retailing, the shift to digital downloads wasn't such a huge leap for consumers.

Another hurdle facing would-be Apple competitors: Services that launch with the authorization of the music industry rarely get the same level of praise as those operating underground. Part of that is due to the user experience, as authorized services operate with more restrictions than unauthorized ones. But fueling the fire is the reputation of the music industry itself, smeared by things like digital rights management restrictions and copyright infringement lawsuits.