Why there is no Zune Phone

The big news out of Barcelona this week was Microsoft's announcement of Windows Phone 7 Series, the heir to Windows Mobile and Microsoft's platform of choice to evolve their mobile strategy. With a UI that's looks very familiar to users of the Zune HD, I think Microsoft has done an excellent job re-inventing their mobile strategy. It's clear they are no longer playing in this market, they're playing to win. It's also clear that this year will be a major inflection point for mobile and Microsoft has gotten off to a good start, much better than what we've heard so far this week. The key will be execution and delivery on the things they've shown us this week. You'd think that would be enough for most folks, but it's clearly not. It seems there are some out there that are still looking for more.

I don't understand why I'm still reading people clamoring for a Microsoft "Zune" phone. It's pretty clear that we're not going to see a phone from Microsoft themselves, at least not one based on the Xbox and Zune business models. I've talked about why we wouldn't see a Zune phone before but it's worth repeating.

The business model of Windows Mobile is totally different than Zune and the Xbox (in fact, I'd argue that we'll see Microsoft get out of the Zune hardware business long before they become a direct handset vendor, but that's another story).

Zune was a good idea to some extent, since the technology Microsoft was licensing wasn't getting them anywhere. As it was, hardware partners were taken aback by Microsoft's actions but at the end of the day, they simply were not delivering on the markets needed by Microsoft to be successful.

Phones are different. Windows Phones are a core platform that is strategic to Microsoft's other lines of business and built on Microsoft's traditional business model of licensing technology to partners. The problem is that no one has ever been successful licensing technology platforms to others and then competing with a device of their own. Apple failed (twice, with both Mac OS and the Newton platform), Palm tried it only to have to split the company into two and Nokia tried it with Series 60 (which it's now open sourced). No matter how creative you are, it just can't be done. Microsoft now has traction with more than 20 million licenses sold last year and a good collection of partners (many of whom are looking at Google and Google's hardware aspirations) along with a new crop of phones for consumer and business use. A Zune or any other phone sold by MSFT would potentially hurt all that and for no good reason.

Moreover, how would MSFT bring this to market? There's no mass market for unlocked phones in the US (just ask Nokia how hard it is to sell a high end phone with no carrier). MSFT as an MVNO? Not happening. A partnership with a carrier as Apple did with the iPhone? Well, it could work but that would alienate licensees and carriers alike.

There's always some possibility of MSFT exploring a different type of business model for a phone, but it's far more likely more Microsoft branded functions and services get baked into a versions of Windows Phone and integrate well with other platforms. That is, of course, something we've heard Steve Ballmer hint about in the last few months.

So, now that we've got the whole Microsoft getting into the phone business cleared up, let's move on and try and resolve that whole "moon landing is a hoax" thing for our next project.