Why the Zune HD needs the Xbox 360

We're standing on the cusp of a new chapter in video game history: the era of microgames, where titles $10 and under take on a starring role, and attach rates (that is, games sold per console) skyrocket.

The charge is being led by Apple with its iPhone and iPod Touch, two devices without gaming as their stated purpose, both of which have found unmatched success in the downloadable gaming industry. The other video game consoles have their own "app stores," where games can be downloaded directly to the system, but none have reached the heights that the iTunes App Store has...yet.

At the annual iPod refresh last week, Apple's Senior VP of Worldwide Marketing Phil Schiller said, "When you think about the companies that came before us... when you played those other systems, they seemed so cool, but now when you look at them, they don't stack up against the iPod Touch."

Schiller cited the fact that there are 21,178 gaming and entertainment titles available on the iPhone/iPod Touch platform while there are only 607 for Sony PSP and 3,680 for Nintendo DS.

Daunting numbers indeed. But the big money isn't in selling downloadable games, and Apple is the only competitor in this field without a related home video game console.

What does this have to do with the Zune, again?

It's a well-known fact that the explosive growth of Mac in the PC market is intrinsically related to the popularity of the iPod: As sales of the portable device increased, so too did sales of the "parent device." This halo effect has been observed since 2004, and Apple has managed to transfer it from the iPod over to the iPhone. As the iconic iPhone takes an increasing share of the mobile phone market, Macs have enjoyed a gradually climbing share of the PC market.

Pairing an iPod with Mac iTunes is a simple and streamlined method of organizing and acquiring music and video content. Similarly, syncing a Mac with an iPhone helps users simply organize contacts, calendars, and communications in addition to entertainment content. But when marketing the iPod Touch and iPhone as gaming devices, what benefit do users gain from pairing with the Mac, a platform traditionally bereft of games?

Not much.

Today, the Zune HD portable media player -- Microsoft's answer to the iPod Touch -- officially launched in retail; and for the first time, Microsoft has a chance at cracking the personal media player market wide open. In addition to the PC compatibility with Zune's desktop Software, the device is compatible out of the box with Xbox Live.

Though the integration plans currently only include sharing of high definition and streaming video and not gaming, Microsoft made sure to highlight the Zune's abilities as a gaming device today.

"Later this year, Zune plans to release...fun 3-D games such as 'Project Gotham Racing: Ferrari Edition,' 'Vans Sk8: Pool Service' and 'Audiosurf Tilt.' Games can be added to Zune HD via Zune Marketplace over the Wi-Fi connection or when connected to the Zune PC software."

Nintendo and Sony have portable devices which pair up with their related home consoles; but due to weak integration, this has not proven to be a significant selling point for either the handhelds or the consoles. Consequently there are only two major releases for Wii that feature DS integration, and PSP remote play is poorly supported at best.

Since Microsoft does not have a dedicated handheld video game system, and an increased amount of attention has been turned on the iPod Touch and iPhone's video gaming capabilities, the company is standing over a market ripe and ready for Zune/Xbox Live integrated gaming.

Were Microsoft to hitch the Zune wagon onto the star that is Xbox 360 (in August it still managed to outsell Sony's PlayStation 3 despite the PS3's 300% increase in sales), it would have an audience of more than 31 million interested users, creating an entirely different Halo effect.

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