Zune has always been about hitting the sweet spot, but over the previous two years, we've become accustomed to major device and software refreshes. That makes this year's Zune 3 platform a bit perplexing. Instead of dramatically improving existing devices or adding new device models, Microsoft is instead revving only the software in a meaningful way. If the Zune device lineup offered some sort of functional parity with what Apple's doing on the other side of the aisle, that would be more understandable. But Microsoft is coming from a vastly outgunned position, with Apple's device marketshare hovering north of 73 percent in the US, while the Zune has snagged just 3 percent, not even good enough for a second place finish.

Of course, Apple's fall 2008 iPod lineup (see my photo gallery) isn't exactly inspiring either, but that fact simply heightens the sense that the Zune team has missed an excellent opportunity to close the gap with Apple. Instead, both companies have provided evolutionary hardware updates--Zune's even more so than Apple's--while focusing instead on their respective PC software solutions. On the Apple side, the iPod and iTunes are both very mature products, and both are now saddled with years of tacked-on improvements that have made the products more useful but also more complex. (Not helping matters is the sheer number of device types, all with different software interfaces.) The Zune, meanwhile, is a relatively new platform and with last year's complete software rewrite (see my Zune 2 review) and new hardware platform, the company gained a fresh start but had plenty of functional holes to fill. Some of those holes have been filled over time, most obviously with the Zune 2.5 software update (see my review), which established the Zune teams's new Xbox-like 6 month release schedule.

Well, another 6 months has elapsed and the Zune team is back with another update, this one a fairly major one, at least on the software side. I'll be reviewing the Zune 3 software and devices in the near future, but for now here's what I can report ahead of the platform's September 16, 2008 launch.

Hardware updates

That there isn't a single substantial hardware update this year is somewhat revealing, I think, though I wasn't able to get anyone to speak on the record about future plans in this regard. Nervously, I wonder if Microsoft is moving the Zune software platform to more and more devices and deemphasizing and even eventually discontinuing its Zune-specific players. This is just a hunch, or a fear, however, and isn't based on anything specific. I do know that Microsoft is continuing development of Windows Media Player, however, so it's not like Zune will be included as part of Windows 7 (though it should be, frankly). And of course there are rumors of Zune software turning up in future Windows Mobile devices and other smart phones.

Regardless of what happens in the future, in late 2008 what we get from the Zune team from a hardware perspective is more of the same. There are still two basic Zune models, a smaller flash-based unit and a larger hard drive-based device. Whereas last year's devices included 4 GB and 8 GB flash units and an 80 GB hard drive-based unit, this year the storage allotments jumps to 8 and 16 GB, and 120 GB, respectively. The old 4, 8, and 80 GB are still available, for now, until Microsoft "sells through" the available stock. Prices are consistent with the previous generation devices: The 16 GB Zune will retail for $199 in the US (the 8 GB Zune is $149), while the 120 GB version will sell for $249.

Microsoft is offering some new color schemes, including an attractive blue flash unit (8 GB only) that features the same silver metal back that graced last year's devices. There's also a nice black glossy finish available on the 16 GB flash unit and 120 GB Zune. It's black all around, front and back, and it's a deeper black, by far, than that offered on the old matte-finish 80 GB unit from last year.

From a hardware perspective, that's about it. The form factors and underlying hardware platform haven't changed at all since last year. Compared with Apple's obsession with thinness, Microsoft's decision to stick with devices that were blocky and utilitarian a year ago strikes an interesting contrast. But there's absolutely nothing wrong with the Zune form factors. And certainly, keeping the same form factors means the Zune won't suffer from the nightmare new iPod owners face when trying to find compatible add-ons, thanks to device thickness differences from year to year and the resulting new dock connector adapters. (And there are no new hardware add-ons this year either, I was told.)

Zune 3 firmware

While the Zune hardware isn't changing this time around, Microsoft is offering a major firmware update, and this update will be available to all previous Zune devices, including the original 30 GB Zune that shipped back in 2006 (see my review). All the more impressive, every single new firmware feature Microsoft is offering this year will work on all Zune devices, including that original Zune. This is an exceptional and even unnecessary move on Microsoft's part, one that rewards early adopters and enthusiasts. And it should shame Apple: That company stops adding features to older devices almost immediately, and certainly when new versions appear. Apple iPods are orphans, specifically so their owners will be enticed to buy new devices. Microsoft's approach here should be lauded. They're doing the right thing.

"Our improvements this year are all about personalization and discovery," Microsoft senior product manager Terry Farrell told me earlier this week in a briefing in Zune's palatial (and curiously airplane hanger-like) offices in Building 87 on Microsoft's sprawling Redmond campus. "We're looking at areas that are smart to invest in for customers, things that can differentiate the Zune."

One such area is the FM tuner. Unlike Apple's devices, every Zune includes an FM tuner and Farrell told me that over 50 percent of Zune owners use this feature at least once a week. This struck me as unlikely, and certainly I've never touched the thing. But Farrell offered up some interesting usage scenarios that make sense. "Every Zune device we've ever sold includes built-in FM," he said, "and customers use them while commuting, or at the gym, where there are TVs where you need to tune into a particular radio station to hear the audio."

Building off the device's previous FM capabilities, Microsoft is adding a feature called Buy from FM. "Friends and the radio are the top two ways the people discover new music today," Farrell told. "The idea is that you're listening to the radio and hear a song you want to buy. Today, people just write down the name of the song on a piece of paper and then try to buy it later. But with Buy from FM, you can have instant gratificiation."

Here's how it works: When listening to an FM station, you can tap the Zune Pad to bring up a short menu. (Previously, doing this would save the current station as a preset.) One of the options allows you to tag the song. If you're currently connected to a Wi-Fi network, perhaps at a public Wi-Fi hotspot, you can purchase it immediately via the Zune Marketplace. Otherwise, you can choose to purchase it later. If you have a Zune Pass subscription, you can simply add the song to your library.

Now, this capability requires a few planets to align correctly. Aside from the aforementioned Wi-Fi and Zune Marketplace availability requirements, you also need to be listening to a station that broadcasts the necessary meta-data. There are currently two technologies available for this purpose, an older version called RDS and a new one called RT+ that offers better results and is being rolled out by Clear Channel.

In case you missed it, that Wi-Fi capability is also new. Yes, Zune 2 added the ability to connect to your own home wireless network for wireless sync purposes, but Zune 3 takes this functionality to its logical conclusion, by offering a way to connect to public Wi-Fi networks. Unlike with the iPhone and iPod touch, however, the Zune doesn't have a Web browser, so you can only access those networks that are wide open or where a simple security key is the only requirement.

With this capability, of course, comes device-based wireless access to the Zune Marketplace. I only had a short time to play with this feature, so I can't yet report whether it exceeds what's possible via the iPhone and iPod touch when you access the iTunes Store with those devices. But I can say this: At the very least, the Zune now offers everything the iPod can do, if not more. As with the music, video, pictures, and podcast menus that have been available on the Zune device for some time, the Marketplace uses the same attractive and functional Zune Twist Menus system, which lets you navigate in four directions. It's logical and useful.

Zune Social has also been upgraded somewhat in this release to support the public Wi-Fi functionality. So if you are able to get online, you can refresh your friend's Zune Cards on the go so you'll always have the latest info. And if you're a Zune Pass subscriber, your friends' playlists can be wirelessly passed to your device.

Zune 3 also adds some support for games, though Microsoft is being very cagey about this feature right now. The Zune 3 software update will include two games, Hexic and Texas Hold 'Em, and yes these will be provided free to all Zune users, including original Zune 30 customers. But Microsoft will not be offering additional games when Zune 3 launches, nor will it reveal what its plans are for games going forward. I'm told to expect an announcement before the end of the year.

And yes, Zune 3 finally adds support for audio books, both from market leader Audible and from a service called Overdrive. Unlike all other Zune content, however, and contrary to the publicly stated goals for the Zune, audio books will not be made available from the Zune Marketplace. Instead, you'll have to visit Audible or Overdrive, configure the download for the Zune, and then "side load" the content onto your device using the services' custom software. On the device, you won't see a top-level Audiobooks menu item until you've added an audio book.

As with other new Zune 3 features, audio books will work on all Zunes. And if you're wondering what took so long, Farrell tells me that "audio books simply weren't a pressing issue for our core audience of 18 to 25 year olds."

Microsoft also answered a long-time Zune complaint by making a clock optional. It appears in the top right of the device screen when enabled. There's also a PIN-based device lock, which I'm told was also a regular request.

Zune PC software

As with the Zune firmware, Microsoft will offer customers a major upgrade for its Zune PC software. (And, it should be noted that this software is free and could be used by any digital media enthusiast, not just Zune device owners.) The overall look and feel of Zune 3 is very similar to that of Zune 2, but with some refinements. The reddish default theme, called Phyta, has been replaced by a clean white theme that Farrell tells me will be replicated across all of Zune's Web-based services. (Phyta is still available, however, and Microsoft has increased the number of built-in themes as well.)

A major new feature called Channels combines the best features of podcasts and playlists, and becomes a top level menu item under Collection in the PC software. "Channels are constantly updated playlists made by partners that will be refreshed every Tuesday," Farrell said. "At launch we'll have Billboard charts, the Latin chart, College Music Journal, various radio stations, local favorites, the Grande Ole Opry, Funkmaster Flex, and others making their own channels. And we'll add more over time." The Zune team is creating subgenre channels for fitness (run, rock, sweat) and others.

Basically, you subscribe to a channel and then sync it to your device. The channel is refreshed weekly and synched to the Zune player, either via Wi-Fi or when docked. Because channels disappear as they're updated, there's an option to save a channel as a playlist. Zune Pass subscribers, of course, will get the best experience in this regard, with ever-renewed playlists to sample.

The Zune software can also create up to four Just For Your channels that are custom-tailored to your listening habits. "We know what you listen to," Farrell said. "And they get smarter over time." If you don't like the recommendations, you can tag songs with the "broken heart" rating to fine-tune the results. There's also going to be a Featured Artists channel designed specifically for highlighting new music from top acts.

"This feature has been super-helpful during [testing]," Farrell said. "For example, soundtracks aren't really on my radar, but now I find out when individual songs by groups I like appear on a soundtrack. It's like an automated alert." Again, Zune Pass users get the best experience because new music can automatically be added to their library.

Not a Zune Pass subscriber? Another new feature called Picks should have more universal appeal. (Like Channels, Picks is now a top level menu item under Collection.) This feature works like Channels but provides musical recommendations in a graphical way on a dedicated page in the UI, again based on your listening habits. (You have to sign into your Zune/Windows Live ID account for this feature to light up.) "Picks is like a soft entry point into Zune Social, because the picks are community based but don't come from your friends," Farrell said. "So it's a passive way to get good recommendations and find out about bands you've never heard of." If you're a Zune Pass subscriber, or at least a Zune Social member, the experience is better because you can benefit from the instant-add capabilities and person-to-person interactions of these services, respectively.

While Zune 3 continues the attractive album art media library view from previous versions of the software, Microsoft has added a unique new Mix View, which is accessed via a small link in the lower left of the library. "In this graphical view, we re-sort the world with the currently-selected artist at the middle," Fallwell noted. Surrounding that graphic, hovering visually in the background like square planets circling a star, are related items you can click on to repivot the view and dig deeper. Some of the items are fairly obvious, like other albums by the same artist or related artists. But mouse around, and you'll see more, including information from top listeners and your friends. Suddenly, your music library is both more active and more interactive.

Search has been dramatically improved in Zune 3. Microsoft has integrated IntelliSense into the Zune search box, so you'll get a drop-down with recommendations as you type. And where the search results in Zune 2 generated two panes of search results, one for your collection and one for the Zune Marketplace, Zune 3 adds a third pane, on the left, for filtering the search results by artists, albums, songs, playlists, or channels.

The Now Playing screen has gotten a wonderful overhaul in Zune 3, though it's curiously still not available in a true full-screen mode. (The Windows taskbar stays onscreen.) A few seconds after you stop moving the cursor while on the Now Playing screen, a gorgeous animation begins, combining group imagery, panning effects, and group biography, playback, and other information. It's hard to describe, but easy enough to show. Check out this photo of the effect:

The Zune Marketplace's already-excellent and graphical artists pages have been upgraded with more information. For example, you can see tour schedules if the current artist is on the road. There's a Mix View for digging deeper. And Microsoft has integrated Zune Social information as well, so you can see who the top listeners are for a particular group and so on. The Zune Marketplace related artist recommendations are also notably accurate and useful.

Zune.net and Zune Social

Microsoft's Zune-oriented Web sites, Zune.net--the service's main Web portal--and Zune Social--the Zune community site--are both being dramatically updated next week to be more consistent, both with each other and with the Zune PC experience. "It's a hefty visual refresh," Farrell confided. "We're adding new features and functionality on Zune Social. The profile pages and My Social views will have a new look and feel. And we're integrating with Windows Live Contacts, and lighting up some other network integration pieces. You can get a digest summary of activity on friends' feeds, for example, and that can be sent right to your inbox if you'd like.

Looking ahead

Mr. Farrell has been at Microsoft for eight years, having come into the company through the Windows Media organization. He worked on Windows Media Player 9, 10, and 11 before moving to Zune and that experience has given him an interesting world view with regards to the competition Microsoft faces in this market and where things are going in the future.

"We knew going in with Zune that there's some hefty competition out there," he said. "There are 100 million people using iTunes. But we're excited about the opportunities we have, especially around some of the scale we see when we look across our entire company. Zune isn't just an MP3 player and a software experience. We think about what Zune means as a broader entertainment brand for Microsoft. So, sure, we can and will expand and refine the MP3 player business. We'll expand the software and broaden it out."

"But we also think a lot about connected entertainment. And that leads to external partnerships with groups like Windows and the Xbox. They're happing now, and that will move us beyond the base of just device owners. All this stuff we're doing isn't just for Zune devices going forward. We want to make the installed base excited, and we think we've done that with Zune 2 and 2.5, and we'll do it with Zune 3. But there's more going on there."

When pressed about what these secret plans might be, Farrell just laughed. "Sorry," he said. "That's a conversation for another day."

Looking less far down the road, I asked about the Zune Marketplace's format make-up. More specifically, I'd like to see Zune Marketplace go 100 percent MP3 like some other services. "We're pushing to be completely MP3," he said. "It's easier for customers and it's easier for us. Right now, we're about third-thirds of the way to being completely MP3 on DTO [download to own] content. But [two record companies] are holding that up. We're working on it. And I think we're going to have something very positive to announce at some point."

Final thoughts

There are actually a few other things happening with the Zune on September 16, but I've agreed not to discuss that until the official announcement. Overall, the Zune 3 platform looks solid, though I'm surprised Microsoft's not doing more with the hardware and wonder what that means going forward. I'll be reviewing the new devices, software, and services once I've had some time to evaluate them thoroughly. But so far, Zune 3 is looking like a decent upgrade, more evolutionary than revolutionary. I'm just not sure this was the right time to scale back in this fashion.