• by Aaron Baar , February 9, 2009

With sales falling and buzz paling compared with its chief competitor, Microsoft is looking to original programming to help prop up its Zune media player--at least for a little while, as it moves into a broader-based entertainment initiative.

"Our video story is consistently growing," said Paul Davidson, lead video and content producer for Zune. "We have new devices and software coming in this year that will showcase that."

The company announced its first original content deal earlier this week, working with MEAN Magazine to produce an original digital series in which celebrities reinvent classic scenes from popular movies. The programming is the first in a series of ad-supported video shorts--from animated comedy to urban and music programming. The shows will be offered free to Zune users through the Marketplace online store, and they may later be offered on other Microsoft platforms such as MSN and Xbox Live.

"The Marketplace continues to be a focus for Zune, and the video part of the business will continue to grow," says Davidson, adding that Apple does not create original programming for its iPod devices. "We want to continue to enhance the value for the users and try to give them something for zero dollars."

The company will have to do something. Launched in 2006 as a competitor to iPod, the Zune has had difficulty catching on. In January, Microsoft reported that Zune sales fell 54% in the fourth quarter of 2008, compared with the same period in 2007 (revenues for the player were down about $100 million for the quarter). At the same time, sales of Apple's iPod increased, and the company has a 70% market share of the category.

"Given the lackluster sales, there are some real questions about the future of the Zune device, and whether it will be around in a couple years," said Todd Bishop, a blogger who covers Microsoft for TechFlash.com. "At the same time, it's becoming clear that the company is planning to extend the Zune software into other devices, such as Windows Mobile phones. So even if the Zune hardware goes away, it's possible that the software and service will probably still be around."