Ballmer finally admits the obvious: Zune's DRM is Microsoft's future

In an interview this week with Knowledge@Wharton, however, Microsoft CEO Steve Ballmer finally admits on the record that the Zune DRM system is where Microsoft's putting its future eggs.

Until now, Microsoft has tried to downplay the fact that the Zune digital-rights-management system nixes the Windows Media PlaysForSure one that the company was championing until late last year.

However, in an interview this week with Knowledge@Wharton, Microsoft CEO Steve Ballmer finally admits on the record that the Zune DRM system is the one in which Microsoft's putting its future eggs.

"We thought that (PlaysForSure) was a brilliant strategy -- [develop] an open ecosystem, get a lot of people [to support it]." What happened? As Ballmer puts it, "In this particular case, the whole was not bigger than the sum of the parts." And, as a result, "Apple -- with one model that was simple and consistent -- wound up taking 75%-80% of the market."

"So we said, 'Okay, what do we have to do here?'.... We had to make the market, not just let our partners make the market.... We needed to get an absolutely consistent...user experience [and] retailer experience.... We said, 'Look, we've got to take a different approach, build a new ecosystem and, by the way, we better do something that Apple hasn't done.'"

The Knowledge@Wharton article continues:

The change in strategy was, in Ballmer's words, a "very hard call." But his conclusion was: "We could be consistent with what is out there, which hasn't succeeded. Or, we can try a new approach, which we think has ... merit and can succeed."

When asked whether such a move was "partner-friendly," Ballmer basically says, like it or lump it, according to the Wharton folks:

"Some of our partners will say 'This wasn't partner-friendly.' But having our partners only have 20% of a market share between them is also not very partner-friendly. One of the key things ... that I have learned about business partners is that business partners are your partners because they make money with you, they succeed with you. And if you don't succeed, eventually you don't have any partners."

And speaking of the Zune, istartedsomething's Long Zheng uncovered this week some interesting new info on Microsoft's Zune trademark.

According to the recently granted trademark application, the Zune mark includes not just multimedia player services, but also telecommunication and Internet services. The Zune trademark applies to current and potential future services including "telecommunication services; electronic transmission of data files, documents, music and videos over the Internet and wireless networks; electronic mail services; web messaging services; text messaging services; paging services; streaming of audio and video material over the Internet and wireless networks; wireless voice mail services; voice-activated dialing services; providing wireless access to computer networks and the Internet; cellular telephone services; and audio, video and television broadcasting and transmission."

Wonder if this means there's a version of Microsoft Office in the works that could work on the Zune -- the same way Microsoft Office competitor ThinkFree offers a version of its online-office product for Apple's iPod? You never know....