By Walaika K. Haskins

June 19, 2006 9:36AM

``To challenge the iPod and iTunes, Microsoft will have to create a really compelling experience for users, and the device itself has to be fun and interesting and attractive,`` said Mike McGuire, an analyst at Gartner. ``The individual components and attributes are not as important as the total usage experience.``

Reports began circulating on Friday that Microsoft has started laying the foundation for new products that will challenge both the iPod and the iTunes online music store.

Citing sources ``familiar with the discussions and plans,`` Reuters reported on Friday that the software giant is going through all the motions of creating a new device and music platform but will not confirm its plans.

A Microsoft-branded device and music service would represent a significant departure for the company, which, to date, has relied on partnerships rather than its own products. Urge, a joint venture between Microsoft and MTV, is one recent example.

``It seems like a shift in strategy,`` one source told Reuters. ``[Microsoft] is very committed to it.``

Talking Points

The software maker cut short talks with major recording labels last fall after plans to launch a music service temporarily stalled. But according to the Reuters report, Microsoft has renewed talks with the labels and has conducted demonstrations of the secret digital device.

Sources cited in the Reuters report said the device will offer video and audio playback. In addition, Microsoft will reportedly not rely on a monthly subscription model that most iTunes competitors have adopted. Instead, according to the Reuters report, Microsoft will go for a pay-per-download strategy.

The company has put Xbox guru Robbie Bach in charge of the project, a source told Reuters.

Joining the Crowd

Sources did not say when Microsoft will introduce the device and launch the service. But when -- or if -- it does, Microsoft will join a growing number of companies anxious to take a bite out of Apple`s majority share of the digital-music market.

``To challenge the iPod and iTunes, Microsoft will have to create a really compelling experience for users, and the device itself has to be fun and interesting and attractive,`` said Mike McGuire, an analyst at Gartner. ``The individual components and attributes are not as important as the total usage experience.``