CNet’s Ina Fried reports on Microsoft‘s quiet reorganization of their Zune team:

The software and services portion of the Zune team–the bulk of its staff–will be added to the portfolio of Enrique Rodriguez, the vice president who currently runs Microsoft’s Mediaroom and Media Center TV businesses.

The hardware team, meanwhile, will now report to Tom Gibbons, who also leads the hardware design efforts within Microsoft’s Windows Mobile unit.

Microsoft’s Rodriguez also expanded on the company’s new vision for the Zune:

“Zune the service needs to transcend Zune the device,” Rodriguez said.

But that doesn’t mean Rodriguez doesn’t see a need for Microsoft to keep making the Zune.

“The reality is that will continue to be the one vertical device that we control every…aspect of it all the way to what it says on the box,” he said. “So shame on us if it is not the best.”

Microsoft’s new direction for the Zune isn’t entirely clear, but it looks like they’ve realized that trying to compete with Apple directly isn’t working. It seems that Microsoft wants to merge it’s failed licensed model for media players with its Zune closed system to create a more viable hybrid. 

Unfortunately for Microsoft, though, the company has struggled to define the Zune as something more than an alternative to the iPod, and the Zunepocolypse and plummeting Zune revenues have seriously damaged the Zune brand.

Do you think that there’s a future for Zune as a service, independent of the Zune player?

Update: Here’s the official Microsoft word on this:

 

If you’re pressed for time, here’s the short version:

• We are combining the Zune software team with the Connected TV organization (Windows Media Center, Mediaroom) to create a single group focused on creating software and services that enable great entertainment experiences across the PC, TV, mobile phones and Zune devices.
• The Zune device hardware team joined the mobile communications business group to create a center of excellence in portable hardware. This will bring people who live and breathe hardware together.
• The priority now is to focus on delivering against our current product roadmaps across each team in the new organization. That means new software, services and devices for Zune customers.

In a nutshell, this is an extension of the way we’ve been taking the business for some time. We’ve said before the strategy for Zune is to provide a great entertainment experience across multiple screens and devices and this move will help us deliver that. We’re looking at how the powerful features of Zune can be combined with the work in the TV space to deliver a broader entertainment experience.

As Enrique put it, “The goal is to make non-gaming entertainment a first-class citizen within Microsoft’s business, that means building better software and gaining scale a little further out than just in Redmond.”

For our current customers, this internal, organizational adjustment won’t result in any changes. Like I said above we’re still committed to delivering the next wave of the Zune hardware, software and services – and we will do so this calendar year, so stay tuned.

 

But now our charter is broader, and more exciting, and we can’t wait to take Zune to the next level for customers!