Microsoft's Zune project is starting to ripple through the rest of the industry. Here's what RealNetworks Chief Executive Rob Glaser had to say on his company's quarterly conference call yesterday:

"Apple's success with the iPod and iTunes has raised a fundamental question: Is this going to be an industry based on proprietary vertical platforms, each from a single company, like the video-game console business, or is the industry going to be based on interoperable platforms that separate hardware and software, like the PC and CD and DVD players?

"This issue got even more focused last week, when Microsoft in effect announced that it's flipping its strategy, from the latter to the former, i.e. from horizontal to vertical. As one of only three companies in the PC space with end-to-end media distribution technology, we think about this topic quite a lot. Indeed, we've been saying for a while that taking Rhapsody music subscription services to the next level requires great end-to-end solutions that enable consumers to enjoy music wherever they want -- at home, at work and on the go.

"Having said that, we think this is a case where our technology competitors -- in this case, specifically Microsoft -- have literally thrown the baby out with the bathwater. Indeed, Microsoft's decision to join Apple in the vertical camp provides us a great opportunity to partner with a number of other companies who make excellent hardware and who are open to integrating it tightly with our Rhapsody software platform. Later this year, we plan to deliver consumer products and services that prove that a world-class, end-to-end music solution can be delivered without one company doing everything. And we plan to work with our partners to market those services aggressively and creatively to consumers."

During Microsoft's meeting with financial analysts yesterday, Robbie Bach, Entertainment & Devices president, was asked how Zune would affect Microsoft's existing device partners. Here's what he said:

"Well, really, our approach, I think, is actually pretty straightforward. PlaysForSure continues as it is today. Windows continues to be a great media platform for people to work on. We're going to continue to support that. We're going to encourage people to continue working with PlaysForSure and the interfaces that interact with Media Player and all the technologies that are in the core platform of Windows, which is, in fact, what the Zune team will do as well. They'll work with those same interfaces and produce their own product.

"So in some ways it's similar to what we did in the Xbox world. When we came out with Xbox, which was a console, some people said, 'Well, gosh, that's going to compete with gaming on Windows.' In fact, what we did was we continued to work with the Windows gaming environment and worked with Xbox, and over time those two things actually ended up working together to help build a better gaming platform for us overall. So we're going to keep working with our partners on those fronts and hope that, between what we do on PlaysForSure and what we do with Zune, we can scale the Windows ecosystem to be the leader in that space."