Why Microsoft's Zune is Still Failing

DECS writes "Last winter, RDM detailed why Microsoft's iPod Killer would fail miserably. This year, the site argues, Microsoft will fail again, but for a new set of reasons. It is not obvious that the company has figured this out itself. 'Microsoft doesn't seem to learn from its mistakes in consumer electronics very well. When it does however, it frequently gets the timing wrong. This year, Microsoft appears set to compete against the Apple of 2006. It now offers two flash models, last year's leftover 30 GB unit, and new 80 GB version. The problem is that Apple moved the goalpost dramatically. Apple's new 3G Nano is ultra thin and small, but delivers the same video resolution as Microsoft's boxy flash Zunes at the same price. It also plays games.'"

Comments

Customer and Buyer must be one and the same

[GnarlyDoug]

Apple wins becuase iTunes exists mainly to help drive the sales of their hardware, as opposed to the Microsoft strategy of using hardware to drive sales. With the Apple approace the buyer, user, and customer are all the same individual. With the Microsoft model the buyer/user is the same, but the customer is someone else, namely content produces and/or content resellers such as record companies and advertisers.

I think it is axiomatic that if your buyer/user and customer are not the same person, then you are in trouble. In Microsoft's case, without hardware sales there will be no advertisements or add sales either, and since they're selling the zunes at a loss, they lose on all counts.

Re:Failure?

[shark72]

"Actually, the Zune has been a failure.... The fact is, consumer electronics do not "Slowly gain market share" - they are hit or miss."

This is at odds with how things tend to work in the electronics and CE industry.

Microsoft started by looking at the market, looking at what they wanted to accomplish, set a budget, and then built a unit and market share forecast. And, they hit that forecast. This makes it a success. Sorry -- that's not the politically correct answer, but it's the truth.

"the iPod is king and will remain king - the Zune, in it's wildest dreams, may become a distant also ran in the top 20 selling."

Again, I'm not sure where you're coming from, as your statement is at odds with the actual situation that's occurring. As of this writing, Zune models occupy the #1 (yeah, #1), #9, #16 and #20 slots in the Amazon top 100. This matches up with the NPD industry data (available via subscription only), which consistently shows that Microsoft has no problem keeping Zune models in the top ten.

More importantly, they've passed Sansa in dollar sales. They've passed Creative. Their dollar share is greater than 10% (something that Sandisk and Creative haven't been able to do for a while), and it's growing. So, I'm having trouble understanding why you claim that the "wildest dreams" for Microsoft are to place it low in the top 20 when they're already doing quite well.