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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.'"
http://www.amazon.com/gp/bestsellers/electronics/172630/ Zune has occupied the top spot for quite some time. Is this a failure?
It worked for web browsers and maybe mouses - but their efforts to penetrate the consumer electronics market in any meaningful way have so far failed to gain any traction.
They've got lots of cash, so they can "compete" while they're losing money and do it for years. Who knows, Xbox might take over the game console market someday. Maybe Zune will amount to more than a poor copy of last year's product. On the Xbox front, they can buy up game developers and convert their products to Xbox-only products. I don't see that kind of business plan working with music players, though. Even if they negotiate exclusive distribution rights for many important acts - the market will ignore those restrictions as it has already shown itself capable of doing. Which act wants to be the first to release "Zune only" tunes? Let's keep in mind the percentage of the portable music player market that Zune represents.
And they've already burned a lot of bridges - remember "Plays For Sure"? They signed up player manufacturers right and left - then left them high and dry. Their potential customers are more than a little aware of this too - who wants to buy a player that you might not be able to purchase any music for in a year or two?
Macs are cheaper than they would be if they had no competition...
The reason macs are typically more expensive than generic x86 clones is because there's less competition in their segment. There's a thousand and one makers of x86 clones, but only one that has the apple branding, reputation and the capability to legally run OSX.
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If it was anybody but Microsoft, maybe. The problem with MSFT positioning itself as an anti-anything is that nobody thinks "I'm a loner. A rebel. And Microsoft is building the product to help me let the world know it."
Anyway, they couldn't done it, IMO. There's a saying attributed to Ford Motor Company that says, "Culture eats strategy for breakfast." I used to work at Microsoft, and Microsoft's culture eats everything for breakfast. When they acquired my former employer, the first thing they did was wipe out our culture, and our culture was a lot of what helped us to make a product good enough to make Microsoft want us.
I left after a year and a half and know work for another company that was recently acquired. Our new parent wants to preserve our culture no matter what, so that we keep making the great product that made them want to buy us. What a night and day difference.
I've been seeing commercials for some voice-activated radio product "powered by microsoft" being offered on Ford vehicles. The commercial says it works with your MP3 player, and I assume that means works exclusively with Zune. Does anyone know if this is the case, and if so, is that MS' strategy to create market penetration?
Actually, that's okay.
IBM used to do this all the time. If they ended up with viable competition in, say, mainframe hard drives, they would drop the prices or give out special deals to customers. then they'd adjust the prices on their typewriters.
I remember that the court case went all the way to the US Supreme Court. However, the Supreme Court announced the results of that case on the same day they started breaking up AT&T, so it kind of got lost in the shuffle.
"marketshare approximately equal to that of the Wii"
that's not good, considering how long the Wii has been out. I mean a new console has the same market share as a console years old, this is 'good'?
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It's not cheaper than SanDisk players. It doesn't have more features than Apple. It's not physically distinct; e.g. is waterproof or shockproof. It's a mundane me-too product in a sea of mundane me-too products. It is a failure? I don't know, are any of them?
I was checking what was left in the Encinitas CompUSA store a couple of days before it closed for good. About the only thing left in quantity were UPS's and Zune's. Bear in mind that CompUSA had cut prices by at least 40% to clear out the store (they were even selling the racks that held the merchandise).
A Shadeless room is a brighter room.
Microsoft started out as a software company. They produced a desktop operating system, office productivity software and Server applications to make office life a bit easier. Apple did the same with less success. Now, every time I hear about Microsoft cutting into new markets where they have no business, I can't help but be embarrassed for them.
Microsoft really has no business making things like the Zune and Sync. It's not their core competency to make personal, consumer products. They're just not as good as Apple (in relation to the Zune) or car stereo companies (in relation to the Sync).
Unfortunately, Microsoft's pockets are too deep to take a lesson from failed products. Now I understand why they didn't cut their losses with the Zune months ago and stop pushing it as an iPod killer.
The game.
Yep.
And when you've figured out why they do something so silly you'll have cracked the problem.
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At Rutgers University in New Brunswick, NJ, USA, about 70% of headphones are iPod earbuds, and most of the rest are replacements connected to a iPod. I don't think I've seen any other mp3 players, and it sort of makes me scared to get anything else. Although, I think I'll be getting an LG Chocolate and using it as an mp3 player.
And as for public transit, Rutgers has free bus service and everyone complains at the start of the fall semester because of the people who think they can drive to class. They don't realize that there are just too many cars on the road if they do that.
If "the bottom line is that there are lots of inaccuracies," why don't you point any out? It's easy to dismissively ignore the facts and stuff words into TFA that don't exist, but if you are an expert, why can't you present anything substantial that was not correct in the article?
Channel stuffing was never brought up about NPD's retail sales because "channel stuffing" is stuffing the channel, not selling through retailers. Stuffing the channel was obvious because Microsoft was "meeting its goals" just in time with huge shipments, but retail sales (such as reported by NPD) weren't reflecting those same shipment volumes. The chart in TFA makes it very clear that Xbox 360s were stuffed dramatically in time to meet goals, not demand.
Stores have been sitting on piles of 360s over the last year. That's why Microsoft dropped its June 2007 cumulative shipment goal from 15 million to 12 M and then only shipped 11.5 M. Since June, new shipments have been very small--the channel is stuffed to the gills! Additionally, Xbox Live subscriptions (which come with new units as a free trial) are only around half the units shipped. Are there that many people who buy a 360 and then don't use the free Live membership? Or are those unused subscriptions just sitting in unopened boxes at retailers?
The number and popularity of games available for the 360 and PS3 also don't reflect the idea that there are only 1/2 the number of PS3 players, despite the year head start Microsoft had. Microsoft also has anemic sales outside of the US with the 360, and isn't even attempting to sell the Zune overseas.
Microsoft can plan on ten year profits, but that didn't work out with WinCE, which has been a flightless bird since 1998 and has been left behind by the rapid ascent of the iPhone in its first few months.
Would all the theorists who think Microsoft should be granted a quiet, uncritical ten year waiting period to see whether their products can survive in the market please take a look at the iPhone? It went from announcement to available product in 6 months, and instantly became the hottest selling mobile. It now has 27% of a contentious market, despite being a luxury, premium priced product competing against simpler and apparently cheaper (when subsidized with more expensive contracts) Windows Mobile phones. It sounds a bit like pundits insisting that President Bush's actions should not be criticized until ten years out, at which time he will somehow look like a competent statesman.
There is no reason to believe that ten years will help the Zune, and no examples of any dinosaur needing ten years to take over a market. Microsoft took the graphical desktop market from Apple between 1990-1995, not by slowly taking Mac sales, but by expanding a larger market outside of Apple in the DOS PC market. It isn't doing anything similar here. Microsoft rapidly took the browser market from Netscape within a couple years 1996-1997.
Microsoft also talked about how PlaysForSure would rapidly take the iPod. It didn't. It started over with an incompatible version of the same technology, starting the clock back at zero while also competing against existing PlaysForSure devices.
How is it that "3% doesn't even matter" Apple rapidly earned a significant share in smartphones (27% in the US in its first quarter) on its first try, while monopolist Microsoft can't be expected to take more than a shred of a very specific market for "MP3 players using a hard drive"? Also note that if you reserve the right to define your own market, Apple has 100% worldwide market share for "mobile phones with more than 2GB of RAM."
iPhone Grabs 27% of US Smartphone Market
I know ONE person with a zune. I have never hear anyone else even MENTION "zune". I know HUNDREDS with iPod's though. Yes it's anecdotal, but perception means more than sales figures. I must ask - where ARE all those zunes? In the bottom of people's junk drawers? They sure as hell are not being used.
...and hates it. She complains about the interface to the unit itself, hates playlists, as well as the interface to the computer - the Zune software. She despises the fact that the Zune software indexes and imports whatever it finds and that she can't delete media from the Zune outside of the PC-ased Zune software. In her opinion the no-name, cheap-ass, 1g flash-based MP3 player she won in a company raffle vastly outperforms her Zune in every way that matters to her, namely; she can manage it on a filesystem level when she plugs it into her PC, there is no DRM so she can listen to her e-books, and she does't have to learn a new software interface just to use it. As far as she's concerned, it's a drive letter when she plugs it in and everything she puts there, she can listen to when she unplugs it. When the Zune behaves like that, it'll be viable. Until then, it's junk.
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