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Heavily Discounted Zune Outpacing iPod Sales
firegate writes "Yahoo Tech is reporting that the Microsoft Zune, having been heavily discounted for the holiday season, 'is currently Amazon's top-selling music player, beating out the new iPod Nano and the 80GB iPod on the 'Bestsellers in Electronics' list.' An Associated Press report even indicates that the Zune's newfound popularity has left it in short supply, sold out in many locations. Is this a sign that a true competitor, from Microsoft no less, has finally broken into the Apple-dominated MP3 player market? And will this spell more success for Windows-media based music subscription services like Napster?"
Except they can't legally do that, unless they plan on always selling zunes at a loss, they would be in violation of antitrust legislation if they used an artificially low price to cut into the competition before raising the price again. They could do it and leave the price low, but if Apple isn't doing so well with the ITMS in comparison to the ipod sales, I can't imagine that MS would do well enough to turn a profit like that.
That being said, with the amount of mark up on ipods, I would be surprised if the zune isn't still selling for a profit.
Personally I'm somewhat skeptical as to how long this is going to last, but even if it doesn't last for too long, it gives the zune more exposure and the ipod owners a sense that maybe ipods really are as over priced as people say.
The main point of this is to get zunes sold so that they can get a proper word of mouth campaign going. Contrary to popular belief the zunes aren't bad, while unpopular, the only person I know that owns one was quite happy with it last time I saw her. After talking to her I probably would have bought one, had I been in the market for a new mp3 player.
I have three iPods, and a Zune 30 (with the new firmware). The new Zune does not suck *at all*, and the wireless sync works quite well. The Zune button is not nearly as good as the click-wheel, though. But the iTMS, and the Zune Marketplace are comparable. iTunes still has better podcast support (includes password protected podcasts), but the Zune has a useful Zunepass subsciption service. And honestly, I'm surprised at how I kinda prefer the Zune points system. There's a certain degree of convenience there that I like.
Zune is for real, and anyone who would be disappointed to get one would only be disappointed because it's not what Muffy has.
The 2006 Zune was intended to be sold for $300, but Apple's price cuts last year forced Microsoft to sell it at $250. Even at that price, it couldn't sell.
By June 2007, Microsoft had stuffed the channel with 1.2 million units. Retailers have been trying to sell them ever since, as low as $80. The fact that last years models, which Microsoft has already claimed having sold, are being sold at fire sale prices of a half to a quarter of the original price indicate that Microsoft hasn't made any profit on the Zune hardware.
Last year, the speculation was that Microsoft would give away hardware with a rental subscription. So the OP is pointing out that no, the hardware itself is a huge failure, and rentals (or sales) can't even bring those losses into the black. Microsoft can't make any money on downloads. Even Apple didn't make money on downloads until it was selling millions of downloads per week.
The idea that Microsoft backers would parade out the line that "the Zune 30 is outselling the iPod at certain retailers!!!" was predicted last week in:
Why Microsoft's Zune is Still Failing
Last winter, I detailed why Microsoft's iPod Killer would fail miserably. This year, Microsoft will fail again, but for a new set of reasons. It is not obvious that the company has figured this out itself. Here's why the Zune will fail in 2007, and how Microsoft is painting a fraudulent portrait of interest that doesn't exist.
Wrong. Anti-trust involves using your market dominance to destroy competition in other markets, not just having done so in the past. If the US wanted open markets, it could have stopped Microsoft before it destroyed markets, rather than just spending millions to establish the facts and then doing nothing long afterward.
However, Microsoft has already failed to use its market dominance to get PlaysForSure off the ground, and sure doesn't seem to be doing a bang up job with the Zune. If th company started dumping the Zune in other markets, you could be sure Sony and others would attack the company using local laws. That's unlikely, as Microsoft has no significant hardware sales outside the US.
Apple doesn't have much to fear in the US from the Zune, as Microsoft can't manage to even sell the Xbox at a profit in volumes around 5 million per year. Apple sells ten times that many iPods, and the number is only going up. Sure some of those iPods are $200, but around a third are $400, and the iPod will add another 10 million per year. Compare Microsoft's greatest hardware "success" to Apple's similarly priced iPod business, and it is clear Microsoft has no hardware position to leverage. The Windows monopoly isn't selling the Zune or the Xbox.
In media sales, Apple is at the top of music, TV, and movie sales--despite the fact that it hasn't even started offering rental movies or HD content. It's still #1 in each segment, with 60-90% of those markets. Microsoft doesn't place among the top four outfits that sell 97% of content downloads, even when combining its incompatible Zune and Xbox media sales.
Microsoft doesn't have any position to leverage. It can't make hardware that works, can't sell it at a profit, can't sell downloads, and still seems to think rental music will somehow take off after ten years of failure in the market. On top of that, it has lost its leadership position in desktop operating systems, lost its effort to monopolize server operating systems, and can't make money in any new markets, including search.
So on one hand, you're wrong about anti-competitive markets, but on the other hand, it doesn't matter because Microsoft is on the way to oblivion. Its 90s crown isn't going to be any good in a world where OEM PC licensing is increasingly not the primary way to make money and wield influence. That weird period of tech history is on the wane, and a new era of open competition will leave Microsoft's fiefdom as obsolete as Windows.
Ten Myths of Leopard: 10 Leopard is a Vista Knockoff!
1. Kindle. (ok, Amazon, I admit it. I'm impressed.)
2. Canon Powershot A57OIS
3. Apple 4 GB iPod nano silver
4. Garmin nüvi GPS navigator
5. Canon PowerShot A560
6. Apple 8 GB iPod nano black
and so on... iPod classic pops up again at #11, iPod Touch at #18 and 21... Zune comes in at #24. WTF? Likewise, if you head over to bestsellers in the "MP3 player" category, you'll see Apple in the #1,2,3, and the 5,6,7,8,10 spots. #4? SanDisk. #9? #9 is the much-vaunted, reduced-price Zune... What's up? I think that Microsoft is playing one of the oldest tricks in the book, using the "in it's class" qualifier. For instance, you are told that the 2008 Chevrolet Pendejo is the cheapest, best-performing, and bestselling SUV "in it's class." What the ad does not tell you is that the class they're talking about is narrowly defined as the class of SUVs which get 5 miles per gallon, which can't exceed 45mph when going uphill, and which tend to spontaneously combust when making left turns. Tack on enough qualifiers, and ANY piece of crap is the best in it's class. Microsoft has it's Zune classed as a "portable digital media player". Apparently, iPods aren't Portable Digital Media Players, they're MP3 players, and there's some sort of really important difference, so the Zune wins the top slot... in it's class. Maybe I'm missing something obvious, but from what I can tell, this is some sort of scam cooked up by the guys in Microsoft's marketing division. Wow... I mean, I feel I should be pissed at Microsoft, but it's just kind of, well... pathetic.
References:
http://www.amazon.com/gp/bestsellers/electronics/16009311/ref=pd_ts_pg_1?ie=UTF8&pg=1 http://www.amazon.com/gp/bestsellers/electronics/ref=pd_ts_e_bcrm_electronics http://www.amazon.com/gp/bestsellers/electronics/172630/ref=pd_ts_e_bcrm_172630
I'd bet money that many kids getting a Zune for Christmas will think "well damn, why couldn't it have been an iPod?". Happens all the time...kids want one thing, parents buy what they can actually afford that comes close.
Although holiday sales give you a sign of how much revenue a company is pulling in, this is the *least* representative time in terms of what product is actually *desired*. Who's doing the buying? Not the people using the stuff!
Come back in January, see how many Zunes are returned. Or hell, look at sales in the middle of March or some other random time. Either of those would be more accurate indicators of whether or not the Zune is really hurting the iPod market.
"Microsoft killed my company, I hold a personal grudge. I don't use Microsoft products and neither should you."-JWZ
The folks who follow Amazon Sales Rank over time know that the Sales Rank tends to fluctuate and one needs to look at them over a period of time to draw any meaningful conclusion. The chart at http://charteo.us/amzn/compare/B000JLKIHA,B000H0QDCC/ looks at the Sales Rank chart for Apple 80 GB iPod Classic (Black) and Microsoft Zune 30GB Digital Media Player (Black) over last 3 months. Yes, the chart is live and compares Sales Rank for last three months from whenever you at it. The chart does show a spike in sales of Microsoft Zune during Oct.-Nov.'07 time frame, but then it levels off. In contrast, Apple iPod sales have been steady and better than its competitor for most of the time. The bump in Sales Rank of Zune could have been due to heavy discounts or special promotion campaign or both.
There is another factor to consider -- both Apple iPod and Microsoft Zune are available in different models and different colors, and each one gets its own Sales Rank. So comparing Sales Rank by picking a single model, even over a period of time, is misleading. As Sales Ranks are not additive, you can't simply add Sales Ranks of various models (or combine them in some interesting way, though this may be possible with some advanced math) to arrive at a single statistic.
I do a bit more analysis od Sales Rank charts of different iPod and Zune models in my blog post at http://charteo.us/The-Myth-of-Microsoft-Zune-Beating-Apple-iPod-as-Holiday-Gift-Item/.