Slashdot Mirror
Microsoft To Exit the Zune Business?
thefickler writes "According to Microsoft's quarterly filings to the Securities and Exchange Commission, the Zune platform experienced a revenue drop of 54 percent, or $100 million. This compares to relatively healthy sales of the iPod, which were up 3 percent in the same period (though revenue did drop by 16 percent). Obviously, with the recent job cuts at Microsoft's Entertainment and Devices Division, pundits are wondering how soon until the Zune also gets the chop. As one pundit wrote: 'Microsoft, by now, should be realizing that it's never going to be as "cool" as Apple, so why waste its time with the Zune where it has no competitive advantage?'"
All of this (the article and our posts) are speculation, so as long as we are guessing/gossiping/conjecturing, etc.
Microsoft has indicated that they would prefer less manufacturers and models of Windows mobile based phones, so they can make the OS more tightly integrated with the hardware. There have also been rumors that Zune functionality would be folded into the phone, which tends to make sense. So my guess would be they gracefully lose, er...bow out to the iPod and say they are "providing a great combination to their customers by putting the Zune features into the phone."
no comment
It's more about making products people want to buy. How many people really want to buy Microsoft products anymore? When was the last time we heard about people lining up to buy the latest version of Windows? The problem for Microsoft is that it has a hard time making products that excite the vast majority of the public, and they've had a few huge mistakes in public perception lately. The Xbox 360 Red Ring of Death was a just a debacle. They shipped a Zune that was less feature-filled than the then current iteration iPod. Don't get me started on Vista, "Vista Capable," and "Vista Ready," or whatever those stupid stickers said.
Sure, Apple products are cool, but they also work pretty well. Why Microsoft didn't look to Apple's or it's own playbook and more closely linked the Zune to the Windows environment is beyond me. This worked for years with Explorer.
Seriously, Xbox games are "cool." I have an original Xbox, and I have been giving Microsoft my $$$ for several years now for my Xbox Live membership. However, I'm just too stingy to give my money to Microsoft for an Xbox 360 after all the hoopla about failure rates. The race to beat Sony to the market was a failure of vision and an appreciation of paradigm shift. There was a huge market for casual gaming that just wasn't going to be satisfied by the first-person shooter, and Nintendo was able to capture it. We can chalk that up to a happy accident for Nintendo executives, but so what?
If a company tries to be all things to all people, it will be unable to do everything as well as companies that are smaller, more focused, or more nimble. Look at General Motors as example number one. Consumers have too much access to information and too many choices. The problem with Microsoft's executive leadership is that the strategic steps they take are, primarily, reactions to market forces. Then, they are placed in the position of having to respond. Why didn't anyone at Microsoft see that Netbooks might one day become popular and have a version of Vista which would run on them? No one? How long was Intel working on the Atom?
Microsoft stocks are, historically, looking pretty affordable right now, but I'm going to wait. I just don't see any game changing ideas coming out of Redmond. Until, as a company, it starts doing something much better than the competition, it will never rise to its former glory days, and its market share and/or profits will continue to decline.
Make love, not reality television.
The idea of the original posting that since MS "only" sold $100M of the devices last year they'll leave the market? Or is it that they'll leave the market because the successful iPod line is eating their lunch? Or is is because we all agree the Zune isn't "cool"?
MS has many lines of business that are under $100M in annual revenue, yet they continue on in those markets, despite not being #1 - I'm thinking keyboards, mice, MS Home Server, etc.
The Zune is a fine piece of hardware, despite the recent bru-ha-ha over the particular model that couldn't handle leap year, and I suspect that MS will lower their investment in Zune hardware development, focus on differentiation on the software side, and (likely) focus on the "self-ripped" MP3 market (as opposed to the $0.99 per-song download market.
A $100M revenue company selling MP3 devices that are tailored to the Windows platform should be a no-brainer, and I believe MS will turn it around. Having said that, my family has all iPods, despite most of our computers running windows...
Ken
I can't imagine what it must be like to work in the Mac Business Unit at Microsoft knowing that all your efforts are going to nothing more than playing accounting games to hide the Xbox disaster.
It is staggering to grasp the magnitude of the Xbox diaster when you look at it:
* Over 4 billion dollars in losses on the first Xbox hardware
* Mac Business Unit moved into the Xbox division to cover up the losses
* Absolute worst and cheapest console hardware ever created with the Xbox 360
* Online fees for everyone playing online games effectively adding 50-150 dollars in extra revenue per console
* Three years on the market
And the E&D division still was only able to post a relatively tiny profit for 2008. Take away the profitable Mac Business Unit, the Xbox online fees, and other profitable parts of the E&D division and the Xbox 360 hardware is obviously still generating huge losses.
For the most part the Zune had to do in a few years what Apple did over five. When the Zune was released in 2006, Apple had over five years of experience designing and tweaking the iPod. It also had over three years with iTunes. The whole ecosystem of the iPod also had to be replicated. That was/is no small task. Also the history of Microsoft suggests that they take a few iterations to get things usable.
The first Zune wasn't bad. The problem was it wasn't great. To beat the iPod, it had to be substantially better. It only offered a few features that the iPod didn't (bigger screen, Wi-fi, radio, sharing) but also drawbacks. Shared music is extremrely restricted. Zune can't be used as HD. The more desired advantages were trumped by Apple with the iPod touch which features a new multi-touch interface that the Zune still doesn't have.
One of the main reasons the Zune didn't do as well was marketing. MS just didn't get it that their other products sold well because people didn't have a choice. To convince people to buy your product over another requires good marketing. So they went with "We're the underdog; let's market our product that way and we'll seem cool. Let's make our commercials oblique and obscure." To their dismay, people have never considered MS the underdog or cool. Their commercials never presented the viewer with a clear picture of what they were advertising.
Contrast this with the iPhone commercials. In the smartphone market, the iPhone was/is new. They had to get people to buy it over Windows CE and Blackberrys and non-smart phones. There were four original iPhone commercials. Each of them showed that (1) it's a phone, (2) some other function (Google maps, browser, plays media, etc), (3) how it works using the new touch interface, (4) who makes it (Apple), (5) where to get it (Apple or AT&T). Each iPhone commercial fulfilled the role of advertising whereas the Zune commercials left the viewer puzzled as to what the message was.
In these hard economic times, it doesn't help that the division that Zune is in a division has not been very profitable historically. In the last few quarters has the division been in the black. With the MSN and Xbox (and now the Zune), the division has been $7 billion in losses since the Xbox was started. That can't bode well if MS is so worried about the future that they've laid people off for the first time. The Xbox 360 has many more customers and is more popular than the Zune albeit it probably costs more. Most likely the Zune will have to be cut.
Well, there's spam egg sausage and spam, that's not got much spam in it.
That means Microsoft have not only managed to damage to MP3 market to the extent that Apple "won", but now they're dropping out too. If I weren't convinced they were just short-term reactionary fools I would believe they had it planned all along.
What am I going on about? Well, you see, back in the days just after iPod, Microsoft introduced this thing called PlaysForSure. It was a system to provide a variety of DRM options - single track purchase, promotion with timeout, monthly fee all-you-can-eat, limited play count, and so on. This in itself would have provided a superset of the functionality iTunes provided.
(For the record, where I stand: DRM must die. Three times. Horribly. Preferably acid bath.)
Sounds great, at least from a technical and business standpoint, right? Unfortunately, just to remind us that they're Microsoft, in order to get a PlaysForSure badge on your product, and to be allowed to use the system whatsoever, you have to pass certain certification processes. That includes making sure you have a good startup time, good inter-track delay time, fast database indexing, and so on.
Still sounds great? Aha, but just to remind us they're Microsoft, they're the people that design the protocol, and they make damn sure it's near-impossible to actually implement a good player from it. The database updates and queries are so horribly defined you'd struggle to get good performance out of a proper SQL-like database running on a PC, let alone a tiny little device with 1MB RAM. The requirement to support PlaysForSure means you must use MTP protocol, which is another botched abortion of a protocol. It also requires that if you use MTP you cannot use Mass Storage, further annoying your customers and very neatly if "accidentally" meaning they don't work on Macs. And then there's the encryption itself which is so horribly over-the-top and poorly implemented (you MUST use Microsoft's libraries) that it badly impacts player performance and its battery life.
So Microsoft screw the entire non-Apple MP3 market for a couple of years. Then they bring out their own PlaysForSure player. Except it's not PlaysForSure. You can imagine the language used where I worked (and presumably other companies). They decided that it was too hard to implement their own spec, so they make a player which doesn't comply to it. It's not even in the set at all - it's totally incompatible.
After an electronics-generation of fucking up the non-Apple MP3 market, then screwing up their own solution, and now after (very likely) ditching Zune, they've basically done almost exactly the right set of steps to put Apple into a lead that will be hard to make a dent into.
I stick with my decade old opinion that you don't partner with Microsoft - you watch your back.
I must be the only one here that has owned and used a Zune. I won the Zune in a drawing at a MS Luncheon for Server 2008.
I must say, I put away my iPod Nano, and am now using the 8gb Zune.
The audio quality is a bit better, missing the EQ though. The FM receiver does work quite well in the metro area.
The one thing I was surprised about liking is the user interface and the touch sensitive pad for controlling it. I can still load MP3's without DRM, and use it to my hearts content.
Still not sure if I would have bought one on my own, but after owning/using it, I would not rule it out now.
Just my .02, and no, I am not a MS fanboy. I use a MacBook Pro, running both native apps, and a Windows VM.
-Ryan
Apple hasn't changed the ipod fundamentally since they introduced the color screen and videos.
O RLY?
I guess Microsoft's strategy to fight iPod could involve merging Zune into Pocket PC.
You raise two interesting questions. a) What constitutes the perfect pmp (or to put it another way, the most desirable pmp) and b) will they become irrelevant as more phones morph into music players? The whole drm thing is a side issue. I can't think of any player that won't play drm-free mp3's - even the zune. The pmp manufacturers don't give a crap about drm but have to include it if they want to have a music downloading service because the record/movie companies demand it.
It looks to me like pmp market of the future will become be divided into expensive high end enthusiast devices and ultra cheap low end mass market devices, with the much larger middle ground being taken up by combination phone/pmp devices. Everyone carries a phone and it doesn't make sense for people to have two boxes to tote around just to listen to music or look at video. Regardless, most players work pretty much the same - they play music and video. How they do it is irrelevant as long as it's simple and makes sense to the end user.
What we end up talking about is really the music management software and associated music sales/downloading services. Ipods/phones/tunes already have a massive lead in this area in terms of seamless integration and a one-stop shop. Apple created the market and do a good job of making sure they remain the best. It's hard to imagine any company being able to outpace Apple on both hardware and software/services such that people see a clear advantage. How could Microsoft really hope to blow away Apple on both hardware and software/music services? Apple is more than good enough to make it impossible. Hence the market stays fragmented and Apple centric.
I have mod points. The reign of terror begins now.
Keyword graphs show the story...
http://www.realmeme.com/roller/page/realmeme?entry=zune_meme_rerun
Microsoft entered a market nearing its growth inflection point with a marginal product. They thought they could win through hype and Microsoft branding.
Microsoft Vista is failing for similar reasons.
I have a brown Zune too. When I first got it, I absolutely loved it. 30 GB of storage, ability to play photos, videos and music either in headphones or on my TV. Then a strange thing happened... Last September I wanted to get a mobile device that allowed me to surf the web. I saw my friends' iPhones and thought it was a good experience. "No problem" I thought. I'll just check out this Windows Mobile 6 stuff. I started on a hunt to find a non-iPhone that browsed the web as well as an iPhone. I went to AT&T stores (since I had their service already though my contract had expired), Verizon stores and Sprint stores. At the time, every other phone's web surfing was a J-O-K-E compared to the iPhone. A joke. I can't tell you how much it pains me to say that, since I am in reality a Microsoft fan and have used their development products professionally for over a decade and a half.
So I got the iPhone 3G. My Zune was then in the glove compartment of my car for a few months. I pulled it out a few weeks ago to try out the Zune games that seemed to be taking off. What I used to think was a sleek, intuitive interface on the Zune now looked clunky. The entire device actually felt cheap. The Zune hadn't changed though - I did. I got used to the iPhone. But anyway, I upgraded my Zune firmware, installed the Zune Games and actually tried the default ones out. Texas Hold'em was actually fun. But man, the experience is nothing - NOTHING - like the iPhone.
I guess I'll try selling my brown Zune on eBay before they become totally worthless.
I'm a big tall mofo.
I have neither a Zune nor an iPod. So I might not know what I'm talking about. But on the other hand, I don't think I have any entrenched bias. And I've done a little googling. So take this reply in that context.
My understanding is that most of the restrictive Zune DRM has to do with the WiFi "squirt" feature. (Obviously this crippled what could have been the Zune's killer feature.) But iPods have no wifi at all; it seems silly to argue that iTunes DRM is less restrictive because it does not prevent you from doing things you couldn't do anyway.
As for moving music around, in some ways the Zune seems better. Music goes onto the iPod and never flows in the other direction. By contrast, you can move non-DRMed files from the Zune back onto your hard drive.
The burn-rip argument I dislike because (1) it degrades quality and (2) consumes media. More, it's nearly* just an application of the Analog Hole (I say "nearly" because CDs are digital. But you're still transcoding between lossy formats, which degrades quality), which of course exists for any device -- Zune, iPod, or some hypothetical completely-and-utterly locked-down player. But that said, it seems that you can burn CDs from WMAs from Microsoft's store too (Caveat: An option exists in WMA files to prevent users from burning them to CD. But it appears not to be in use anywhere.)
So I'm not seeing a clear win for Apple in DRM here.
But I think the most fundamental argument is: It sounds like you're saying Apple has "good DRM." Can such a thing exist?
The zune was never going to be a the ipod killer that MS hoped it would be and it is difficult to see why MS entered the market.
Basically if you are going up against the gorilla that is Apple in the ipod market, you have to have something that differentiates markedly. The only thing the zune had was the wireless sharing. However two problems with that. Firstly it was hopelessly crippled by MS usually DRM fan boys. Secondly it relied on enough mass usage of the zune so that there was a chance someday you might meet another zune user. If you took that away you were left with a nice MP3 player competing with all the other nice non apple MP3 players in a sea made by Apple. And remember an ipod is not just a music player but is the focal point of a whole industry providing ipod addons. Zune never had a chance.
The question is what could compete with ipod? History has shown that it would either take a whole new technology shift(wireless music ???) or Apple to make a mis-step. So far Apple has shown they are not likely to do the latter, in fact you have to be impressed how they do not sit back and wait for the competition to catch up, but are constantly pushing the envelope. This makes it very hard to compete against. You only have to look how a few months after the zune was produced apple produced the itouch so totally changing the market before the zune ever got going.
So what about MS. Probably what they should of done instead of spending millions on Zune was got into phones. Here they have a slight advantage in that their software runs the corporate world so if they made a phone that seamlessly connected then corporate world would probably buy a few.
However even here they have a few problems. Firstly it would eat away at their mobile OS market, since they would be competing against the same people who buy there software from them at the moment. This would almost certainly push these same manufacturers to android and the like.
Secondly MS hardware sucks. They just do not have the ability to integrate the software and hardware into one unit, in the same way apple do. This must be partly to do with their reliance on 3rd party hardware suppliers to do the hardware design, then having to fit their software to it.
In the end of the day, MS should really concentrate on doing what it knows best, making operating systems for gray boxes
Choose your allies carefully, it is highly unlikely you will be held accountable for the actions of your enemies
Blaming Microsoft for the fact that Apple doesn't support MTP is ridiculous. Apple locked down iTunes so that you can't really use it with other players, and they tried to lock down the iPod so that you can't use it with other music management applications.
You missed my point. They specified that you can only use MTP and no other protocol. You were not allowed to have a dual-protocol device, which was perfectly possible. Of course, they eventually settled for allowing this, but not before the damage was done - vendors implemented MTP instead of the ubiquitous Mass Storage (MSC) and when you've got limited resources to do things, you settle for one protocol. So a mass of MTP devices appeared, which neatly didn't work on Mac.
And, of course, just to let us know they're Microsoft, MTP wasn't supported unless you had Windows Media player 9 installed. And of course, WMP9 wasn't supported unless you had Windows XP installed. Very neat.
I was there when this all happened and it was as obvious as a 100ft tall pink elephant. They got away with all this crap simply because the US and EU were busy with the bigger fish of browsers, openness, protocol compatibility and all the other monopolistic practices. I don't see why you should give them the benefit of the doubt here - there's decades and hundreds of examples of Microsoft doing the same thing over and over. This is no different.
As for "screwing the entire non-Apple MP3 market", I think you give Microsoft too much credit; Microsoft has had virtually no impact either way. If you want an MP3 player, there are plenty of choices that cost almost nothing.
You are wrong. If you are a non-Apple MP3 manufacturer you must go with PlaysForSure. It's a tick-box. The mass market wants tick boxes, and customers wanted P4S. If you didn't have P4S, you didn't sell. It's sad and believe me it's true. Microsoft screwed the market by crippling all the non-Apple vendors with a shitty product.
MP3 players are dead anyway; like PDAs, they are just becoming part of phones.
That is patently untrue. There are so many factors which will ensure they'll be around for years. Form factor is one. Price is a fucking obvious one too.
Also notice that the phones which list music playback as a strength have all gone with their own implementations. Notice how big the companies are that had the guts to do it: e.g Nokia. Sadly we're left with a bunch of walled-garden solutions, iTunes included.