Zune The Impossible
Uploaded on November 11, 2006 by penmachine
of the Dallas Morning News comments today about the fate of the Zune and indeed why iPod users should care.
But anyone who plans to buy an iPod should hope that Microsoft is able to turn the Zune into at least a modest success.
His basic argument is that having healthy competition will force Apple to improve it’s product. He has cited the lack of an FM radio in the iPod as an advantage in a competitive landscape. However there are his arguments are based on Apple having competition, where as the speculation as to the demise of the Zune i totally based on the question as to why Microsoft should be in the portable music player business.
There are numerous competitiors to the Apple iPod including Sony, Philips, Archos, iRiver, SanDisk, Creative, Cowon, iBiza, Blue Raven, Coby, RCA, Toshiba, Music Gremlin, DigiArmor, Cowon, Yukyung among many others. If we narrow it to effective competition, ie those that have distribution ability, we still have Sony, Philips, Creative and Toshiba. (I would also argue SanDisk).
The problem with Microsoft being in the portable music business is that it is highly unlikely that Microsoft will ever be a significant player in the music market. Microsoft needs to have products with a $1Billion + runrate in order to satisfy it’s shareholders and customers. Couple that with the failure of Vista, customers and shareholders are unhappy that Microsoft are playing around the edges and not working on their core product offerings.
The failure of Microsoft Zune to even dent the iPod marketshare is exactly the same problem as Sony has delivering sales on it’s Walkman products: the portable music industry has a high network effect and that network effect is iTunes. ITunes through it’s critical mass now has tremendous market power in the delivery of digital content and all major content owners must deal with them. ITunes are the price maker in this market, everyone else is a price taker.
Just like Windows OS has a very strong network effect, so too does iTunes. And for this reason people have a valid reasoning to suggest that Microsoft should not be in the Zune business, especially since it’s revenues are going in the complete opposite direction from upward.
We don't use the nofollow tag out of principle, you are welcome to comment, but please respect it or it could disappear. If you want to understand what this means please read my 
new zealand
flight of the conchords
Peter Jackson
Kiwi
Kiwifruit
Moblog
Travel and Places
The zune still has a long way to go to catch up.
I love my zune… never even used an iPod.