http://www.youtube.com/watch?v=aSCUjVacGcc

Lana hits the streets of downtown Wellington with $50 for anyone who will eat sheep eyes.

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Uploaded on Flickr by finn

After the Microsoft purging in early January no one department was left untouched including the team working on the Zune player. All of Microsoft’s divisions are losing money except Windows, Office, Tools and Business CRM

Although they deny it, it is related to the precipitous drop in revenue in the last quarter (down 54%) Microsoft recently announced that it would split the Zune team in two. [TechCrunch Link]

The software and services portion of the Zune team–the bulk of its staff–will be added to the portfolio of Enrique Rodriguez, the vice president who currently runs Microsoft’s Mediaroom and Media Center TV businesses. The hardware team, meanwhile, will now report to Tom Gibbons, who also leads the hardware design efforts within Microsoft’s Windows Mobile unit.

This is because they realize that the Zune cannot drive it’s own market and so it must be made to be relevant to the consumer other ways and that including rationalizing the Windows Media Player and Media Center.Their strategy with the Media Center and Windows Media Player is all over the place, unlike the Quicktime Engine which is in every product that Apple has, from the iPhone through iPod, Apple Tv, Macs and the professional editing tools, so now is a good time as any to bring the groups together.

Microsoft’s portable strategy, although they have possessed one for the last 10 years, is in tatters and they have a very limited window to fix the problem. When they originally created the Windows CE they were in market where they were able to tie it to the Microsoft Office and Exchange. But what is inexplicable is why they let the Blackberry eat their lunch with Exchange integration. The Blackberry Enterprise Server is a truly awful product. (If you have set it up you will know).  Microsoft needs to move fast to tie the Zune Software into the Windows Mobile 7 platform and create an experience close to what the Iphone has. A Windows Media Center/Zune/Mobile 7 integration effort will pay dividends in the future as people will be able to consume their video and music over multiple devices under a single account. Finally as I suggested the Windows Live/XBox Live presence to support all the portable devices as well as Media Center to tie the whole experience together.

Whether or not the Zune Player will survive as a Microsoft product is unclear. There is no reason why they cannot create a reference design and let others develop the hardware. After all the Zune Player is the Toshiba Gigabeat Player. Maybe they can give away the Zune player with the Xbox or tie the Zune together with an Xbox portable player.

Whatever they may do they are running out of time to make a difference in this market and they have many moving parts. No company has every tried to execute on so many levels. Apple has taken 8 years to get to where they are, Microsoft has about 18 months.

Related Posts:

• Is Microsoft’s Portable Strategy in Tatters?
• Zune The Impossible
• Zune Sales Plummet 54%
• Zune Opens Nerd Club
• Bill Gates On Energy (Video)

Uploaded on Flickr by gailjadehamilton

Microsoft entered 2009, midnight PST to be exact, with egg on their faces over failure of the Zune Media player to account for the Leap Second which ended 2008.

According to Zune owners from across the globe, thousands of Microsoft’s 30GB iPod imitators suddenly gave up the ghost at exactly midnight Pacific time last night.

“We’ve got two Zune 30GBs,” says one poster to the Zune.net forums. “One was docked in the Zune Docking Station, the other wasn’t. At exactly 2am CDT (12am PDT), the docked Zune made the ‘unplugged from USB port’ bong-noise and went to the boot-up screen with the 100% loading bar…and froze.

It certainly was not a great start to what is to be a difficult year for the software company. The biggest challenge will be to deliver a successful launch of Windows 7, especially since it was announced today that according to Gartner, Enterprise adoption, the bread and butter of the Windows Monopoly is firmly stuck in single digits:

Just over two years since Microsoft launched Windows Vista, fewer than 10 per cent of PCs in the enterprise are running the successor to the company’s eight-year-old Windows XP.

That compares to last July when Forrester reportedly said Windows Vista adoption was at 8.8 per cent and Windows XP was at 87.1 per cent. In that report, Forrester said Windows Vista was like “new Coke”, which was killed by its corporate parent because nobody like it.

Shareholders are quite rightly disappointed in not only how long it took to deliver Vista, but how badly the launch of the product into the market and finally the adoption rate as we discuss below. Couple that with the news that Firefox continues to make significant ground in the browser wars, a key component of Microsoft’s online strategy.

Internet Explorer now has 67.55 percent of global browser market share, a drop of over seven percentage points in a year, according to figures from Web metrics company Net Applications, released Monday. Mozilla’s Firefox browser, meanwhile, has gained market share in the same time frame, climbing over three percentage points to 21.53 percent.

This continues to make Microsoft very uncomfortable because the Internet Explorer is and will be designed to work well with Windows Live, the partner and successor to the Microsoft Office Strategy. This is important because while other browsers have insignificant marketshare, Microsoft can safely ignore support for those browsers. But now Firefox has moved past 20% in North American market share (it has always been larger in Europe), it will come under greater scrutiny should they attempt to tie IE to Office Live Online.

The Windows Desktop, Windows Live and Windows Mobile are three interdependent legs, which are designed to strengthen and extend Microsoft’s franchises. They rely on each other to block competitions ability to attack Windows Desktop with a single point product.

Which brings use to Windows Mobile, another device that was designed to tie the Microsoft Enterprise Strategy to portable devices. Without a significant market share in mobile devices, it cannot use their strength in Office to nail the Live strategy and strengthen the desktop defense. They all rely on each other to work.

To top off January, Motorola has made sharp cutbacks it’s Windows mobile investment:

Now there are signs Motorola is shifting away from Windows as well. Its recent job cuts included a team of more than 70 employees working on the Windows Mobile platform at its facility in Plantation, Fla. Telecom analyst Ittai Kidron of Oppenheimer & Co. said delays in releasing a new version of the Windows platform may have caused Motorola to alter its plans in the short term.

With key partners HTC and Motorola dancing with Google’s Android platform, the iPhone and Blackberry blowing away records, makes the Microsoft tri-platform strategy look like it is taking on a lot of water. This is because each component is designed to support the others and without this approach, it makes it very difficult to build the network effect (read profits) that they have enjoyed with Windows and Office.

It is troubling to think that Microsoft, being a company with huge resources have executed poorly on the Windows Mobile strategy, are playing off the backfoot on the Online strategy and have failed to convince their customers to stay on the upgrade strategy that worked so well 8 or so years ago. If walking and chewing gum at the same time is so difficult thus far, can we expect them to be able to pick up the pieces in 2009?.

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Uploaded on November 11, 2006 by penmachine

Victor Godinez 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.

Related Posts:

• Zune Opens Nerd Club
• Zune Team Splits Up Prepares for Hardware Divorce
• Is Microsoft’s Portable Strategy in Tatters?
• Zune Sales Plummet 54%
• Bill Gates On Energy (Video)

Buried in the Microsoft latest SEC filing is an interesting and noteworthly comment about the Zune player:

Zune platform revenue decreased $100 million or 54% reflecting a decrease in device sales….

This means the Zune went from $185M for the quarter ending Sept 2008 to $85M for quarter ending Dec 2008. The December should be it’s best quarter because of the Christmas sales. However what has happened is that the Zune was universally spurned as a holiday gift.

We expect a major shakeup soon inside the Microsoft Entertainment Division which also holds the XBox 360 and game products.

Related Posts:

• Zune Team Splits Up Prepares for Hardware Divorce
• Is Microsoft’s Portable Strategy in Tatters?
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[Uploaded on March 17, 2008 by Carlo Alberto Della Siega]

A club to celebrate the love child between Steve Ballmer and Robbie the Robot, otherwise known as the Zune player has opened in downtown LA:

Zune L.A., formerly photographer Greg Gorman’s studio, serves as an office for a handful of the Microsoft music player’s employees during the day, but, after dark at events such as last month’s opening soiree, the tri-level space offers the company the opportunity to court L.A.’s tastemakers.

The venue on Beverly Boulevard offers loners and misfits the opportunity to experience the joys of owning one of Microsoft’s misadventures into consumer products.

Jamaal Layne, project manager for Zune L.A., likens the experience of entering the space to “walking into an actual Zune [player].”

Which means the experience is a lot like walking into that math club social that you accidentally happened upon while looking for the loo at the Student Association building. The walls lined with awkward teens furnishing their zunes pocket protectors.

With Microsoft sounding being beaten in the game console market and producing a music player they can’t even give away, a club to celebrate a mostly irrelevant piece of consumer plastic means they obviously have more money than sense. A club to celebrate the blender would have been a better use of people’s time and money.

Related Posts:

• Zune The Impossible
• Zune Team Splits Up Prepares for Hardware Divorce
• Is Microsoft’s Portable Strategy in Tatters?
• Zune Sales Plummet 54%
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 According to Forrester Research [via CNET] the Zune Market Share (read awareness) is smaller than a rounding error for the poll:

When researchers asked MP3 player owners which one they bought most recently, the Zune was in second-to-last place, with only 2% of respondents naming it. Nearly everybody else–Toshiba (2%), iRiver (3%), Samsung (4%), Coby (4%), Creative (8%), Sandisk (11%), Sony (11%), and Apple (43%)–was ahead, with only Archos trailing.

Microsoft was even beaten by that Chinese power brand Coby, the maker of the $25 DVD player at Walmart.

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Kia have announced the 2008 Kia Spectra. It includes AM/FM CD player, 15″ steel wheels, 4 wheel disc brakes and auxiliary audio input jack for your zune…

If you like the Kia Spectra, you will love the new Zen-killer Zune 2.0 (catch a social). With exciting features like it plays music and photos and video (sometimes), it allows you to share songs with your friends (and pass on a DRM social disease), and allows you to basically standout at the next Society of Accountants meeting (with your fiscally responsible Kia)….

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Microsoft, who trumps a 10% market share for Hard Disk Players that starts with “Z”, has changed ad agencies in response to the underwhelming reception for their Zune Music Device. They have chosen McCann-Erickson in San Francisco to develop a new strategy based on the personal, now that the Zune has been identified as largely a social disease amongst the young and fashionable:

….Zune is dropping its original strategy, which painted the iPod as an isolating device and Zune as more social because its tunes can be shared among users. Now the campaign is centered on the individual and tagged “You make it you.” The iPod “has become a superficial status symbol,” said Mike Harris, partner-strategy for T.A.G. Zune is more personal, he said.

Microsoft staff have put a brave face on the obvious failure to convince people that Microsoft can make a media device that does not completely suck, but merely less sucky that say using Windows Media Player:

Such sentiment has, of course, put mighty Microsoft in a more humble position when it comes to MP3 players. “We are very much aware of the strength of our competition, but once our company gets into something, it will not give up,” [Can you spell IRAQ - ed] said Mr. Stephenson, painting Microsoft as a challenger brand. “It’s good being in the No. 2 place — we can fight the good fight.”

Microsoft will continue to struggle with this product until it realize that it’s strength in the corporate sector is exactly the thing that is stopping them from being successful in the creative and left brain markets for consumer devices. It is exactly this brand myopia that Microsoft has believe that it has brand value beyond the corporate market.

The Zune will survive in the history books as a case study in the limitations of brand.

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Not being one to bash the steady stream of mediocre late-to-market poorly executed products but the really the Zune characterizes the poor state of Microsoft product management. It is a good example of how when you have some money you can screw it up and when you have a lot of money you can really screw it up. Apple’s new iPod range shows just how far behind Microsoft is competing in the portable music player market. Seth Jayson puts it this way:

Obviously, Microsoft’s Zune Czar, J Allard, is presiding over a miserable failure of a device. (I say that as the resident of a two-Zune household.) Not only is the Zune hardware completely outclassed by the new generation of iPods, but Apple has also leapfrogged Microsoft by including a Wi-Fi chip in the iPod touch, and — get this — actually making it useful.

Now Motley Fool is not exactly your open source liberal leaning pinko open-source using crowd, they have held MSFT in their portfolio for a long time, but they have essentially given seeing anything close to innovation from anywhere inside the Microsoft monolith.

They like others on Wall Street are calling for Microsoft to be broken up so that it at least has a chance of competing with smaller more focused competitors.

Other than their core business of monopoly pricing structures for Windows and Office, they have failed to break into any other market. All of the so called “new technologies” such as MSN Windows Live, and the myriad of home devices have failed to garnish any market share without placing the product on cash life support.

The Zune is a symptom of the entrenched myopia that Microsoft has inside it’s walls. It is time for a change in the way Microsoft does business before the inevitable erosion in even it’s core base of products.

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The troubled Microsoft Zune Player has now suffered the ignominy of being even cheaper this week:

Microsoft says the cut is “part of the normal product lifecycle, something we’ve had on the books for months.” Its statement added: “We just got some research back and customer satisfaction with the 30GB device is really high (around 94 percent) and we expect even more consumers will now want to discover the Zune experience at the new lower price.”

The problem is that at even $9.99 the Zune is as useful as a one armed dishwasher……

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This is the new Zune phone secret movie….

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Forget the adjective ‘Edsel’ , Ford has a new descriptor for product failure and that is ‘Zune’, as in Lincoln is the ‘Zune’ of Luxury cars. The Zune player is a lot like a Lincoln Towncar, a poor man’s iPod with a vinyl roof and white walls.

Ford has partnered with Microsoft to deliver entertainment integration into their cars including the mediocre Lincoln brand. Where as Cadillac has completely refreshed it’s product range and uses Bose as it’s core entertainment technology including comprehensive iPod integration, Ford has chosen the Zune player.

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Prices for new Zune players have collapsed amidst growing inventory levels. According to Creative Labs:

Microsoft, the world’s largest software maker, used price cuts to bolster sales of the Zune to challenge the iPod, Creative said. Sales in the Americas accounted for 30 percent of Creative’s total revenue in the quarter ending June 30, down from 46 percent a year earlier.

Over on Amazon the Zune is selling new from $207, down from the $249 list price only a few months after it went on sale. And according to Helen Malani:

….found a cute pink MP3 player on Target.com at a retail price of $249.99, so I entered that information, along with the date, on PriceProtectr.com as a test. A week later, this message appeared in my inbox: “Price Protectr saw a price drop on the Zune Music-Video Player 30GB – Pink you submitted for price protection at www.priceprotectr.com. You purchased the item for $249.99 and it just dropped to $89.99!”

The cool reception for the Zune is in response to large inventories in the channel coupled with a very luke warm reception from the media and market in general.

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Not one to throw water on the Zunebox Xbox, I let others do it for me.

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Whilst Apple’s iPod and iPhone products continue to create new sales records, Microsoft’s Zune player pricing continues to slide with discounts ranging from 17 to 20% off retail according to Amazon.

Whereas the iPod at the retail level is sold at list price, online it attracts only a 5% discount at most.

The dramatic discounting for the Zune reflects the poor demand or it could be a consequence of large stocks in the channel.

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The folks at hideapod.com have released the ultimate anti theft device for your ipod, an iPod cover that is shaped like a brown Zune player.

It’s really very simple. Just tell us what iPod model you want to protect and we provide a gutted and hinged Zune with our custom molded iPod casing adapter. We also include a custom cable from the Zune’s controls (see FAQ) and audio output jack that you simply plug into your iPod. No iPod modifications are necessary.

The cover can protect any ipod as well as the new iPhone theft by would be iPod-jackers. By hiding your iPod in a Zune cover you can guarantee that it won’t be stolen. You can even leave it in plain view at your local starbucks knowing it will be safely there when you get back.

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Universal Music has announced that it has ended their long term contract with Apple’s ITunes and is now on an “at will” contract which basically means they have gotten out of their lease and are now on a month to month at iTunes. This is now a battle of wills.

After driving Microsoft into a corner with the Zune Marketplace and getting a cut of the Zune sales, they have made it clear they want to drive a better deal from Apple. However the Zune Marketplace is not exactly a threat because in real estate terms it’s like threatening the Bellagio Casino after cutting a deal with the Super 8 Motel on Paradise Rd.

Universal is unhappy because:

• They were originally out maneuvered by Apple with iTunes
• They hate flat pricing, they want tiered pricing and shonky pricing models that maximize profits
• They hate the new iTunes Plus DRM free deal and think that it is pure socialism
• iTunes is now the rogue retailer they (record companies) always feared who unlike Tower they cannot push around
• Artists could get control of their product and go around them, and lets face it Artists are only a small part of the business
• They are always unhappy, lets face it, they may have to drive 2 year old Ferraris !!!!

Apple now has the upper hand but Universal is going to have a go at breaking this down but the problem they have is that Apple does not get it’s profit from the music, it gets it from the iPod.

Which creates a big chicken/egg question. With the Consumer, does the music create the demand for the iPod or does the iPod create demand for the music ?

My bet is that if a customer really wants an artist they will buy the CD and burn it onto the iPod rather than ditching the iPod…..

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Microsoft Employees at the Zune Headquarters in Redmond Washington are refusing to give up their iPods. In an attempt to force staff to give up their ipods without retribution, the Zune staff have installed an “iPod Amnesty” bin.

iPod Amnesty Bin

Originally uploaded by fimoculous.
“After been out for a week, the effort has been pretty much a bust” says insiders, “much like the Zune itself” they added.

“The iPod amnesty was to give us a chance to make some money out of the Zune Player” says sources inside Microsoft. “We have our Ebay store ready to go with the surrendered iPods. We tried selling Zunes on ebay but they turned out even less popular than our ‘tickle me BillG’ soft toy “.

“We will continue to look for innovative ways to make money on the Zune as obviously the general market continues to be oblivious to our marketing efforts.” says Microsoft PR.

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In a surprising strong report on Zune Sales, Microsoft says it now claims the lead in the delivery of hard disk based players that start with the letter Z (oops the Zen sells better) …with the letters Z and U and are colored Pink and are manufacturer by Yuckatume…

the “limited edition” pink Zune has become the second-best seller in the product lineup, Microsoft said today in its monthly update on its music device. The pink version, released earlier this month, is outselling white and brown, according to the company. That makes it second only to black.

Microsoft sources when on to say that it only took a bazzillion dollars to dominant this market and show the superiority of the Zune platform.

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Microsoft has quietly killed the Portable Media Center, the ms-comic-sans of portable devices and embedded mobile OS offering that provided on-the-move playback of content synced with Windows Media Center. The hardware was manufactured by various hardware chumps vendors including Creative (above) and Phillips.

In case you didn’t know Creative had one of these immensely popular paper weights:

Creative ZEN Portable Media Center puts all your favorite videos, music, and photos at your fingertips wherever you are. Take digital entertainment from your PC with you on the go, including recorded TV shows, videos, home movies, music, and photos. With Windows Mobile software featuring an easy-to-use, familiar Windows Media Center Edition interface, Portable Media Centers let you enjoy immediate access to all of your favorite entertainment – anytime, anywhere.

Over at engaget, they have more.

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Check out Northvoice Independent Music Podcast here

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Whilst battling poor Zune sales and a complete drubbing online at the hands of Google, Steve Ballmer, CEO of Microsoft has backed down from a previous statement that Microsoft was indeed looking at a Zune type iPhone.
Todd Bishop from Seattle PI, reports that:

Lieberman asked, “When can we look forward to a Zune phone?” and Ballmer responded:

“It’s not a concept you’ll ever get from us. We’re in the Windows Mobile business. We can put Zune into Windows Mobile, we can put Xbox into Windows Mobile. We can pour everything in. We wouldn’t define our phone experience just by music. A phone is really a general-purpose device. You want it to make telephone calls. You want to get and receive messages — text, e-mail, whatever your preference is. You may want music, you may want to play games, you may want to carry your contacts with you, and you may want to pay for things. I think we have to think about the phone instead of as a fixed-function device, a phone is really kind of a general purpose device that we need to have clean and easy to use.”

I suspect that the major issue with a Zune Phone is that like the Zune player, it can only talk to other Zune Players, which makes for a pretty small group of friends. That would make the Zune Phone as popular as Mel Gibson at a Bar Mitzvah.

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Check out Northvoice Independent Music Podcast here

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Just as soon as I proposed that Microsoft adopt a DRM Free platform in order to compete with Apple, Apple announces DRM free music from EMI on Itunes….

Reacting to Apple’s announcement Monday that it will soon begin selling music tracks from EMI without copy protection, PiperJaffray analyst Gene Munster advised investors to look out for an increase iTunes music sales, explaining that the removal of DRM abolishes one more barrier to entry into the iTunes+iPod ecosystem.

It is difficult to underestimate the important seismic change that the music industry is going through. I suspect that Jobs picked off EMI in typical fashion (ie. divide and conquer) in order to prove that DRM free is ultimately the way to go and EMI cracked.

This is not good news for Microsoft and at this time be hiding the chairs from Ballmer…..

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Check out Indie Music Mix Podcast here

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Angry Zune users threaten to return their Zune Players on Zune Insider.

One reader ripped the company for not telling customers early on that the update was pushed back. “I just don’t get why no one let us know before because the Zune team blatantly must have known before today that they weren’t gonna make the supposed deadline,” he said. Another reader placed the blame on the Zune team, even going as far as questioning their dedication. “Is the ZUNE team actually taking their product seriously? If they did, there would be no delay. Xbox team might have to take this over and GET THE JOB DONE!” Finally, there were a few pro-iPod comments—just as you would expect from a good ol’ Zune trashing. “When I got off work this afternoon I boxed everything up, including the a/v kit, premium headphones, and Zune and headed over to Circuit City where I returned everything and purchased an iPod video.” – ArsTechnica

Hmmm…, world’s largest software (only) company, they know what the work around is, they know where the bug is, and they can’t release a patch to fix for over two months……

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Check out Indie Music Mix Podcast here

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My post on the weekend about the impending doom for Zune created a lot of feedback. Most of it was positive but some was negative and their were the usual supporters from the “Microsoft can do no wrong” cult. Here is some responses to the feedback:

IPod was successful because it was cool

Those of you who support the iPod, the iPod was not successful because it was cool, it was successful because it created an integrated music experience that released us from the tyranny of the Compact Disk (CD). Although there we very good players before the iPod, such as the Rio Player and the Sony MiniDisk Walkman, it was Apple that first made it so simple that anyone could purchase, burn and listen to music. Itunes is by far the easiest CD ripper and music organizer on the market. You dont need a degree in computers to load and play music. Yes the iPod is cool but the compelling feature is the simple to use interface (both iTunes and iPod).

Also the click wheel allowed you to use it when commuting. Using one hand while holding onto the railing on the subway train is very important. It is no coincidence that New York is a huge market for Apple.

The iPod has better sound than the Zune and vice versa

This is not the point. Better sound is a subjective criteria (ie matter of taste) and beside most Joe and Joeline Sixpack’s can’t tell the difference anyway. What did happen is that they could rip and listen to their music in a couple of mouse clicks.

The XBox is a Success therefore the Zune will be successful argument

This is bogus. Firstly I don’t believe the XBox is a success as defined by Microsoft. Microsoft lives by the curse of the Windows/Office monopoly. This means that people measure Microsoft success by the success of Windows, that is anything less than total domination of a market is a failure. In Microsoft terms, Xbox, 3rd place in a market with two strong competitors is not good. After 5 years on the market it is

However I want to be fair to Microsoft, it is extraordinarily rare that a product can capture the kind of market share that Windows/Office has. I can think of only two other products that have that level of success, the iPod and Google. We cannot realistically expect any company to meet the ridiculously high standard of Windows/Office market share and nor should we measure Zune based on this high standard.

To answer the question, Xbox and the gaming market has nothing to do with the Portable Music Player market other than they have some overlap of users. The Zune is not a product extension of the Xbox no matter how much you can allude to Zune mixing with the Xbox environment. They are decisions that can and are being made separately.

iPod is not compelling

Bollocks !!!!, in the last quarter (1Q 2007) was 21 million units including me buying 2 new iPods (Nano as a gift and a blue shuffle for the gym, I have the 60GB Video as well).

My point was that the Zune has no compelling features over and above the iPod, and in fact it has less features, the wireless thing is a gimic and it has been crippled by it’s DRM system and the concessions made to the music industry.

Summary

The point is that the Zune has been a miserable failure (29 – 40K units see here) by any consumer product which is why the VP for Zune was fired. It offers no compelling features over and above the iPod and hence no reason to purchase the product over the industry standard. To get the product to market, Microsoft had to make major concessions to the music industry which left the product crippled. The only way to create a compelling product beyond what Apple has is to completely support MP3 and make it into an open platform which isn’t going to happen.

So unless something radical happens, the Zune is doomed…..

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Check out Indie Music Mix Podcast here

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I have written a number of posts about the so called iPod killer, the Zune Player and it’s debut on the market. As of today, the Zune Player is a failure:

From Roughly Drafted:

1. •Apple 72.7%

2. •Sandisk 8.9%

3. •Microsoft 3.2%

4. •Creative Labs 2.9%

5. •Samsung 2.0%

 Once again, NPD’s numbers only cover retailers that supply it with data, which excludes Apple, Costco, online sales, and mail order outlets.Based on NPD’s numbers and my math, it would appear Microsoft sold $7.2 million in Zunes in January via retail outlets, which at $250 each would be just short of 29,000 units, making its Dr Evil goal of “one million Zunes!” by June 2007 a bit of a joke.

Although RoughlyDrafted is partisan, the analysis does stack up. With retail margins of 30% puts the unit numbers between 29,000 at the low end, and 44,000 at the high end (depending on the whole sale or retail cost). The numbers that NPD uses are most of the major outlets, but they do exclude Costco, Walmart and Apple Stores.

As the wireless zapping thing turned out to be a gimmick, and that it relied on your friends not having iPods, there is no compelling reason to purchase the Zune over the iPod. It offers no benefits that cannot be found in the iPod and in many cases they are inferior to the iTunes/iPod combination.

The truth is that without a major market disruptor, Microsoft taking on the market for MP3 players and effectively competing with Apple is impossible. This is just like the battle with Windows Live Search vs Google Search, without a major shift in how and why people search, Microsoft (and for that matter Yahoo) will remain far behind in market share.

Although markets are constantly changing and evolving there are a few immutable laws that they are governed by. The first understanding is that markets are accumulated or aggregated consumer (read people) behavior that result in a metric, that is revenue or units sold.

The first being the law of motion and equilibrium, that is consumer behavior tends to be habit and does not shift radically over time unless their is a jolt from a shift in externalities that result in a shift in behavior. A good example of shift in behavior is the change in parking at your local Starbucks. Starbucks relies enormously on foot traffic and such changes in patterns of parking at your local Starbucks effects the sales of coffee over time.

In the MP3 player market, Apple took over market share from Sony Walkman because they were the first to create a truly integrated experience where as the Walkman stumbled badly in this respect. In fact so badly that they missed the MP3 Player boat. In the music distribution market the disruption was the flow between downloading music from an online store onto the iPod and the standard distribution which is CDs. Suddenly you didn’t have to purchase those other 10-12 songs you didn’t really care for and could purchase only the songs you did like (what ever happened to the Vinyl Single). What Sony did not realize that adding another layer between the CD (the ripping part) and the user increased resistance to the product, where as Apple reduced a layer (the CD package) between the purchased music and the listener.

The bottom line is that the Microsoft Zune Player today offers no reason for the consumer to change it’s behavior and continue to purchase iPod/iTunes combination and no amount of advertising will shift that perception with out a radical departure from the model that Apple created. There are some radical things that you can do, for example you can completely remove DRM from the Zune Market and Player and completely open it up, but with the music industry determining the product design at Microsoft this is not going to happen.

The bottom line is that Zune is and will fail to ignite the imagination of music consumers because their imaginations of what they want to see in a omnipotent music player is currently beyond what the music industry will allow them to deliver………

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The Microsoft VP behind the MS branded door-stop called Zune has left the building. Bryan Lee, corporate vice president of Microsoft’s entertainment unit, and lead for the Zune player has taken early retirement from Microsoft according to AP. This is a sure sign of trouble at Zune Central according to one Gartner Analyst, as Microsoft faces a backlog of stock and dismal sales for the so called “ipod-killer”.

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The Zune apparently does not share all the songs from the Zune Store. What is and isn’t shareable is up to the record company. You can read more at P2PNet.

As more information gets out, the crappier the experience…..

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