Why Microsoft's Zune is Still Failing 593
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.'"
Amazon bestsellers (Score:4, Interesting)
MSFT Trapped in Same Old Rut (Score:4, Interesting)
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?
Re:write to congress (Score:5, Interesting)
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.
Re:Competition sells iPods (Score:5, Interesting)
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.
Ford Tie-in (Score:1, Interesting)
Re:Amazon bestsellers (Score:4, Interesting)
I know the US is a big (the biggest?) and important market, but with Zune sales it's a different story [amazon.co.uk] in the UK. When I looked just now, the first Zune appears in 61st position, with iPods of all kinds dominating the top ten. Of course, the position changes all the time but I've been looking at this every time I see a story on Zune's top spot on Amazon US and the highest position I've seen for Zune is 35th.
Re:Amazon bestsellers (Score:5, Interesting)
From 25 - 50, there are 2 more Zunes, and 8 more iPod model, From 51-100 - 5 zunes and 7 ipods.
That the -brown- zune is the most popular product could well be pretty meaningless, as well as a reflection of the blowout pricing. The black and red versions ranked FAR lower, and I find it impossible to imagine that brown is what everybody wants.
The point is: there are 14 zunes in the top HUNDRED, while there are 13 ipods in the top TWENTY. (and 28 in the top 100).
If the brown zune at blowout pricing can grab the #1 spot, yeah that's impressive, but really doesn't say THAT much. Looking at the numbers its clear that ipod still utterly dominates. If only we had the numbers so we could add up total zunes and total ipods then we'd know by how much.
Its also clear the ipod is far more profitable, considering the lock they have on positions 2,3,4,5,and 8 all at pretty much regular full retail, and especially considering the number 3 spot is held by the 16GB ipod touch which is their flagship product and runs more than twice the price of the zune.
Also, ipod, by having twice as many sku's roughly cuts its sales scores in half, because sales are divided by that many more products. I suspect that if ipods weren't available in quite the same rainbow of options as they are, they'd handily lock up the top 5 to 10 spots no matter what Microsoft did.
-cheers
Re:Failure? (Score:5, Interesting)
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.
Re:Just Look At The Xbox Fiasco For Why (Score:3, Interesting)
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'?
It doesn't distinguish itself in any way (Score:3, Interesting)
CompUSA anecdote (Score:3, Interesting)
M$ != consumer goods merchant (Score:3, Interesting)
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.
Re:So apple doesn't think ahead? Only Microsoft... (Score:5, Interesting)
And when you've figured out why they do something so silly you'll have cracked the problem.
Re:Failure? Definately (Score:3, Interesting)
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.
Re:Failure! (Score:5, Interesting)
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 [roughlydrafted.com]
Re:Amazon bestsellers (Score:3, Interesting)
Re:Failure? (Score:3, Interesting)
My sister has a Zune... (Score:2, Interesting)