Zune’s Swoon–Doom Soon?

By  |  Friday, January 23, 2009 at 2:29 pm

Microsoft ZunePodcasting News’s Elisabeth Lewin notes an interesting tidbit in Microsoft’s Form 10-Q SEC filing: Microsoft says that its Zune-related revenue “decreased by $100 or 54% reflecting a decrease in device sales.”

The 10-Q doesn’t seem to say how many Zunes Microsoft sold, and the company has slashed prices. So it’s a little tough to tell whether the plummeting revenue stems from consumers not buying Zunes or from them buying cheaper Zunes. As a frame of reference, Apple reported earlier this week that it sold three percent more iPods in the last quarter than it did a year ago, but made 16 percent less dough doing so.

No matter how you slice it, you can’t turn Microsoft’s Zune revenue number into evidence that the company is making any real inroads on the iPod hegemony. In an era of Microsoft layoffs, cutbacks, and other tough decisions, does that mean that Zune is toast? Tough to say. If you consider Zune to be an MP3 player, it appears to be a disappointing seller that’s in decline, and doing away with it might make sense. But I’m assuming that Microsoft sees Zune as a platform–involving devices, services, and software–and that there’s a good chance it sees it as being strategic enough that’ll continue to invest.

Even so, the Zune name feels permanently tarnished. Suggestion: Microsoft has another entertainment-related brand that’s thriving and which overlaps increasingly with the Zune’s domain. That would be Xbox. Might it be time to retire the Zune name and roll the platform into the Xbox universe?

 
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12 Comments For This Post

  1. Patrick Says:

    I’m not sure how they would roll a hand held device into a “tower” type device?

    Maybe I misread?

  2. Harry McCracken Says:

    I just mean they might expand the definition of “Xbox” to include everything that Zune encompasses–the handheld devices (including phones, maybe, someday), the music service, and anything else coming up. Much as they’re emphasizing that “Windows” involves a lot more than a PC operating system…

    –Harry

  3. Jared Newman Says:

    Let the Xbox Portable Media Player Handheld Games Device Robot Phone speculation begin! Tasty.

    In all seriousness, though, here’s an article of interest:
    http://www.alleyinsider.com/2009/1/microsoft-may-finally-nuke-the-zune

    Suggests that MS won’t be looking to launch any more mobile devices if/when the Zune dies, and would rather focus on software, according to Ballmer.

    Might be wise as far as gaming handhelds are concerned — who would want to battle the DS right now?

  4. Alfiejr Says:

    sure, let’s call it the ZBox.

    but it’s far too late. Dead Man Walking. the Edsel (or Newton) of this decade. Adios!

  5. Patrick Says:

    I see what you are saying. I’m dense today. I don’t think they will although it might be interesting.

  6. SkateNY Says:

    Better to pull out sooner than lose a whole lot more later. And I’m not just talking about revenues; I’m talking about reputation.

    Compared to the iPhone and the iPod touch, the Zune sucks, and everyone knows it. I don’t care how many testimonials I read from so-called Zune owners. The fact that the Zune owns aroud 3-4% of the market versus 70% market share for the iPod should be enough suggestive evidence to quiet the squawkers. But it isn’t. So be it.

    The Zune is so late to the game that Microsoft’s own music download store is hobbled by DRM restrictions, something Apple has recently persuaded the record companies to drop. This is the same DRM that every Kool-Aid drinking, anti-Apple freak complained about.

    So, my question to all you misguided Microsoft miscreants is this: How do you justify Microsoft’s DRM-straddled music store?

    Please. Don’t even answer. I’m so tired of Microsoft apologists, continually posting love letters about failed products. “I love Vista! It’s the best OS I’ve ever used!” Yeah. That worked out well. Even the CEO/Chief Priest of the Church at which you worship told you it was a failure, and you continued to kneel down in submission. You people should be living in the Middle East, where unfounded beliefs are taken as fact, and misguided behavior is taken as the norm.

  7. Marty Says:

    Harry,
    Your story about the Zune weakness seems odd. At CES, Robbie Bach said the Zune “had a great year.”
    So … one of you is wrong.

  8. SkateNY Says:

    @Marty: Microsoft says that its Zune-related revenue “decreased by $100 or 54% reflecting a decrease in device sales.”

    If losing 54% of revenues is a “great year,” then what would be reprentative of a bad year? Owing money to Zune owners?

    If someone is wrong, my money is on Mr. Bach.

  9. SkateNY Says:

    I don’t doubt that many or even most Zune owner are satisfied with what they have. Here’s my thing: Apple dove into the MP3 market when that market was already well on its way to maturity. The iPod quickly made a big splash, and iTunes has played no small part in helping the iPod acuire a 70% market share. Apple did not engage in illegal, monopolistic business practices in order to achieve that level prominence; nor did Steve Jobs hypnotize buyers in steering them towards the iPhone.

    When the iPhone was released in October of 2001, it succeeded during a recession caused by the terrorist attacks of 9/11. If the current economic climate adversely affected the Zune and other consumer products, then it stands to reason that it also adversely affected iPod sales. Yet, Apple reported a growth in iPod sales for the most recent quarter, versus a 54% drop in Zune revenues.

    I believe that Microsoft and its investors need re-evaluate the Zune with regard to how it affects other products, and how it affects shareholder interests. If I’m a Microsoft competitor — and I don’t believe that Apple and Microsoft compete in the sense that they appeal to very different groups of customers — I truly hope that Microsoft continues to throw money and other resources at the Zune.

  10. Harry McCracken Says:

    I do know some Zune owners who really like their devices and the Zune service. But the Zune name seems kind of tarnished; as far as I can tell, it has a reputation for lameness rather than hipness, and the December 31st bug surely didn’t help things.

    The world’s perception, at least, is that Zune is about some dedicated portable music players. Such devices are clearly eventually going to be part of the past of entertainment. Apple has done a good job of broadening iPod beyond its origins by introducing new types of iPods (the Touch), emphasizing video, putting as much energy into the iTunes Store as into the hardware, etc. Microsoft has done less of this to date, and if Zune is worth saving, it may be because it hopes to do more of this in the future.

    But I still think it’s worth considering retiring the Zune name and making Xbox the umbrella brand for a broader range of Microsoft entertainment-related hardware, software, and services.

    –Harry

  11. coffee Says:

    Revenue for the Zune might be down because of the recession, or it could be because people are afraid it will freeze up again next New Year’s Eve

  12. rooseveltfranklin Says:

    The New Zoon Review…. if i may borrow a few lines from previous posters;
    Dead man walking! The new edsel…. i like that one best;-)
    the “new” device is a day late and a dollar short.

    welcome to heaven here is your IPod touch
    welcome to h3ll here is your zune HD.. or is it zoon???
    BTW, i know this is a little off topic but…. whats a zune??

    see ya real zoon at the apple store!!! hahahahahahha;-)

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