Perhaps if You Bundled the Zune With Windows?
by John Paczkowski
Posted on July 30, 2009 at 3:15 PM PT
“For something we pulled together in six months, we are very pleased with the satisfaction we got. The satisfaction for the device was superhigh.” Microsoft Chairman Bill Gates said that of the Zune in October 2007.
Boy was he ever wrong. MarketWatch reports that revenue at Microsoft’s Entertainment and Devices unit, which manages the Zune and Xbox 360, fell 42 percent to about $211 million in its most recent quarter. Microsoft (MSFT) shipped more Xbox systems this spring than last, so what could be driving that grotesque revenue shortfall?
Yep. After nearly three years at market, Zune has remarkably little share to show for it. In fact, recent data from NPD Group show Zune’s share of the portable media player market at about two percent, compared to about 70 percent for the Apple (AAPL) iPod. And with a sales trend like the one revealed in Microsoft’s January 10Q, market share isn’t likely to be growing much. According to that document, “Zune platform revenue decreased $100 million or 54 percent reflecting a decrease in device sales.”
And that was in a holiday quarter.
Little wonder, then, that some have begun to wonder if it might not be time for Microsoft to just scuttle the device. “The market reception for Zune is so disappointing that many retailers have even stopped selling it altogether,” Tradition Capital Management VP George Kurian told MarketWatch. “Microsoft should abandon Zune and follow Apple’s strategy to try to make its presence felt in the high-growth smartphone sector.”
