Microsoft loses a Zune retailer
GameStop, a leading video game retailer, has decided that it will no longer stock Microsoft's Zune players, citing poor sales. And while I don't quite agree with my fellow-blogger Don Reisinger that this is the beginning of the end for Zune, it's hard to see any silver lining in the news.
Microsoft's entry into the consumer electronics space came with a thorny channel problem. Microsoft sells the vast majority of its products through PC makers, who bundle Windows (and often Office and other software) on new PCs, and through well-established partners who specialize in selling to large organizations and businesses. Microsoft had a retail channel for selling Windows and Office upgrades and other consumer products (like Money, Encarta, and keyboards and mice), but for the most part these products were sold through computer specialty stores like CompUSA. To succeed in capturing a broader audience, Microsoft had to broaden its retail channel.
The Xbox business helped take care of that problem: once Microsoft proved that it was serious about developing and promoting the first Xbox, and once it began to show reasonable sales figures, a new class of retailers--including game-specialty stores like GameStop--were happy to make shelf space for Microsoft's consoles and games, right alongside Sony and Nintendo.
These retail partners are an important part of Microsoft's Zune strategy. Microsoft figured that the mostly young male audience who buys game consoles and games might be a natural fit for a new MP3 player from the same company that produces the Xbox.
Apparently, after giving it a year and a half, GameStop has found that's not the case. Looking at recent NPD figures, it's easy to see why--compared with the first Xbox, the product just isn't moving nearly as many units (2 million in 18 months) or capturing enough market share. Moreover, if a retailer sells a customer a console, that customer might come back again and again for games. Where's the equivalent attach for Zune? Peripherals, maybe, but I don't think a customer will buy 10 periperhals at $60 a pop like they might with games over a console's lifetime.
I'm not going to write the Zune's obituary just yet. I know the company has been planning some sort of update for the 2008 holiday season. But if that launch fails to capture public interest and fizzles, and we begin to see other retailers pull out, what happens then?
My guess: Microsoft would reassess the situation in early 2009 and quietly refocus the Zune team's energy on mobile phones. In other words, it would scale back manufacturing and marketing for the dedicated MP3 players. However, it might continue updating the software and "social" Web site and use them in conjunction with a new version of Windows Mobile, and/or a new hardware reference design for a consumer phone.
Of course, Microsoft could always follow Apple's lead and open a line of retail stores. But that would be a tremendously expensive project requiring perfect execution, and I'm not sure it's in the company's DNA. Apple is primarily a consumer hardware company, so having a well-designed physical showcase for its products makes sense. Microsoft's got a much broader focus--some would argue lack of focus--and has a lot of other big, complicated things on its plate right now.
Matt Rosoff is an analyst with Directions on Microsoft, where he covers Microsoft's consumer products and corporate news. He's written about the technology industry since 1995, and reviewed the first Rio MP3 player for CNET.com in 1998. He is a member of the CNET Blog Network. Disclosure. You can follow Matt on Twitter @mattrosoff. 
Sorry so many vendors out there, this hardly matters at all !
And zune sales are not down, so something else happening behind the scenes.
I hope Zune dies messily.
Now I can see that most of the frustration isn't the Zune itself but it's the DRM. DRM exists in the Ipod realm too. Both suck but at least Itunes and Amazon both offer DRM-free downloads, something the Zune Marketplace has yet to offer, but the time will soon come. Then the Zphone. But I'd rather see a better Windows 7 first, probably with ideas taken from Mac OS.
1) Compatibility - Their firmware isn't that great - the player needs to be able to play a wider variety of music and video files and as a bonus may I highly suggest be capable of storing and retrieving other forms of data.
2) Pricing is just plane stupid - You don't price an item as a Porsche or Ferrari when the market perceives the Zune as a mid priced american car. The goal of Microsoft is to market and service the Zune similar to a Toyota Camry.
3) Microsoft really does not have any consumer based retailers - sorry to be more accurate, Microsoft does not want any consumer based retailers because it does not provide them with sufficient incentive to continue marketing and selling the Zune. There is not enough or never existed continuing revenue streams for the retailers that Microsoft has provided. Microsoft has elected intentionally to keep all potential auxiliary and ancillary items pertaining to the Zune to itself, thus other revenue streams that a retail might get is lost. Such as selling music, video, and data files for the Zune as well as providing other uses for it. Please note visicalc should be Microsoft's and everyone elses dream for any product they sell. If you don't know Visicalc history then you better .
Regards - Ferdinand Turla
Next up - the 3G iPhone and MS will have a hell of a time getting me back. So try sell me a Zune? Ne-ver.
I don't doubt their historical success but they didn't get there by being everything to everyone, they got there by being the operating system of choice, and then riding that wave, you could pretty much offer the crappiest software around, provided it was better integrated to that OS.
Many companies have - to a much lesser degree suffered the same fate, I think the best example I can find is the old 4GL called Progress, which had an absolutely amazing basic design back in the 1980's which was so successful that 20 years of increasingly crappy ideas have still failed to successfully kill the product, to the point where the good folks at progress, have given up on their once great DB fundamentals and just decided to become a C#/SQL shop.
Microsoft, too suffers from this same "walking wound" since they don't really innovate, they should be much more careful in what they consume.
Firstly offering a physical appliance like Zune while certainly engaging Apple or Creative Labs, really totally works against their inherent strengths and totally drains focus off of what should be their focus.
Taking the extravagance of the XP operating system and trying to "make it fly" on a portable device, has invariably met with various levels of disaster. If you are willing to spend some ridiculous amount of dollars, you can get a hand held that runs MS Portable OS pretty well. Not many people have that kind of cash.
Meanwhile, with operating systems that are truly embedded, the market price for the OS is fast approaching 0, and it's possible to get a a trivial per-unit cost for Verizon or other phone. With an OS specifically designed for the basic tasks of a phone not redacted from a very large general use OS.
In this way Linux and other providers are again - currently much more able to provide such reduced-set OS capabilities. This is not to suggest their offerings are perfect, just more adaptable.
This "walking wound" syndrome, has even affected their core competency , or rather it has diluted their core competency. By trying to offer everyone everything, and NOT innovating, they are constantly reacting to market movements.
Valid and long term marketplaces for "desktop" applications will always exist in some form or another, that's one.
Most applications will become both visually rich and web-enabled, that's market number two.
Data - is king, data flow and based decisionmaking and ubiquitous data-sharing - are a third marketplace. All real value from business IT, stems from this, where at the moment, there really is no marketplace dominance, for 40 years various standards and methodologies, from flat-file to EDI 1030, 4050, and XML/HTXML and whatever variant supersedes these flavors of the day, dataflow is a major management concern for the marketplace.
And as far as dominating in something other than the consumer marketplace, they don't even need to leave their own campus, Just have the Zune guys spend some quality time with the X box guys.
How does this relate to the Zune, it doesn't - in so far as it's NOT where Microsoft SHOULD be spending it's time, rather than ham-handing some poor second fiddle to Apple in a marketplace it does not have any competence, if they really want to succeed going forward take a line from the movie "The Dish", there's the old party saying, "don't f*** up".
Focus on delivering a superior operating system, focus on delivering a superior language experience without suffering some corporate variant of ADD.
Besides, it's a lot to swallow when your buying a gaming console for $280 and a small MP3 player for $250. Price is the key to any market, if it doesn't sell well then you probably have it priced too high.
--mark d.
- by onlyauser May 27, 2008 9:59 AM PDT
- I have had two Zune 80s and while they are quite nice MP3 players I cannot help but feel Microsoft does not listen to consumers and it seems many of their products have unaceptable problems or are half-baked. I cannot think of a single Microsoft product that does not have this weird 'feature' built-in.
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Showing 1 of 2 pages (39 Comments)I have never had the pleasure of squirting with my Zune. And many specifics from the documentation to specs on the device are unforgivably inaccurate or suspiciously missing information. Microsoft is very lost on how to appeal to customers from their software, products and promotions. MS is so good at copying everyone else they should just focus on being Apple. I mean really focus for a change.