Microsoft won't see Zune zoom up the charts

Stan Beer
Saturday, 22 July 2006 13:04

Opinion and Analysis

Coming from a base of zero against a 80% market share holder such as iPod was always going to be a monumental task. Microsoft's strategy of pitting like against like will make it an impossible one.

The so-called iPod killer, code-named Zune, looks to be simply a me too effort from an IT company that is flailing in all directions trying to find ways to spend its huge pile of excess cash to buy itself into new markets.

Noting that Apple's formula for success appears to be working very well these days, Microsoft is spending resources on developing its own hardware division. Instead of just mouses and keyboards, Microsoft now produces games consoles, web cams and soon Wi-Fi music players.

As far as the music players are concerned, Microsoft will probably succeed in gaining a few points of market share. Maybe even a double digit share. However, it is more likely to grab that share off the non-iPod users than Apple.

The question is, why would anyone buy a new Microsoft player rather than the enormously popular iPod, which has the brand, the market recognition and the proven reputation? There would have to be a market differentiator so powerful and so clear that the consumer would be forced to think about their purchasing decision.

So far, rumours circulating in the marketplace for the Zune include a bigger and better screen than iPod and Wi-Fi capability. However, Apple has been working on those issues and there's not much doubt that the next generation of iPods will also have those features and perhaps more.

In addition to being a music player, maybe the Zune will also be multi-function device with games capabilities like PSP. Would that give it the needed edge to grab a sizeable chunk of the market off iPod? Not really. The iPod is rumoured to be morphing in the mobile telephony direction. Voice calls, videos, internet access, as well as music of course, are all far more interesing to the market than a few low-level portable games. That's not to say that games won't be part of the mix in future iPods.

Microsoft's dominance on the desktop will not be seriously threatened until a technology is introduced that makes the desktop obsolete. Similarly, the iPod and iTunes dominance is not likely be threatened unless a technology happens along that makes its model of buying and listening to music obsolete.

iPod has a dominant market share and the only thing that can break that is a technology that introduces a paradigm shift. Unless there's something very special that Microsoft has up its sleeve, Zune does not appear to be that paradigm shift.