Microsoft Zune rack and ruin

Stan Beer
Monday, 24 July 2006 22:05

Opinion and Analysis

Dont miss: Microsoft won't see Zune zoom up the charts

You have to hand it to Microsoft. The company knows how to create a buzz about a product. From all the noise about Zune, you would think the “iPod killer” actually has a chance. Sadly for Microsoft, it won’t happen.

Forget about the hype about Wi-Fi, enhanced video, Xbox compatibility and so on. We’re talking about a music player. Anyway, except for the Xbox part, iPod has it covered. iPod will soon morph into an iPhone – who cares about Wi-Fi parlour tricks?

Now let’s get down to the nitty gritty. Apple has something that Microsoft doesn’t – it’s own music store that’s inextricably entwined with iPod. Yes, Microsoft has a collaborative venture with MTV. And yes, it will probably offer the same tie-in with Zune.

However, iTunes doesn’t make all that much money, so what’s in it for MTV?

Then there’s another issue for Microsoft. Last quarter there were more than 8 million iPods sold. Assuming the next two quarters at least match that, there will probably be about 50 million iPods in the marketplace loaded with billions of iTunes tracks.

Of course, none of these iTunes tracks can be legally transferred to Zune unless Microsoft pays for them. There is talk that Microsoft is planning to do this. If so, it would be one of the most irresponsible misuses of shareholders’ money in history.

Imagine a board of a company consenting to spending hundreds of millions or even more than a billion dollars in an attempt to buy a few points of market share from a dominant player. It is highly doubtful that Microsoft would do this. This is a risky enough venture as it is.