An article by Mike Ferro over at Blorge cites Microsoft’s recent quarterly FCC filing of a 54 percent revenue drop in Zune sales and the Redmond giant’s planned layoffs to propose that “It is more than likely that the Zune business will receive a good helping of the layoffs and possibly the end of the Zune as well.”
Ferro goes on to say:
The thing about the global financial crisis is that it’s forcing companies to undergo reality checks. Microsoft, by now, should be realizing that it’s never going to be as “cool” as Apple, so why waste its time with the Zune where it has no competitive advantage?
Whether you agree with that statement or not, it begs the question: How does Microsoft perceive the success of the Zune internally and does it feel that it’s a wise business move to keep moving forward with it in the face of a pretty serious financial downturn?
The Zune has been around for a little over two years and in that time, over 3 million units have been sold. In comparison, the iPod has been around for a little over seven years and over 173 million units have been sold.
What’s not clear is whether or not the Zune is making money for Microsoft. It doesn’t need to beat Apple in order to turn a profit. If the 3+ million units that have been sold generate more revenue than losses for the Zune division, Microsoft may very well keep the Zune in its portfolio.
I’d submit that, if anything, Microsoft might decide to get out of the hardware side of the Zune and focus on the software for Windows Mobile smartphones. Indeed, rumors have been floating around that members of the Zune UI team are already moving over to the WinMo team. Whether that’s to try to create a secondary Zune platform on Windows Mobile or to transplant the Zune platform to Windows Mobile entirely is the big question.
Some would argue that the best thing the Zune has going for it is its interface, while the actual hardware has always been sort of so-so. If you could take the Zune experience and transplant it into your WinMo phone, it’d sure beat using the mobile version of Windows Media Player, right?
I posed that same question to one of Microsoft’s Windows Mobile developers at the Embedded Systems Conference here in Boston last October: How closely do the Zune, WinMo, and Embedded teams work together and would we ever see elements of the Zune interface on a WinMo phone? He dodged answering the question directly but conceded that the Zune and WinMo teams shared a fair amount of info with each other (the Embedded team was more separated).
It doesn’t seem likely to me that Microsoft would ever pursue a Zune phone. It seems far more likely that Microsoft would integrate elements of the Zune UI into its already-established Windows Mobile platform. So, just for the sake of argument, if Microsoft decided to drop the Zune hardware — and there’s no clear indication that it would aside from the layoffs and the drop in revenue – it’d be a shame for the Zune UI and platform to die just because the hardware does.
Keeping the platform going on smartphones, the next closest thing that Microsoft has to portable audio/video devices, seems logical when you consider all the over-the-air features you’d be able to integrate into the Zune experience, like direct music downloads and streaming over 3G.
Microsoft to exit the Zune business? [tech.blorge.com via Slashdot]
I don’t see how Ferro’s statement assumes the proposition to be proved implicitly or explicitly in one of the premises. Can you elaborate on that for me?
For those who aren’t philosophy and/or linguistics geeks, Alex was referring to the improper usage of “begs the question”. http://en.wikipedia.org/wiki/Begging_the_question
But there was no need to be dick about it, Alex. =)
I seem to recall many commentators voicing similar opinions about the Xbox, and how they can never match the Sony Playstation, what a difference a couple of years make… I personally wouldn’t bet against Microsoft, that have a long and steady history of success.
I would be happy if my Zune would just stay working. Now as of yesterday it is having the same problem as it did right after Christmas with it locking up at the boot screen.
… and the answer is: yes. Period. End of discussion. Fim.
Considcering that iPods are sold worldwide and Zunes are sold only in Canada and the US its really not the same comparison (173M to 3M)
Also they operate under 2 different business models. this kind of story is just FUD and lacks even blogging journalistic standards.
Thanks for stopping by.
Stop by? I am a big fan fo Crunch Gear. I think, however, that the quote fromt he FT was misattributed to Ballmer when in reality it was the FT’s own assumption.
Regardless, the fact that the Zune is sold in a fraction of the market means that it will *never* make a dent on iPod hardware sales. The Zune team all but admits that.
Similarly, MS is a dsoftware company, its what they do best. hence going to Tosh for the original Zune. Also Apple pretty much controll the supply stream for media player parts.
So will we see a world one day where stand alone media players go the way of the 8-Track? Yes. With respect to the Zune, will it be because of the recent 10-Q? No.
I will say that this is the most logical post I have eread on the subject for this simple line:
“So, just for the sake of argument, if Microsoft decided to drop the Zune hardware — and there’s no clear indication that it would aside from the layoffs and the drop in revenue – it’d be a shame for the Zune UI and platform to die just because the hardware does. “
YAY!!! DOWN WITH THE ZUNE!! apple should be the only one in that market anyway
I know you like it from behind – the counter to site down and drink your coffee.
If you like the closed Apple ecosystem you get iPod. Zune competes with companies like Creative etc, so the comparison is not great.
And couldn’t you have done some simple math? 173M/7years=24M per year, 3M/2years=1.5M per year. It’s apples with apples, excuse the pun.
I just think the zune sw and music service is better than itunes. The hardware is fine, nothing amazing, but fine.. it would be a shame.
I don’t doubt that many or even most Zune owners 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 of prominence; nor did Steve Jobs hypnotize buyers, 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. How much better would the iPod have faired this quarter without the deepening recession?
I believe that Microsoft and its investors need to 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 — then I truly hope that Microsoft continues to throw money and other resources at the Zune.
One more thing…two tech giants, Intel and Dell, both offered MP3 players, but quickly dropped out when they saw their efforts were only serving to burn more money. I think HP did the same thing, though my memory on that is not as clear.
Microsoft would be well served to follow suit.
I love the swap out of arguments by supporters.
iPhone 1 was doomed because it was just launched in the USA, because of the volume of mobiles sold globally.
Zune is a different business and can’t be compared because it just available in NAm. Uh, yeah.
iPod is a closed ecosystem and that’s bad. Yet it isn’t closed. Unless you are an IT nOOb and then that’s its advantage to you.
Zune also a closed system is good.
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This is sad, if true. I am no fanboy but I like my Zune 80 GB. I have used it over the last 15 months, without problems and I find all the music and podcast s I want at the Zune marketplace. While IPODs and I tunes are okay, I do like the interactivity with my XBOX360. I would be unhappy as a customer if they stop and close up all the o9ther stuff as well. So much for being a loyal MS customer.
i would like to buy a zune if it wasn’t bulkier than the apples and a touchscreen would be nice, as long as it still had the touch pad around there… people tell me to just go with an itouch but i feel that the zune is just more cuztomizable and the software is cool (my sis owns a zune). fix the bulkiness and add a touchscreen and keep everything else the same and it will surely become a competition
If zune discontinues its hardware I will say that It was a fun fun ride. Ive owned my Zunes since they came out and Microsoft has continually worked to improve everything about the Zune experience. What MP3 player do you know of that you can Listen to FM radio, hear a song you like, and download the High Quality wma song instantly via Wi-Fi, all while you play poker on the Zune with other zuners . You can do all this without even turning on your home computer. Sound like a pretty powerful piece of technology. I’ll take two !