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December 6, 2006

Xbox and Zune whistle a happy tune

Posted by David Hunter at 10:57 AM ET.

Paul Thurrott talks to Microsoft’s Zune team and finds them undaunted:

Stung by recent criticism of the marketing and functionality of its Zune portable media player, Microsoft this week revealed its plans for the device and, in a rare disclosure, its expectations for sales during Zune’s first holiday season. According to a Microsoft representative who briefed me on these plans yesterday, the company expects to ship over 1 million Zune players by the end of 2006. (ed. note: see update below.) That’s enough to give Zune 10 to 20 percent of the market currently enjoyed by the Apple iPod device the Zune most closely competes with.

Note the precise phrasing.

Assuming that happens, Zune isn’t a total wash, as the number one non-iPod product in the over-$200 MP3 player market during last year’s holiday season only sold a tiny fraction of that amount.

Many–myself included–have debated or even decried Microsoft’s entry into this market, the underwhelming marketing of the device, and the lack of certain features. Microsoft admits to making some mistakes, such as the viral marketing scheme that appears to have fallen flat with consumers. But it defends its decision to enter this important market now and says it is here for the long haul. Over the next year, I was told, Microsoft will ship numerous functional updates to the existing Zune player and launch new Zune devices with new form factors and unique features.

More by following the link, but Zune’s clearly a story that will have to play out for better or worse over time. As for Microsoft viral marketing, just chalk up another dud.

Also recounting high hopes was Xbox executive Peter Moore:

Microsoft Corp., competing with new machines from Sony Corp. and Nintendo Co., may exceed its forecast to sell 10 million Xbox 360 video-game consoles by the end of the year, Vice President Peter Moore said.

Asked whether Microsoft is likely to beat the outlook, Moore replied “Yes. All indications are that we came off a very strong Thanksgiving holiday.” Moore, in an interview today, declined to provide a new forecast.

“They key is we’re in stock, we’re available, we’re delivering well to retail,” Moore said. “Certainly the consumer is recognizing the fact that we have a great price point as well as 160 games available and that flies in the face of our competition.

I expect the statement was prompted by another Bloomberg report over the weekend that Xbox 360 USA sales trailed analyst expectations in November. Microsoft may well beat their Xbox 360 forecast this holiday season, but Carl Howe estimates that they don’t have an exclusive on good news:

The data here is still a little sketchy, and we should get a better read at the end of the day Thursday when NPD releases its sales numbers for video game consoles. But by my estimates on the data I have available, Nintendo’s Wii gaming console outsold Sony’s Playstation 3 and tied Microsoft’s XBox 360 in November. The Wii’s success against XBox 360 is particularly interesting, because the Wii was on sale only for 11 days and in limited quantities. The Playstation 3 also was available for only 13 days, while the XBox 360 doesn’t currently have any supply constraints and was available all 30 days.

Like Zune vs iPod, the battle of the next gen video game consoles is just starting.

Update: Some more whistling from later in the day. Microsoft: 1M Zunes to Be Sold by June (not the end of 2006 as stated in the Thurrott article above which has since been corrected to say end of fiscal year):

Microsoft Corp. said Wednesday that it expects to sell 1 million of its new Zune music players through the first half of 2007. That figure would pale in comparison to Apple Computer Inc.’s market-leading iPod, but Microsoft contends it would be a good start.

“We think that’s actually pretty awesome,” said Bryan Lee, corporate vice president for Microsoft’s entertainment group.

Microsoft to ship over 10 million Xbox 360 units:

Microsoft Corp. on Wednesday said expects to have shipped more than 10 million units of its new Xbox 360 video game console to retailers by the end of this holiday season.

That “sold” number refers to units “sold into retail” and refers to units in transit, units sitting in store inventories and machines sold to consumers, the spokeswoman said.

Filed under Apple, Argo, Coopetition, Executives, General Business, Marketing, Microsoft, Peter Moore, Xbox, Zune

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3 Responses to “Xbox and Zune whistle a happy tune”

  1. Bob Says:

    “by the end of 2006″

    That’s apparently 1M by end of *fiscal* (i.e. June/07).

  2. David Hunter Says:

    Thanks for the tip. The Microsoft FY strikes again.

  3. Lipstick for the pigs -- Microsoft News Tracker Says:

    [...] Then despite the brave words about sales of Microsoft’s Zune personal media player sales being on target, there are rumbles that an increased advertising push is really what the Zune needs: To tout its Zune, Microsoft launched a marketing campaign on par with that for the original Xbox. But now that the music player has spent a month on the market, the company is considering increasing its advertising to attract more attention to it. [...]

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