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September 18, 2006

Zune announcement afterthoughts

Posted by David Hunter at 8:06 PM ET.

Since last week’s Zune “almost announcement,” a variety of pesky details have come to light:

About that unique Wi-Fi media sharing feature:

Microsoft seems to be counting on the sharing feature to provide a boost for Zune, but it is seeming more like a boat anchor.

Then there’s the teensy problem that Zune doesn’t do PlaysForSure:

Microsoft says the device won’t play tracks or albums bought through existing music services affiliated with its own Windows Media “PlaysForSure” initiative. Those services — such as Napster, MTV’s Urge and Yahoo Music Unlimited — have been partnering with Microsoft and device makers to try to challenge Apple Computer’s iPod and iTunes juggernaut.

The PlaysForSure program and music services will continue even with the Zune’s launch, Microsoft says. But analysts say the rise of the Zune, and the device’s incompatibility with the PlaysForSure services, promise to further reduce the potential market for those Microsoft partners.

The situation could be “very, very disruptive” for the existing PlaysForSure services, said analyst Michael Gartenberg of Jupiter Research.

“While Microsoft says that PlaysForSure is still a viable strategy going forward, it’s hard to see how viable it is given their reluctance to put it in their own device,” Gartenberg said. “It would probably not appear that PlaysForSure has a very bright future.”

That’s putting it mildly. Zune’s rogue status has long been rumored, of course, and a number of partners have already left the foundering PlaysForSure ship or seem to be planning to and the latest is SanDisk (the number two player manufacturer) which just did a deal with RealNetworks to build their own closed ecosystem in competition with Apple and Microsoft.

Finally, there was the absence of Zune prices in the announcement:

At least one analyst suspects that Microsoft decided to forego announcing pricing of its Zune music player at the last minute due to the surprise announcement last Tuesday that Apple would drop the price of its smallest hard-drive based iPod to $249.

This seems to match information obtained by BetaNews over the weekend, which indicated that Apple’s announcement caught Microsoft by surprise. The issue created an awkward situation for the Redmond company where a product was announced, but without any kind of retail pricing or availability guidance.

Sources within Microsoft indicate that the company is taking a “we will not be undersold” approach in its pricing structure, and was likely to announce a price that was either the same or lower than that of a comparable iPod.

An interesting question is whether Microsoft (or Apple for that matter) is willing to sell the players at loss like the Xbox 360. Right now Apple seems to be leaving plenty of room for competitors in player pricing, but that might change and there doesn’t seem to be any question of making up losses on music sales:

However, the report into the habits of iPod users reveals that 83% of iPod owners do not buy digital music regularly. The minority, 17%, buy and download music, usually single tracks, at least once per month.

On average, the study reports, only 5% of the music on an iPod will be bought from online music stores. The rest will be from CDs the owner of an MP3 player already has or tracks they have downloaded from file-sharing sites.

The importance of “free” to digital music fans should not be underestimated, warned the report…

I’m not shocked by that news, but once again I have to ask why this is a business in which Microsoft wants to dabble.

Filed under Apple, Argo, Coopetition, Microsoft, Nokia, PlaysForSure, RealNetworks, SanDisk, Technologies, Zune

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2 Responses to “Zune announcement afterthoughts”

  1. Other Zune shoe drops, pricing and availability announced -- Microsoft News Tracker Says:

    [...] Back on September 14, Microsoft teased the crowd with a lot of information on their upcoming Zune personal media player, but glaringly absent were any details on pricing and availability. That just got fixed: Today the company announced that the Zuneā„¢ digital media player and online service will be available to consumers in the U.S. on Nov. 14, 2006, just in time for the holidays. The Zune device will retail for $249.99 U.S. (ERP) and will create new ways for entertainment fans to connect and share media experiences device-to-device through the use of wireless technology and new software scenarios. So Microsoft decided to match the new price of of the 30GB iPod that was announced by Apple on Sept. 12. [...]

  2. RealNetworks, SanDisk take a swipe at Apple and Microsoft -- Microsoft News Tracker Says:

    [...] It’s no secret that Microsoft’s erstwhile PlaysForSure partners are a trifle miffed that they were abandoned to to continue the losing battle against Apple’s iPod/iTunes juggernaut while Microsoft blithely went its own proprietary way with the upcoming Zune. As announced last month, number 2 player maker SanDisk and media service RealNetworks have left the PlaysForSure camp to provide their own competitive player/online music store structure and today RealNetworks buffed up their part of the deal: RealNetworks launched twin salvos Thursday against Microsoft’s forthcoming Zune portable music player and Apple Computer’s iPod player and iTunes Store. [...]

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