Saturday, December 09, 2006

Microsoft Zune media player

Microsoft has predicted that sales of its Zune media player will hit one million by the end of June, although initial sales of the media player designed to take on the iPod have been sluggish.

When Zune first hit the market in mid-November, it came in at the number-two spot, with a 9 percent share. But in its second week of sales, the Zune dropped to fifth place, seeing its sales rank at retail outlets drop to just 2 percent, according to data from the NPD Group.

Microsoft noted that it is not focusing on weekly numbers, and instead is concentrating its efforts on incremental sales. In the past, Microsoft acknowledged that the payoff for its investment in the Zune might take years, and indicated that it was confident that it could attract a significant amount of users to the player.

Bite of Apple

Even if the Zune begins selling at a healthier pace, some say it is likely that Redmond will mainly be competing against media players from Creative and Sony rather than against the iPod.

Apple Computer dominates the media-player market, with a 70 percent share for its family of iPod music and video players. The company recently introduced a matchbook-sized version of its popular Shuffle player. That gadget is expected to be in high demand during the holiday season, analysts have noted.

One advantage that could pay off for Microsoft, though, is Zune's connection to its new operating system, Windows Vista. The majority of the world's computers run on Windows, and if Microsoft can tie the player together with the system more closely, it could boost sales.

Wait and See

Whether Microsoft can meet its sales target remains to be seen, but it is likely that the company will not be able to reach the amount of users it needs with the player in its current version, said Jupiter Research analyst Michael Gartenberg.

"Potentially, the one million mark is achievable, but Microsoft will have to do more if they really want to get there," he said. "They need to create an incredible alternative to Apple if they want to compete in this space."

Although Microsoft has hyped Zune's storage capacity, which is comparable to Apple's iPod players, the battle for market share will not be about who can have the most gigabytes in a device, Gartenberg noted.

"Consumers aren't looking at who has the best 30-GB player and comparing them that way," he said. "They're more attracted by services, aftermarket products related to the devices, and features like video and podcasts. Those are the areas where Microsoft will have to focus if they want to catch up."

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