I think we all realize the Zune isn't exactly setting the world on fire. But in these days leading up to the release of the Zune HD, things have apparently gotten worse than ever.
To be sure, the Zune provides a tiny, and apparently deteriorating portion of Microsoft's business. Revenue for the non-gaming side of Microsoft's Entertainment and Devices unit, which includes the Zune, tumbled 42% to roughly $211 million for the fourth fiscal quarter ended in June - or about 2% of the software giant's total, according to regulatory filings.
Microsoft said revenue at its Entertainment and Devices division was undercut by a 54%, or $100 million, decline in Zune platform sales.
In a survey conducted last fall, IDC's Kevorkian said only 4.8% of those with a portable media player reported having a Zune, while 61% had some sort of iPod.
So, in late 2008, the Zune actually had 50 percent more usage share in the MP3 player market than the Mac did in the worldwide PC market. (Hey, math can be fun.) When you consider how little advertising Microsoft did/does for the Zune, that's rather astonishing. What's Apple's advertising budget? $10 gazillion or something?
Comedy aside, it gets worse.
More recent data from NPD Group Inc. indicates that the Zune's already slim market share may have slipped further. NPD Group analyst Ross Rubin said in the first half of this year, Zune's share was 2%, compared to about 70% for the iPod.
Put simply, I am a fan of the Zune. The PC software is superior to Windows Media Player and iTunes by a wide margin. The current devices are decent, but now lagging behind the touch screen/App Store goodness Apple offers. The online marketplace is good, but not as good as iTunes Store, though that matters less with music because MP3/AAC is universally compatible. (For movies and TV shows, there's simply nothing like the iTunes Store.) And of course Zune offers various features and functions that simply aren't available on the iPod at all. It's competitive from a technical/usage standpoint at least.
But it's not competitive, apparently, where it arguably matters most: In the market. It's unclear whether Microsoft can turn things around with the Zune HD, no matter how good it is. I fear a small but temporary bump on its release and then another long, slow slide into irrelevance. And that's too bad. The Zune is actually a neat platform for digital media.
