Microsoft to spend hundreds of millions, several years on Zune trying to catch Apple iPod+iTunes

“Microsoft does not expect an immediate return on its outlay for its upcoming ‘Zune’ media player, predicting a three- to five-year investment period for the new device,” Reuters reports.

“‘It is something that is going to take time,’ Robbie Bach, president of Microsoft’s entertainment and devices division, said at Microsoft’s annual analyst meeting. ‘This is not a six-month investment time horizon,’ he said, adding that it may take three, four or five years to succeed,” Reuters reports.

Full article here.
[Thanks to MacDailyNews Reader “BrooklynNYC” for the heads up.]

“The software giant plans to have one music player in the U.S. this year, expanding into other devices and regions next year, [said] Robbie Bach, president of the Entertainment and Devices Division at Microsoft,” Ina Fried reports for CNET News.

“Microsoft confirmed its plans for its Zune-branded player and service last week, but has offered scant details beyond the fact that it will have a hard drive-based music player with a built-in Wi-Fi connection on the market this year,” Fried reports. “The move is a radical departure for the software maker, which has until now tried to take on Apple with a partner approach, in which many devices and services used Microsoft’s technology. Although the devices and services were by and large compatible, the experience hasn’t been what Microsoft hoped.”

Fried reports, “Bach said Microsoft is not abandoning its partner-oriented PlaysForSure program, even as it looks to build its rival Zune approach. ‘PlaysForSure continues as it is today,’ he said, addressing a question from analysts. ‘We’re going to continue to support that,’ he said.”

Full article here.
Are Microsoft really shooting for 20% of the iPod market or are they actually targeting the 20% of the market that iPod currently doesn’t own? We suspect the latter. Regardless, we hope Microsoft spends a lot of money on this. While we don’t see Microsoft’s efforts as much of a threat to iPod+iTunes, we also hope it pushes Apple by providing some measure of real competition that will drive innovation even faster.

For more on why we don’t think Microsoft can “kill” Apple’s iPod+iTunes, please read SteveJack’s take here.

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More blood on Apple iPod’s Click Wheel: Thomson gives up on MP3 player, CE markets – December 12, 2005
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More blood on Apple iPod’s Click Wheel: Rio is dead – August 26, 2005
Apple’s iPod has blood on its Click Wheel: Virgin Electronics is dead – March 08, 2005
Apple’s iTunes Music Store has blood on its play button: BuyMusic.com is dead – March 28, 2004

38 Comments

  1. More money down the toilet. It will be just like the X-Box:”We lose $400 on every unit, but we’ll make it up in volume!” When are they going to fire Ballmer and his cronies?

    In any case, this will most likely be a failure. They are just too dysfunctional these days to pull this off.

    One of my neighbors was working for an ad agency and was working on the MS account. He quit. He said that he just could not justify wasting his life in incessant meetings at MS where NOTHING was ever accomplished. He said that it was always a room full of people who spent the entire meeting on their laptops or Blackberries, nobody paying attention to what was going on.

    I don’t think anyone there, especially Ballmer, has the attention span to focus on a project and have it succeed.

  2. 20% of the iPod market is logical. And smaller than the 20% of the portable player market.

    Consider the iPod is a moving target. So for example today’s portable player market is 100 units. 80 units of that is the iPod and 20 units of that is everyone else. M$ wants 20% of the iPod market, thus they want 16 units.

    The market is growing at what 50% annually? So three years from now the market is 337.5 units. M$ has spent billions to get to 16 units in 3 years, or as the market has grown just under 5% market share. Which in M$’s warped logic would be a victory because they achieved their goal. Meanwhile M$’s partners have doubled their units in that period to 40 units and the iPod has almost than tripled it’s sales to over 280 units.

  3. wmd, you’re exactly right . . . and that’s precisely the problem for MonkeySoft.

    There will come a time when the company will either have to sh*t or get off the pot with that enormous cash reserve. BILLIONS sitting around doing nothing (essentially) is partial explanation for MS’s remarkable stock malaise over the past seven or eight years.** If they don’t begin to put this money to good, profitable, growth-based use pretty soon, you will see a stockholder revolt the likes of which the tech sector has NEVER seen.

    _________________

    ** Five years ago MS was bumping into and around $34 per share. Today it closed at $23.80, a 30% decline in that period. Clearly, the lack of innovation, vision, and leadership within that company is rotting it from the inside; only time will tell if Herr Ballmer can TRULY become the “font of creativity” he recently promised to be. Certainly “Zune” doesn’t fulfill that promise, for it’s just another in a long line of “MonkeySee” products.

  4. Here is the real question. . . WHY do they want to do that? I mean seriously. Stick to a few good things. Not 112341234 bad things. . Seriously. Tomorrow they will be spending millions to beat out McDonalds or something.

  5. I think Zune will be huge.

    Me and my posse need archive dls of Duran Duran. We’ll put gel in our hair and smoke some righteous buds in support of the cause. Let’s all meet at Taco Bell at midnight or at Mike’s place. His folks are in Bermuda. He’s got a cool axe and some Marshalls. Let’s all hook up at myplace unless friendster takes over.

  6. The Xbox analogy – ie selling the console for a loss and making money back on the game licenses and Xbox Live fees (not sure of that myself – anybody know if MS makes a profit there?) does not hold true for Zune.

    1 – MS cannot make money from the store by impose ruiniously high “DRM” fees for music to be “Zune compatible” because its competing with Apple (who breaks even or takes a loss on it store)and the plain-jane CD. So the revenue stream of games (like the Xbox) isn’t there. They MIGHT be planning to do that with a subscription service, but nobody has really shown that a subscription model can compete with iTunes.

    2 – MS is selling their player at a loss and trying to make money on their store….while their competitor (Apple) makes ridiculous profits on the player and breaks even on the store. FACT: Apple makes money even if you never, ever buy anything from the store. MS is counting on making money by tying you into their infrastructure. Like the Xbox, the best way to hurt MS is buy a bunch of Zunes and then bury them in the backyard.

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