Microsoft to subsidize Zune $150-200 per unit?  30GB Zune for $99?

“Mike Evangelist, writer of the excellent blog Writer’s Block Live, had an interesting comment on my weekend article on Microsoft’s marketing strategy for its Zune music player,” Carl Howe, principal analyst, writes for Blackfriars’ Marketing.

…it occurs to me that there may be another answer that explains Microsoft’s odd behavior regarding the price and compatibility of the Zune. I think they are going to subsidize it…sell them for $99, or something like that. Buy their way into the market, then milk users for the rest of their lives as they buy/rent media.

Howe writes, “I think Mike may have hit on Microsoft’s plan.”

“With music subscriptions offering up visions of consumers playing $120 to $240 a year to Microsoft, subsidizing a Zune player by $150 or $200 might make a lot of sense to grab market share. While it would cost Microsoft something around $300-$400 million this year in subsidies and more next, such a strategy would have a chance of breaking Apple’s dominant position. However, history doesn’t favor a Microsoft win here, though; there are no examples of a company successfully building a sustained profitable business from such a subsidization strategy with one exception: the Sony Playstation 2,” Howe writes.

Howe writes, “So keep your eyes peeled for the possibility of $99 30-GByte Zunes. If Microsoft does that, Christmas music player sales could get very interesting.”

Full article including an online poll “What price do you think Zune will debut at?” here.
Paying people to buy Zunes is about the only chance for Microsoft, however slim it would be. And, still, Apple holds all the cards: at any time, if Zune gains meaningful traction, just license FairPlay to other device makers and/or online services to apply an instant death sentence to Zune.

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Microsoft’s underwhelming Zune a ‘viral DRM’ device – September 18, 2006
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Creative does Apple’s dirty work by immediately attacking Microsoft’s Zune – September 17, 2006
Motley Fool’s Jayson: Microsoft’s ‘just plain ugly’ Zune a meager offering, not an iPod killer – September 15, 2006
What’s in a name? ‘Zune’ a French-Canadian euphemism for penis or vagina – September 15, 2006
Crave at CNET: ‘Microsoft Zune, all the excitement that brown can bring’ – September 15, 2006
Microsoft’s Zune underwhelms – September 15, 2006
Enderle: Microsoft Zune ‘a design mistake’ – September 15, 2006
Microsoft hypocrisy exposed with Zune: What ever happened to ‘choice?’ – September 14, 2006
Analyst: Microsoft Zune with fake scroll wheel ‘hardly an Apple iPod killer’ – September 14, 2006
Analyst: Microsoft Zune won’t spoil Apple’s biggest iPod Christmas ever – September 14, 2006
Microsoft unveils Zune 30GB player, Zune Marketplace; declines to disclose prices – September 14, 2006
Analyst: Microsoft’s Zune an ‘underwhelming’ repackaged Toshiba Gigabeat; no threat to Apple iPod – August 30, 2006
Microsoft confirms brick-like Zune to be made by Toshiba – August 25, 2006
Microsoft Zune is chunky brick made by Toshiba – August 25, 2006
Microsoft to spend hundreds of millions, several years on Zune trying to catch Apple iPod+iTunes – July 27, 2006
Zune: Apple cannot lose. Microsoft cannot win. – July 26, 2006

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