The Microsoft Zune 1.0 dud

“Last week, Microsoft officially announced details of its new Zune consumer brand. The September 14th announcement came two days after rival Apple announced a refreshed iPod family, updated iTunes software for Windows and Mac OS X, and a revamped iTunes Store (now the ITS; it is no longer ITMS, as “Music” has been dropped from its name) that now supports movie downloads. The verdict? The soon-to-arrive Microsoft device and its accompanying Zune-branded ecosystem will not slow the iPod juggernaut. Zune, in its initial 1.0 incarnation, will be a dud,” Tom Rhinelander writes for New Rowley.

Rhinelander covers many aspects of Zune, iPod+iTunes, and more in a comprehensive article.

Rhinelander concludes, “As for Microsoft, Zune 1.0 will be seen as a flop. Like the Xbox, Zune will cost Microsoft hundreds of millions of dollars, with no near-term profits. Basically, Zune will be a financial loser for Microsoft for some time, despite how Apple has shown that the digital content market is extremely profitable (at least for devices).”

Rhinelander writes, “And unlike the Xbox, Microsoft shouldn’t rely on Apple to damage its own future market position as Sony appears to be doing with its next-generation PS3 console. Zune 2.0, evolving and emerging sometime next year, will attempt to fix the launch flaws, but Zune won’t really take off until PlaysForSure offerings disappear and the digital content ecosystem becomes a clear two-horse race.”

Full article here.
This is a very interesting article which prompts one question: What if PlaysForSure offerings don’t “disappear” because Apple licenses selected players into the iPod+iTunes family with FairPlay DRM?

As we’ve said from the start, if Zune gains any meaningful traction, Apple can change the game instantly by licensing FairPlay. The first online service to get a FairPlay license will quickly become the number two downloadable media seller next to iTunes, as they will have content that plays on what should be over a hundred million iPods, not to mention Macs, which are currently excluded due to Microsoft’s Windows-only PlaysForSure (and Zune) DRM. Likewise, the first device maker to get a FairPlay license will quickly become the number two digital media device seller next to Apple.

One would safely assume that Apple can draw up the licenses at very favorable terms and companies will still jump at the chance to participate in the iPod+iTunes ecosystem. Surging Mac sales (and sales into new markets, ie. “iTV,” “iPhone,” etc.) will more than make up for any iPod and iTunes revenue losses engendered by FairPlay licensing (remember, this licensing won’t happen for quite some time).

Apple can quickly and effectively make Microsoft Zune a very remote island that will have no chance of competing or generating meaningful revenue for Microsoft. The result will be that Apple controls the standard and owns the best-known brands while still selling the device(s) (iPod family) and the online content service (iTunes Store) that started it all. Microsoft would have no recourse and would shut down the isolated, unprofitable Zune brand.

Related articles:
Microsoft’s underwhelming Zune a ‘viral DRM’ device – September 18, 2006
SanDisk teams with RealNetworks against new common foe: Microsoft Zune – September 18, 2006
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

36 Comments

  1. green,

    It’s not illegal in the U.S. to have a monopoly. It’s illegal to abuse it. Ask Microsoft about that distinction, they know all about it.

    MDN is right. Apple will control the standard and everything will actually work for once.

    I believe that Jobs will license if and when the proper time comes.

  2. “Todays KMart Blue Light Special is the Microsoft Zune. Absolutely FREE! Hurry, before they are gone, to aisle ‘dumpster'”.

    MW:after, as in “After The Thrill Is Gone”
    -What do you do when your dreams come true, and they’re not quite like you planned?-8th Eagle “Buzzard” Ballmer

  3. MDN, are you retarded?

    Apple will never license Fairplay. Steve Jobs is 100% against licensing to OEM’s. It’s against his whole philosophy of controlling the whole widget. Apple is a systems company, they sell complete user experiences, hardware and software combined…,.. iPod/iTunes, Mac/OSX…. Get the picture? Apple won’t ever license or sell one sum of its parts. Your above take sounds like Enderle or Dvorak’s paranoia.

  4. Don’t–

    Enjoy. I just got my new nano. This thing is sharp, well put together, and isn’t trying to play catch up to anything.

    I hope your Zune brings you happiness. …um… but if you’re the betting sort, I bet it won’t. ” width=”19″ height=”19″ alt=”cheese” style=”border:0;” />

  5. Apple is the only compsny thst really understands the digital lifestyle that people are living.

    Its an uncomplicated thing made complicated by companies like M$.

    I want to get hold of the media that I own where and when I want it. nuff said…..

    Fsck M$

  6. Don’t forget Microsoft’s patience factor. MS has shown time and time again that it is willing to release an obviously inferior product, but stay in the market and make improvements until version 3 or 4 is competitive and even somewhat stable.

    The real danger here is that Microsoft has so many Windows users, it’s almost like a built-in audience. Of course, that may be what Microsoft is counting on, and even though iPod and iTunes work perfectly well with Windows (and I’m sure even better than Zune does), Apple will have to watch out for the group of people who simply like Microsoft products (yes, MDN, there are some of those out there).

  7. The tech market is far more mature no than when M$ made its coup. When M$ made it big, people had no idea what tech was for them, except a novelty. They experimented– and cheaper was better. With all the IBM clones (my family’s included), they grew overnight.

    And yet… they’re products are sub-par.

    If M$ makes it now, it’ll likely be that they have a good product. Thank you, Toshiba.

    if so, we all win as pressure moves the market forward. 5 bucks that it won’t happen like that…

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