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Microsoft Handhelds Music Media Media (Apple) Hardware

Microsoft To Exit the Zune Business? 361

Posted by timothy
from the leaving-only-the-other-makers-of-zunes dept.
thefickler writes "According to Microsoft's quarterly filings to the Securities and Exchange Commission, the Zune platform experienced a revenue drop of 54 percent, or $100 million. This compares to relatively healthy sales of the iPod, which were up 3 percent in the same period (though revenue did drop by 16 percent). Obviously, with the recent job cuts at Microsoft's Entertainment and Devices Division, pundits are wondering how soon until the Zune also gets the chop. As one pundit wrote: 'Microsoft, by now, should be realizing that it's never going to be as "cool" as Apple, so why waste its time with the Zune where it has no competitive advantage?'"
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Microsoft To Exit the Zune Business?

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  • by Joce640k (829181) on Sunday January 25, 2009 @08:55AM (#26597429) Homepage

    Steve Ballmer saying "squirt".

    Heckuva marketing slogan, that one.

  • wheres (Score:5, Funny)

    by ionix5891 (1228718) on Sunday January 25, 2009 @08:56AM (#26597437)

    the "suddenoutbeakofcommonsense" tag

  • by owlnation (858981) on Sunday January 25, 2009 @09:00AM (#26597459)
    It's fairly easy to see why the Zune failed.

    1. A mammoth uphill struggle to beat the popular and well-established iPod (as well as many other competitors)

    2. The use of DRM.

    3. The use of the word "squirt." Which is easily associated with bodily functions.

    4. It came in brown. Which made "squirt" all the more obnoxious.

    5. The lock-up issue.

    No-one will miss it...
    • by Joce640k (829181) on Sunday January 25, 2009 @09:11AM (#26597509) Homepage

      Nobody except this guy:

      http://sydfish.files.wordpress.com/2008/04/zune-tattoo.jpg [wordpress.com]

      Oh, now I see why it failed...

    • by grumling (94709)

      It also isn't clearly better. Yes, some would argue that the sound quality is better, but most people are happy with the sound quality of the iPod. Being able to beam music to another Zune is great, but not if there's only one in your world. And FM radios in portable devices usually aren't all that fantastic if you are outside a major metro area because of signal fade and Clearchannel.

      An iPod killer would have to be clearly better, and that's hard to do. Not because the iPod is perfect, but because it is go

      • Re: (Score:3, Interesting)

        by Anonymous Coward

        I must be the only one here that has owned and used a Zune. I won the Zune in a drawing at a MS Luncheon for Server 2008.

        I must say, I put away my iPod Nano, and am now using the 8gb Zune.

        The audio quality is a bit better, missing the EQ though. The FM receiver does work quite well in the metro area.

        The one thing I was surprised about liking is the user interface and the touch sensitive pad for controlling it. I can still load MP3's without DRM, and use it to my hearts content.

        Still not sure if I would h

      • by aurispector (530273) on Sunday January 25, 2009 @12:25PM (#26598603)

        You raise two interesting questions. a) What constitutes the perfect pmp (or to put it another way, the most desirable pmp) and b) will they become irrelevant as more phones morph into music players? The whole drm thing is a side issue. I can't think of any player that won't play drm-free mp3's - even the zune. The pmp manufacturers don't give a crap about drm but have to include it if they want to have a music downloading service because the record/movie companies demand it.

        It looks to me like pmp market of the future will become be divided into expensive high end enthusiast devices and ultra cheap low end mass market devices, with the much larger middle ground being taken up by combination phone/pmp devices. Everyone carries a phone and it doesn't make sense for people to have two boxes to tote around just to listen to music or look at video. Regardless, most players work pretty much the same - they play music and video. How they do it is irrelevant as long as it's simple and makes sense to the end user.

        What we end up talking about is really the music management software and associated music sales/downloading services. Ipods/phones/tunes already have a massive lead in this area in terms of seamless integration and a one-stop shop. Apple created the market and do a good job of making sure they remain the best. It's hard to imagine any company being able to outpace Apple on both hardware and software/services such that people see a clear advantage. How could Microsoft really hope to blow away Apple on both hardware and software/music services? Apple is more than good enough to make it impossible. Hence the market stays fragmented and Apple centric.

        • by Knuckles (8964) <knuckles&dantian,org> on Sunday January 25, 2009 @03:20PM (#26600065)

          The pmp manufacturers don't give a crap about drm but have to include it if they want to have a music downloading service because the record/movie companies demand it.

          As recent iTunes and Amazon store news show they really don't, or are not in a position to. Microsoft failed at defining their customers: they collaborated with the content industry against the people who were supposed to buy the Zune. Apple got it right, whether that will be good or bad in the long run.

    • Re: (Score:2, Insightful)

      by anss123 (985305)

      It's fairly easy to see why the Zune failed.

      I can't even see the Zune succeeding if all iPods suddenly combusted. It was a bad product from day 1.

      • Re: (Score:2, Informative)

        by Anonymous Coward

        It was a bad product -at- day one, but it's gotten far better since. It has some very impressive features which I haven't seen in any other MP3 player at that price range, and upgrading older versions to support all the features of the newer ones is something I wish more companies would allow. If they'd just open the fucker up and lose the DRM...

        • by anss123 (985305) on Sunday January 25, 2009 @11:11AM (#26598151)

          It was a bad product -at- day one, but it's gotten far better since. It has some very impressive features which I haven't seen in any other MP3 player at that price range, and upgrading older versions to support all the features of the newer ones is something I wish more companies would allow. If they'd just open the fucker up and lose the DRM...

          The way I think DRM should work is like this: If you try to play a file which you don't have the 'key' for the media player will still play it, only also informing the user that it's playing an unlicensed song somehow. Thus make DRM a tool to help the user stay legit, instead of a punishment for those who are legit but can't playback the file the way they want to.

          That way it's the user, and not a potentially faulty algorithm, that have the final say whenever they can play back the music or not.

          • Re: (Score:3, Funny)

            by S.O.B. (136083)

            That's a reasonable and well thought out approach to the issue of DRM.

            Hold on...reasonable and well thought out? What are you doing on Slashdot?

    • by JohnFluxx (413620) on Sunday January 25, 2009 @09:44AM (#26597665)

      I don't know if it was a factor, but it is deliciously funny, that Microsoft's Zune did not play Microsoft's PlayForSure format. :-)

      • by scotts13 (1371443) on Sunday January 25, 2009 @12:23PM (#26598589)
        It may in reality be the largest factor. After the PlaysForSure fiasco, who in their right mind would ever buy ANYTHING with DRM from Microsoft, ever again?
        • Re:Ever Again (Score:3, Insightful)

          by TaoPhoenix (980487)

          This is that critical mass thing again. PlaysForSure was still early enough in the general maturity of the net that it's been kinda washed over.

          But to pull that stunt *twice* makes an event that will show up at the more dangerous business-analysis-article level, and that's far harder to get away from. Also, it coincides with a strange emergence of audience maturity awareness not even present 8 years ago.

          You used to form opinions about stuff from 3 newspapers and *the local retail store*. Products created th

    • They killed the brand with a massive fault and the bad publicity surrounding it. Nothing else in Zune's history needed to happen to justify scrapping the brand, just like nothing else needed to happen for IBM's Deskstar brand to be sold off after it became known as Deathstar.

    • by Anonymous Coward

      The entire Entertainment and Devices Division is going to get a massive house cleaning.

      Zune hardware is the first step. It's the easiest to kill off. How much of stand alone portable music player market there will be in five years when so many people are starting to use their cellphones makes just throwing in the towel on the Zune hardware an obvious choice.

      Killing off the eight year long Xbox fiasco is next. Microsoft has been consistently killing off or letting go first party developers for the past coupl

      • by jcr (53032)

        The entire Entertainment and Devices Division is going to get a massive house cleaning.

        I'm sure that MSFT shareholders would hope that's true, but why do you think MS management is suddenly going to get a clue? They've been pouring their shareholders' money down ratholes for quite a few years now.

        -jcr

      • by MediaStreams (1461187) on Sunday January 25, 2009 @10:37AM (#26597949)

        I can't imagine what it must be like to work in the Mac Business Unit at Microsoft knowing that all your efforts are going to nothing more than playing accounting games to hide the Xbox disaster.

        It is staggering to grasp the magnitude of the Xbox diaster when you look at it:

        * Over 4 billion dollars in losses on the first Xbox hardware

        * Mac Business Unit moved into the Xbox division to cover up the losses

        * Absolute worst and cheapest console hardware ever created with the Xbox 360

        * Online fees for everyone playing online games effectively adding 50-150 dollars in extra revenue per console

        * Three years on the market

        And the E&D division still was only able to post a relatively tiny profit for 2008. Take away the profitable Mac Business Unit, the Xbox online fees, and other profitable parts of the E&D division and the Xbox 360 hardware is obviously still generating huge losses.

        • Re: (Score:3, Funny)

          by NeutronCowboy (896098)

          1) Sunk cost. No one cares right now.
          2) First I heard of this. A quick search turns up nothing outside of general managers moving from the Mac unit to the XBox unit
          3) You've never dealt with the Atari 7200, or the PS2.
          4) The only people who care are PS fanboys who don't pay the fee. Strange, really.
          5) You're probably still talking about the XBox.

          Finally, your point that if you take away profitable parts of the E&D division, you end up with a loss.... uh, really? I would have never thought that.

          Get out o

    • by rolfwind (528248) on Sunday January 25, 2009 @09:49AM (#26597695)

      Except for #1, I don't think many of those issues really hit the average consumer except when it was too late - when they already bought it.

      In my life, I probably used an iPod for less than 20 minutes and a Zune for less than 15. I like looking at the newer models my friends carry from time to time, and recently had a friend's newer Zune in my hands. It's okay, much better than the sloppy buttons of the 1st gen. What strikes me about the interface - the pad where you can scroll up or down with your thumb - is that it still isn't as easy as the clickwheel on an iPod. It may sound irrelevant, but since this is the one and only way to communicate with the device it does become a big deal.

      Otherwise, it's just another Me too! device and with the prices pretty much in the same range as an iPod, there is little incentive to go out and buy one. With an iPod, you at least have iTunes and the like.

    • by BeerCat (685972) on Sunday January 25, 2009 @09:59AM (#26597745) Homepage

      How about:

      6: Not available outside North America (presumably because getting the rights for the marketplace agreed was too hard), which then planted the meme that it could only take purchased tracks, rather than "rip your own CD".

      7: Marketplace tracks were priced in "points" rather than real money, which meant that the customer needed to pre-load the points ("What, I need to pay for my music in advance! Why can't I just pay when I want it?").

      Now, while both of those are incorrect (it could take MP3, and the loading of points could be done at purchase), it gave out the wrong perceptions. And in this game, perception is all.

    • by Bake (2609)

      6. Not sold outside USA

    • by Dogtanian (588974)
      I think brown could be an interesting and different colour choice in the hands of someone with a modicum of design flair. If only because it's a relatively uncommon colour for consumer electronics- and things in general- nowadays.

      Sure, you can make the obvious comparison, but lots of other things are brown, and it doesn't stop women stuffing their faces with chocolate for example. Personally, I'd have bought the brown Aspire One if I'd been able to get it at the same price as the white model.

      The problem
    • by UnknowingFool (672806) on Sunday January 25, 2009 @10:42AM (#26597979)

      For the most part the Zune had to do in a few years what Apple did over five. When the Zune was released in 2006, Apple had over five years of experience designing and tweaking the iPod. It also had over three years with iTunes. The whole ecosystem of the iPod also had to be replicated. That was/is no small task. Also the history of Microsoft suggests that they take a few iterations to get things usable.

      The first Zune wasn't bad. The problem was it wasn't great. To beat the iPod, it had to be substantially better. It only offered a few features that the iPod didn't (bigger screen, Wi-fi, radio, sharing) but also drawbacks. Shared music is extremrely restricted. Zune can't be used as HD. The more desired advantages were trumped by Apple with the iPod touch which features a new multi-touch interface that the Zune still doesn't have.

      One of the main reasons the Zune didn't do as well was marketing. MS just didn't get it that their other products sold well because people didn't have a choice. To convince people to buy your product over another requires good marketing. So they went with "We're the underdog; let's market our product that way and we'll seem cool. Let's make our commercials oblique and obscure." To their dismay, people have never considered MS the underdog or cool. Their commercials never presented the viewer with a clear picture of what they were advertising.

      Contrast this with the iPhone commercials. In the smartphone market, the iPhone was/is new. They had to get people to buy it over Windows CE and Blackberrys and non-smart phones. There were four original iPhone commercials. Each of them showed that (1) it's a phone, (2) some other function (Google maps, browser, plays media, etc), (3) how it works using the new touch interface, (4) who makes it (Apple), (5) where to get it (Apple or AT&T). Each iPhone commercial fulfilled the role of advertising whereas the Zune commercials left the viewer puzzled as to what the message was.

      In these hard economic times, it doesn't help that the division that Zune is in a division has not been very profitable historically. In the last few quarters has the division been in the black. With the MSN and Xbox (and now the Zune), the division has been $7 billion in losses since the Xbox was started. That can't bode well if MS is so worried about the future that they've laid people off for the first time. The Xbox 360 has many more customers and is more popular than the Zune albeit it probably costs more. Most likely the Zune will have to be cut.

    • by Korin43 (881732) on Sunday January 25, 2009 @04:10PM (#26600531) Homepage
      I doubt DRM was a big deal in this. My roommate has a Zune and the two biggest reasons he hates it are the Zune software (the only way to transfer music to your Zune), and the lock-up issue.
  • by howardd21 (1001567) on Sunday January 25, 2009 @09:03AM (#26597469) Homepage
    All of this (the article and our posts) are speculation, so as long as we are guessing/gossiping/conjecturing, etc.

    Microsoft has indicated that they would prefer less manufacturers and models of Windows mobile based phones, so they can make the OS more tightly integrated with the hardware. There have also been rumors that Zune functionality would be folded into the phone, which tends to make sense. So my guess would be they gracefully lose, er...bow out to the iPod and say they are "providing a great combination to their customers by putting the Zune features into the phone."
  • by rts008 (812749) on Sunday January 25, 2009 @09:09AM (#26597503) Journal

    Just rename it the iZune, eZune, or better yet, the ieZune...slap a Vista Capable sticker on it and it can't help selling like hotcakes!

    *crickets chirping*
    Well, then again, maybe not.

  • especially when it was never sold outside of North America.
    If it was such a world beating innovative 'must have' then it should have been available worldwide.

    The writing was even on the wall from day 1. What marketing droid said 'sell it in Brown'? Duh?
    Then came all the recent lockups.

    Come on Microsoft, put the injured beast out of its misery.

    And while you are doing that, have another long hard think about launching a DRM crippled Music Download service.
    Many of us Elephants have long memories. Does 'Plays f

    • Re: (Score:3, Insightful)

      by im_thatoneguy (819432)

      I have a brown zune you insensitive clod!

      Microsoft won't kill the Zune. Or at least they better not and here is why:

      1) They would never be able to sell music again ever... EVER. After play for sure people were cautious to buy another microsoft DRM'ed product. "Fool me once shame on me..." Microsoft wants to sell music through Xbox, through Windows Mobile, through the PC. They want to sell music in the future. Killing the Zune would end that dream. Killing the Zune would end Microsoft's Live Media sa

  • by indytx (825419) on Sunday January 25, 2009 @09:21AM (#26597549)

    It's more about making products people want to buy. How many people really want to buy Microsoft products anymore? When was the last time we heard about people lining up to buy the latest version of Windows? The problem for Microsoft is that it has a hard time making products that excite the vast majority of the public, and they've had a few huge mistakes in public perception lately. The Xbox 360 Red Ring of Death was a just a debacle. They shipped a Zune that was less feature-filled than the then current iteration iPod. Don't get me started on Vista, "Vista Capable," and "Vista Ready," or whatever those stupid stickers said.

    Sure, Apple products are cool, but they also work pretty well. Why Microsoft didn't look to Apple's or it's own playbook and more closely linked the Zune to the Windows environment is beyond me. This worked for years with Explorer.

    Seriously, Xbox games are "cool." I have an original Xbox, and I have been giving Microsoft my $$$ for several years now for my Xbox Live membership. However, I'm just too stingy to give my money to Microsoft for an Xbox 360 after all the hoopla about failure rates. The race to beat Sony to the market was a failure of vision and an appreciation of paradigm shift. There was a huge market for casual gaming that just wasn't going to be satisfied by the first-person shooter, and Nintendo was able to capture it. We can chalk that up to a happy accident for Nintendo executives, but so what?

    If a company tries to be all things to all people, it will be unable to do everything as well as companies that are smaller, more focused, or more nimble. Look at General Motors as example number one. Consumers have too much access to information and too many choices. The problem with Microsoft's executive leadership is that the strategic steps they take are, primarily, reactions to market forces. Then, they are placed in the position of having to respond. Why didn't anyone at Microsoft see that Netbooks might one day become popular and have a version of Vista which would run on them? No one? How long was Intel working on the Atom?

    Microsoft stocks are, historically, looking pretty affordable right now, but I'm going to wait. I just don't see any game changing ideas coming out of Redmond. Until, as a company, it starts doing something much better than the competition, it will never rise to its former glory days, and its market share and/or profits will continue to decline.

    • I really love my Microsoft Natural Keyboard. It really is one of the finest keyboards ever made for those who can type with ten fingers. The only way to make it better would be to put IBM Model M clicky keys on it.

      Except they put the '6' on the left-hand cluster, not the right. WHAT.

    • by JamesRose (1062530) on Sunday January 25, 2009 @10:34AM (#26597937)

      Really? Because the only phrase in that drivel you just wrote about the zune was wrong "They shipped a Zune that was less feature-filled than the then current iteration iPod." BS! Bigger screen, FM radio, and Wifi. The thing the ipod actually did have that the zune didn't was a shiny surface on the back. That's literallly it. The zune even had better quality audio. Buy music from FM radio? Geat idea.

    • by springbox (853816)

      When was the last time we heard about people lining up to buy the latest version of Windows?

      People did this for Vista, but you probably weren't paying attention.

    • by DingerX (847589)
      The Zune problem was that they started with a great idea, and then removed its testicles in committee. PMP + Wifi? Yes. Music is something humans are hard-wired to share.

      Then it hits committee. Share music? That's illegal! Oh wait, it depends? Well, even if it's not illegal, we need to monetize this feature. Just like "Vista-Capable" was a good idea, until they decided to change the standards to suit their suppliers. Xbox 360? You're on the money. Committees don't see shifts. People do. And when you give
  • In a bid to win back profits after huge layoffs worldwide, Microsoft UK has launched Zune MusicTurd(tm) [today.com] for mobile phones.

    The highly competitive music store offers tracks at twice the price, DRM-locked to a chosen individual ear of the purchaser. If they can get it to work with their phone. Microsoft were careful to point out to the financial press that charging your account, however, works perfectly and that the helpline number has been connected to a fax machine.

    Microsoft is confident the MusicTurd(tm) service will attract millions of people who will buy tracks from them to play on one mobile ever, not transferable to any other device including the same phone's replacement, in preference to stores offering cheaper unlocked MP3s, and won't just drive people to filesharing networks, MP3 blogs or copying 500 gigabyte USB disks full of music from their friends in sheer disgust at these corporate tools.

    "We understand that lots of people use telephones they carry around with them these days," said Hugh Griffiths, Microsoft UK head of Mobile, "and you can even play music on them. A bit like a transistor radio. Whatever will they think of next! So if we get the consumer interest, we'll offer an enhanced version, MusicTurd(tm) Polished(tm). Like we're doing with Windows 7. You can't expect it to be any good until the third version, of course. So buy the first two and it'll be fantastic. Trust us on this. We have hundreds of loyal suck, er, customers on the MSN website, I'm sure we can squeeze them until the pips rattle.

    "What do you mean, I'm lacking enthusiasm for our product? You'd think I was trying to get redundancy in the next round of layoffs or something. Ha! Ha! What a ridiculous notion."

    [Read the original interview [pcpro.co.uk]. Least enthusiastic marketer in history. It was quite hard to outdo.]

    [Oh, and have a Zune-Anus logo [today.com].]

  • It doesn't really matter what the market share is compared to what the costs versus revenue the thing is bringing in. OK, with sales that low compared to the iPod it might not be all that great, but there are niche products with lousy market share that have good returns. So that's the real question and the one that the business decision makers at MS will be examining.

  • 'Microsoft, by now, should be realizing that it's never going to be as "cool" as Apple, so why waste its time with the Zune where it has no competitive advantage?'"

    What are you talking about? The Windows platform was never cooler than Apple's but did Microsoft quit the PC business just because Apple's product was way cooler? No! They should keep hammering on until the market goes their way.

    We've seen the same trend when it comes to their IIS web server vs Apache and the rest, Windows Live vs Google/Yahoo.

    The battle is on for Silverlight/Moonlight vs Flash, and XPS vs PDF.

    Microsoft should not just give up. Wars are never won by giving up battles here and there. They ar

    • "They are won when the smarter adversary opens up new fronts with better targeted resources."

      e.g. netbooks, which Windows blames their failure to make their numbers this quarter on. i.e., the cold wind of actual competition with Linux. And it's all a completely unintentional side-effect!

    • by malkavian (9512) on Sunday January 25, 2009 @09:54AM (#26597725) Homepage

      Windows got the market by price, not by opening up new frontiers.. They copied a lot of stuff from the Mac.. Just iimplemented it on a platform that became affordable to more users than the Apple hardware/software.

      Then their 'hammering away' wasn't actually technical; they employed marketing campaigns, misinformation, and even error messages in their products to scare people away from competition (c.f. the old messages in windows 3 when you ran it on a competing DOS)..

      MS doesn't (historically) play the 'competition' game.. It plays scorched earth tactics. Find a market it wants to play in.. Throw endless money at it, pushing products out for less than a commercial competitor in only that market can afford (c.f. IE vs Netscape, and other similar events in other markets). Wait until said competitor is dead, then lock it in, and perhaps charge more for the product afterwards, or let it stagnate and put no further development in, killing the development of a whole market.

      In the iPod battle, it's Apple, not Microsoft, which pushes to new areas (all the functionality of the iPod touch, the ease of use, so on, so forth).. MS had the almost killer app in there with their wireless sharing, but with its limitations, nobody would have been that enthused about it..

      So, MS did their usual "throw money at it, and see what sticks", Apple did design work, and targetted their resources and worked out what people would want to see..
      There's a point at which you decide to cut your losses and run. MS have been trounced solidly on all fronts on this one. Now that MS seem to actually have to worry about money (wonder how much they lost in the market crashes), seems this loss maker that isn't going anywhere soon would be a good cut, rather than other areas that actually make a profit.

      Wars are won (or at least not completely lost) by not fighting on too many fronts, especially ones where you're getting solidly thrashed by overwhelming opposition. Sometimes a ceasefire, or strategic withdrawl can save the whole show, rather than throwing everything you have in every direction.

    • Re: (Score:3, Insightful)

      by Alioth (221270)

      PCs for the most part aren't about fashion. PCs, for the most part, are for businesses and should be boring and un-distracting (and part of the problem with Vista is they forgot this, and blinged it out at the expense of hardware).

      As well as administering Linux and BSD systems, I also admin a couple of Win2K3 servers. I sort of like Win2K3, because it's crushingly boring and just gets the job done. Once I've set up the scripting environment how I like it, I hardly notice it's there. That's how a business OS

  • A better question is, why waste time reading an article that has half the story. What sort of "pundit" makes predictions based on that sort of information? The entire thing hinges on PROFIT, which is skillfully avoided throughout that piece. Assumably, this isn't an xbox situation, surely these devices are not being sold at a loss.
  • by MMC Monster (602931) on Sunday January 25, 2009 @09:43AM (#26597659)

    Why not compare revenue to revenue, or sales to sales?

    • by UnknowingFool (672806) on Sunday January 25, 2009 @11:09AM (#26598137)

      iPod sales (22.7 million) went up 3%, revenue ($3.3 billion) was down 16% compared to last year. That would suggest more people were buying this year but were buying the cheaper models compared to last year.

      Zune on the other hand drop 54% in revenue ($100 million) due to drop in sales. There's no other breakdowns. Considering the whole division was profitable by only $151 million and the Xbox made up $135 million of that, the Zune doesn't generate much profit for MS whereas the iPod is substantial money maker for Apple.

  • by line-bundle (235965) on Sunday January 25, 2009 @09:56AM (#26597735) Homepage Journal

    It was doomed from the start and here is why. Most MS products do not stand on their own. They are either riding on someone's coattails initially or shoved down people's throats (e.g. DOS and office and explorer). This is usually through corporate sales which a bribeable. Zune had to stand on it's own but had no legs.

    • by Alomex (148003)

      They are either riding on someone's coattails initially or shoved down people's throats

      There you go. They should have shipped a zune device with every copy of microsoft windows, and had they done so by now they would own the digital music player market.

      Zune had to stand on it's own

      That was their tragic mistake. The poor thing never had a chance. If only they had bundled it with windows. There's still time to bundle an XBox 360 with every copy of Microsoft Windows 7 though.

    • Zune had to stand on it's own but had no legs.

      Standing on your own without legs is no problem for Weebles [youtube.com]. So how should Zune have wobbled without falling down?

  • And as cherry topping to the Zune's EOB they need to shutdown their DRM servers along with it...

    What would again prove that they do not get how to deal with customers directly.

  • What the heck? (Score:4, Interesting)

    by kenh (9056) on Sunday January 25, 2009 @10:18AM (#26597851) Homepage Journal

    The idea of the original posting that since MS "only" sold $100M of the devices last year they'll leave the market? Or is it that they'll leave the market because the successful iPod line is eating their lunch? Or is is because we all agree the Zune isn't "cool"?

    MS has many lines of business that are under $100M in annual revenue, yet they continue on in those markets, despite not being #1 - I'm thinking keyboards, mice, MS Home Server, etc.

    The Zune is a fine piece of hardware, despite the recent bru-ha-ha over the particular model that couldn't handle leap year, and I suspect that MS will lower their investment in Zune hardware development, focus on differentiation on the software side, and (likely) focus on the "self-ripped" MP3 market (as opposed to the $0.99 per-song download market.

    A $100M revenue company selling MP3 devices that are tailored to the Windows platform should be a no-brainer, and I believe MS will turn it around. Having said that, my family has all iPods, despite most of our computers running windows...

    • Re:What the heck? (Score:4, Interesting)

      by spisska (796395) on Sunday January 25, 2009 @11:38AM (#26598293)

      The idea of the original posting that since MS "only" sold $100M of the devices last year they'll leave the market?

      According to TFA, Zune revenue wasn't $100M, the drop in Zune revenue was $100M, which is a 54% fall.

      By extrapolation, this suggests that last year's revenue was around $185M and this year's around $85M.

      MS has many lines of business that are under $100M in annual revenue, yet they continue on in those markets, despite not being #1 - I'm thinking keyboards, mice, MS Home Server, etc.

      That may be, but it's not a question of revenue but of margin. Keyboards and Mice (which MS makes quite well) are quite likely moderately profitable lines. But doubling profit on them (or elimintating them altogether) would have no effect on MS' botom line.

      There is no way the Zune is even close to profitable based on these sales numbers, and based on various figures that have come out concerning Zune development.

      It doesn't cost that much (relatively) to spec out, manufacture, and rebrand Logitech hardware. It does cost a lot to design, develop, distribute, promote, and maintain a device and platform like the Zune. $85M, or even $100M a year is not going to cut it, particularly when the market has spoken and given MS a much smaller piece of a rapidly growing pie.

      The Zune is a fine piece of hardware, despite the recent bru-ha-ha over the particular model that couldn't handle leap year [...]

      The Ford Pinto was also a fine piece of automotive design, despite the bru-ha-ha over the particular model that couldn't handle a rear-end collision without exploding.

      It's isn't that the Zune is a bad product or poor design. It's that it isn't cheaper, better, easier, faster, or more convenient than the alternatives. You can argue all you want, but the market has spoken quite clearly on this point.

      A $100M revenue company selling MP3 devices that are tailored to the Windows platform should be a no-brainer, and I believe MS will turn it around.

      This is a concept I've never been able to understand. Why on earth would someone want to make (or buy) a device that only works on one platform, when similar devices work with any?

      Particularly when there is little the manufacturer needs to do to ensure cross-platform compatibility. How much did Apple contribute to the development (or suppression) of Gtkpod?

      The fact is that MS' Entertainment (or whatever they're calling it today) division has been a money-sink from day one -- full of confusion, odd rebranding decisions, failed initiatives, conflicting projects, lack of focus, and several hardware fiascos -- most notably the XB360's red-ring-of-death and the Zune's leap-second crash.

      If I was a MS shareholder (and hadn't sold out long ago when they stopped performing), I would be apoplectic about a lot of these initiatives.

      There is a time to cut your losses, consolidate your position, and focus on what you do well. MS has never been able to do this and I doubt they will start now, although in the case of Zune (and probably MSN) it would be the wise thing.

  • If MS really wants to go for it, they have enough cash to ride out any downturn. They can re-tweak the Zune design till it clicks with the public.

    This happened before with Windows CE and Palm. Palm had a solid lock on the handheld market, but MS kept dogging them, and Palm kept screwing up, till MS overtook them in the market.

    This discussion sounds like pure pundit BS. I still find it hard to believe that MS chose to lay off staff, with all the money they have laying around. 'Tis the season, I guess
  • by sheldon (2322) on Sunday January 25, 2009 @10:43AM (#26597993)

    Seriously, I've been amazed at watching the ipod over the years. They came up at 40 gig and it was quite remarkable. I bought an 80 gig model about 2 years ago when they had introduced those. But now you go to the stores and it's hard to buy a classic. They are pushing the nano.

    That's usually the first sign of a product hitting it's peak in the business cycle. When they stop caring about the consumer, and start pushing the models which have the highest profit.

    If I were MS, I'd stay in this market. Apple hasn't changed the ipod fundamentally since they introduced the color screen and videos.

  • by Dystopian Rebel (714995) * on Sunday January 25, 2009 @10:57AM (#26598053) Journal

    "Gee, gone so zune?"

  • by pslam (97660) on Sunday January 25, 2009 @11:02AM (#26598089) Homepage Journal

    That means Microsoft have not only managed to damage to MP3 market to the extent that Apple "won", but now they're dropping out too. If I weren't convinced they were just short-term reactionary fools I would believe they had it planned all along.

    What am I going on about? Well, you see, back in the days just after iPod, Microsoft introduced this thing called PlaysForSure. It was a system to provide a variety of DRM options - single track purchase, promotion with timeout, monthly fee all-you-can-eat, limited play count, and so on. This in itself would have provided a superset of the functionality iTunes provided.

    (For the record, where I stand: DRM must die. Three times. Horribly. Preferably acid bath.)

    Sounds great, at least from a technical and business standpoint, right? Unfortunately, just to remind us that they're Microsoft, in order to get a PlaysForSure badge on your product, and to be allowed to use the system whatsoever, you have to pass certain certification processes. That includes making sure you have a good startup time, good inter-track delay time, fast database indexing, and so on.

    Still sounds great? Aha, but just to remind us they're Microsoft, they're the people that design the protocol, and they make damn sure it's near-impossible to actually implement a good player from it. The database updates and queries are so horribly defined you'd struggle to get good performance out of a proper SQL-like database running on a PC, let alone a tiny little device with 1MB RAM. The requirement to support PlaysForSure means you must use MTP protocol, which is another botched abortion of a protocol. It also requires that if you use MTP you cannot use Mass Storage, further annoying your customers and very neatly if "accidentally" meaning they don't work on Macs. And then there's the encryption itself which is so horribly over-the-top and poorly implemented (you MUST use Microsoft's libraries) that it badly impacts player performance and its battery life.

    So Microsoft screw the entire non-Apple MP3 market for a couple of years. Then they bring out their own PlaysForSure player. Except it's not PlaysForSure. You can imagine the language used where I worked (and presumably other companies). They decided that it was too hard to implement their own spec, so they make a player which doesn't comply to it. It's not even in the set at all - it's totally incompatible.

    After an electronics-generation of fucking up the non-Apple MP3 market, then screwing up their own solution, and now after (very likely) ditching Zune, they've basically done almost exactly the right set of steps to put Apple into a lead that will be hard to make a dent into.

    I stick with my decade old opinion that you don't partner with Microsoft - you watch your back.

    • by nine-times (778537) <nine.times@gmail.com> on Sunday January 25, 2009 @03:10PM (#26599975) Homepage

      So Microsoft screw the entire non-Apple MP3 market for a couple of years. Then they bring out their own PlaysForSure player. Except it's not PlaysForSure.

      Yes, I still have a hard time understanding what Microsoft thought they were doing there. They screwed all their partners there by destroying the idea of PlaysForSure, in that suddenly those songs wouldn't play, at least not for sure. Putting "PlaysForSure" on any product after that was a joke.

      I've also thought, in hindsight, that people have greatly underestimated the degree to which Apple hurt Microsoft with the iPod. Most people used to talk about the "halo effect", meaning people would like their iPods so much that they'd be interested in looking at other Apple products, but there were much bigger problems than that.

      Microsoft put a decent amount of money into developing Window Media formats, promoting them, pushing support onto every product they could, and selling media companies on the idea of DRM. Most people are quick to note that Windows Media gives Microsoft increased vendor lock-in, since they didn't provide or allow support for other platforms, but it did much more than that. It allowed them to create strategic partnerships with large media companies, and more importantly let Microsoft get their hooks into all sorts of other markets. If they owned WMA and WMA was *the* audio format people were using, then they could own the MP3-player market as well as the cell phone market for phones that would provide media capabilities. Likewise, it could give them an edge in competing in devices like consoles or set-top boxes that might include media-playing capabilities. Further, any embedded systems (e.g. computerized audio systems in cars) would potentially be forced to license the embedded version of Windows. All of these sorts of things apply for video, too.

      But apparently someone at Microsoft was snoozing and didn't notice that the iPod was growing in popularity. Since the most popular MP3 player didn't support WMA, it meant that people weren't going to rip their audio collections as WMA, and also they weren't going to be buying those DRM-wrapped WMAs. Since the only DRM they did support was one that no other online stores could use, the record industry was eventually forced to drop DRM, which then lead to an even bigger problem for Microsoft. The great selling point for WMA was that it allowed a nearly universal (except for on the iPod) DRM technology, and not much else. I can only guess that this damaged Microsoft's leverage with media companies, but more importantly it means that it doesn't make any sense to sell WMAs on online stores. The only sensible formats to use for online stores are MP3 and maybe AAC.

      Further, since people are much less likely to use WMA, the benefit of providing support in consumer electronics and embedded systems is virtually neutralized.

      Sorry for the random (and poorly organized) rant, but I thought it fitting to provide some context. It seems to me that the Zune really wasn't some random unimportant side-product for Microsoft, but rather a desperate attempt by Microsoft to rescue a lot of their work in developing control/lock-in in a variety of markets. I think that, if they're going to drop the Zune, they may be on their way toward abandoning the media dominance they've been chasing for several years.

  • by fermion (181285) on Sunday January 25, 2009 @11:14AM (#26598169) Homepage Journal
    It was all about DRM, and non compatible players, and near monopoly status. MS could not really complain because it has been playing this game for years, with, for example,the embrace and extend HTML. Then there is the random changes in format. This worked well for MS Office, as it forced everyone to move from one version to the next, but did not do any good for the Zune when MS decided that it would randomly develop a new DRM system and ignore playforsure. Then, as it was feeling the pressure of competition, it followed the drop of support for IE on Mac with the non release of Zune Drivers for Mac.

    So, MS only drivers, no Playforsure support and no Apple protected ACC support. Of course of this would have been a non issue if MS supported universal standards(a media player does not need customer drivers if it is just treated as removable drive) and if MS focused on DRM free music. In fact the primary driver that kept Apple in the forefront for so long is the music industry insistence on DRM and the computer industries support of that position. We will see how apple fares now that Amazon has cheaper drm free music, but I think Apple will be ok now that people are used to used going to iTunes.

    But I don't think that MS has to exit the market, just remember that the pupose of MS is to provide the low cost option. The Xbox is successful because it is the cheaper than a PS3, as the xbox has no HD media capability. The Zune is not cheaper than any iPod, except for the touch, so why buy it. If a PC were as expensive than the mac, how many people would buy it? Sell a zune for $100, and it will be on the top of the charts, just like the xbox. Or they could do something innovative and include wireless cell phone access, like the Kindle, and inlcude one year of subscription service. But that would innovative, not what MS does.

  • Just because "there were plenty of people suggesting Microsoft should just exit the Zune hardware business entirely," just because the Zune has nothing in particular to offer and is doing poorly, does not mean that they will exit the Zune business.

    One of the things I really admire about Microsoft is their tenacity and stick-to-it-iveness. If they think something is important, they'll stick with it and improve it with each release.

    I worked at a former Fortune 500 company that just didn't have this tenacity.

  • by gnalre (323830) on Sunday January 25, 2009 @05:06PM (#26601021)

    The zune was never going to be a the ipod killer that MS hoped it would be and it is difficult to see why MS entered the market.

    Basically if you are going up against the gorilla that is Apple in the ipod market, you have to have something that differentiates markedly. The only thing the zune had was the wireless sharing. However two problems with that. Firstly it was hopelessly crippled by MS usually DRM fan boys. Secondly it relied on enough mass usage of the zune so that there was a chance someday you might meet another zune user. If you took that away you were left with a nice MP3 player competing with all the other nice non apple MP3 players in a sea made by Apple. And remember an ipod is not just a music player but is the focal point of a whole industry providing ipod addons. Zune never had a chance.

    The question is what could compete with ipod? History has shown that it would either take a whole new technology shift(wireless music ???) or Apple to make a mis-step. So far Apple has shown they are not likely to do the latter, in fact you have to be impressed how they do not sit back and wait for the competition to catch up, but are constantly pushing the envelope. This makes it very hard to compete against. You only have to look how a few months after the zune was produced apple produced the itouch so totally changing the market before the zune ever got going.

    So what about MS. Probably what they should of done instead of spending millions on Zune was got into phones. Here they have a slight advantage in that their software runs the corporate world so if they made a phone that seamlessly connected then corporate world would probably buy a few.

    However even here they have a few problems. Firstly it would eat away at their mobile OS market, since they would be competing against the same people who buy there software from them at the moment. This would almost certainly push these same manufacturers to android and the like.
    Secondly MS hardware sucks. They just do not have the ability to integrate the software and hardware into one unit, in the same way apple do. This must be partly to do with their reliance on 3rd party hardware suppliers to do the hardware design, then having to fit their software to it.

    In the end of the day, MS should really concentrate on doing what it knows best, making operating systems for gray boxes

  • by Locutus (9039) on Sunday January 25, 2009 @05:46PM (#26601341)

    It would be a first for them to cut failing business which was created to keep a competitor in check. Microsoft has many money losing businesses, ones which lose billions annually but their purpose is not necessarily all about being profitable, it's about limiting the growth of the market leader. Windows CE was created to slow or stop Palm's growth beyond the PDA and Microsoft has lost over $15 billion on that. The Xbox was created to slow or stop Sony from growing the PlayStation market beyond the console and Microsoft has lost many billions on that. The Zune was created to slow the Apple iPod market and they've lost a billion or two on that.

    So with Steve Balmer still in charge and the Windows OS making up over 80% of Microsoft's profits and with huge profit margins, there is no history to show a willingness at Microsoft to cut any of these market protection based projects. Cutting the Zune would probably be the first one to be cut and not succeeded at its goal. IMO.

    LoB

  • by duckInferno (1275100) on Sunday January 25, 2009 @06:30PM (#26601735) Journal
    Any Windows 7 beta user will tell you that Microsoft are definitely capable of "cool". I fully predict Win7 to be a resounding success, both in sales and in actual performance and usability terms. This is personal, but I find it to be superior to OS X even in its current beta state.

    Success aside, the "coolness" of this OS could lead to a rise in the number of MS fanbois (yes they do exist). This, combined with MS's newfound "coolness" (assuming it persists), could just breath new life into their Joe Sixpack consumer products like the Zune.
  • by JohnnyComeLately (725958) on Monday January 26, 2009 @01:06PM (#26608877) Homepage Journal
    Just to piggy back on what's probably been said 3,000 times, but I've had the Zune and it won't really be missed.

    I bought it originally because I had a PC and I thought it might work well with MediaPlayer. I was right and I was wrong. Under the first version (I think 9) it worked ok, but once I upgraded to the suggested MP10, it was a huge pain. I think the video was originally a nice feature, but again, DRM made things a pain. I had music I legally owned that it wouldn't play.

    Then, of course, accessories were next to impossible to find. Want a rugged rubber case (like my zCover for the iPhone)? Not going to find one (at least not in your first 5 stores you visit). I walked into Fry's, which is a geek supermarket on steroids, and they have one shelf (back then). Now there's maybe a little more, but you'll find two AISLES of stuff for the iPod.

    When the iPhone came out, there was finally an iPod killer. Zune made a great try, but it's M$ after all. They had to keep corporate interests. Now my iPod Video sits on the shelf, while I go everywhere with the iPhone. I'm listening to it right now at work.

    One last thing killed the Zune for me. "Lock" doesn't. Yeah, I can't change songs, but the unit powers up to show you the lock symbol, which the iPod doesn't do. May not sound like much, but I make a 4 hour ride monthly on my motorcycle. With the Zune in my motorcycle jacket pocket, set to "Locked", the unit would die far before the end of my ride. The unit would get touched, power up, show the "locked" for awhile and then power down. I can make the 8 hour round trip with my iPod and iPhone set with the lock on.

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