Microsoft Plays a Different Zune, Admits to iPod Killer

"I agree that it's a possibility, although I doubt that it will be even that." In the short run, maybe not. But in the long run, the product may just be profitable. Also, at least initially, Microsoft will consider the product to be successful if it can achieve a substantial marketshare (15-20%). Market dominance will be part of their long-term strategy. Considering the amount of buzz the product is generating, if it's good and affordable, I think it won't fail. People will definitely compare this to the Origami fiasco. Origami failed because the product had a horrible battery life and it was way too expensive. Since, this time Microsoft is actually making the hardware too, I'm sure it'll be eager to avoid those mistakes.

"Because Apple/Mac fanatics *are* a niche market. They're just so vocal that they appear more numerous than they are." That's cute. The iPod, my fine friend, is not a "Mac" product. It is a cross-platform digital music player. It has its own fanbase outside the "Apple/Mac" cult that you deride. You might want to remember that the iPod was a raging success long before it went cross-platform...not just in terms of mindshare, but actual market share. That "niche market" that you sneer at had a lot of buying power and market influence. You might remember that even before the iTunes music store was available for Windows, it was taking names and kicking a s s compared to the anemic performance of (alleged) competitors such as buymusic.com. All of this speaks to a hunger for a good combination of design and performance. Since the market for digital music and players wasn't already locked in by a single vendor the way PCs are with Windows, Apple had a golden opportunity to shine. And they did. That's not to say they'll stay on top forever, but they got where they are today because they had a superior product, not because there were a lack of alternatives. There just weren't any *compelling* alternatives. We'll see if Microsoft can change that. So far, the much-vanuted "Windows Ecosystem" hasn't been able to do a thing to dent the iPod's dominance, which is why Microsoft is apparently going it alone. There's a lot to be said for that. Just ask Apple.

"Suppose more people continue switching platforms (as they've been doing)" Yeah, the competition had 0.2-0.3% growth over one year... At this rate it will take 75 more years of chipping away before MS would reach the 75% you randomly tossed out (and that's domestically as foreign marketshare has been largely stable). The MS platform will experience huge growth come 07 as a result of Vista... This has occurred for every Windows release since 3.1. During that period the relative sales percentages by competitors will drastically decline. Similarly, the competition receives sales boosts when they switch platforms. There was a similar trend from 68k to PPC, which did not result in any long-term gains. These boosts were also preceded by a decline in sales. MS is faring with the same problem as savvy consumers and volume purchasers are holding off until the next year. An OS release by MS has always been a major driver of sales. The competition doesn't see such huge boosts due to the seemingly yearly cycle of upgrades. The analogous spurts are the aforementioned platform shifts (which doesn't occur with the MS platform since it has been Intel-based since the beginning). Present day sales growth can't be attributed to anything other than a cycle. We'll have a better idea in 2008-09 how the market really looks because the period of transitional volatility (for MS and its competitors) will be in the rear view mirror. I'm not saying there couldn't be a fundamental realignment, but one-year does not make a trend.

Actually, I think the "Start something" ads are better than the current switch ads. Maybe I'm dreaming or maybe I'm biased, but I'm not a real big fan of the switch ads and I hate the mac guy in those ads. Microsoft's "Start something" ads seem more polished to me.

"Anyway, I'm always happy to see Microsoft flushing money down the toilet." Hmmm. What's the difference between you and "I am praying that Microsoft dies" Bonch? Anyway, Microsoft's idea is to have alternate sources of income before Windows and Office start to lose revenue. It's always good to diversify. If you put all your eggs in one basket, you'll end up like Apple in the 90s. "To me, MS challenging Apple in design and marketing is like the 12 year-old spoiled, nerdy kid whose parents buy him all the best football equipment money can afford. The kid still gets his a s s kicked on the field." We'll know soon enough who kicks whose a s s. Remember, Microsoft thrashed apple once already.

bdkjones: "Past performance does not predict future performance." Ignoring history also makes someone bound to repeat it. A prior trend does not mean it will repeat, but it is prudent to presume the pattern will be sustained. Discounting an event which has occurred twice isn't wise even though the potential exists for change. Making assumptions in the absence of facts is wishful thinking. Modern advances have blurred the ability to measure the market in simple terms. There is no known percentage of Apple hardware sold with the intention of being used exclusively as a "Windows PC". I know a couple people in that camp, but that doesn't indicate a broader trend. "It won't take 75 years if the switch rate increases." Your assuming the rate will increase is equally valid to my assuming it won't. This could very well be a short-term, one-off consistent with prior events and be a quiescent market over a broader period. In reality, I'm guessing that Linux users defect to the Apple platform. The platforms aren't entirely dissimilar, and despite the promise of open-source, it isn't paying dividends in the needed level of polish. The community provides incredible creativity, but that, in and of itself, isn't something you can bank on. MS would end up in the same place before and after any such transition. As for me, I'll use whatever tool gets the job done, and invest (stocks and skills) in whatever company enables my earliest possible retirement. That's my decision matrix in one sentence. Outside of work I don't invest in "trendy" things. I'm the type of person that buys a handmade watch that no one has heard of because I appreciate quality rather than social benefits of wearing a well-known Swiss timepiece. Everything outside MS is too "hip" and form-over-function for my tastes. I'm fine blending with the Windows user base since it accomplishes everything I need (and for the foreseeable future is the only thing that will be able to).

I take about as much stock in this new device as I do the "Origami" UMPCs (remember those?). Microsoft wants you to believe PCs are still the future. Oh, by the way, the X-Box is the future. Actually, it's UMPCs and Zune. This company doesn't know what it's focus is.

Mr. Lotsamystuff, Mr. Thurott was only quoting someone else. He just said it was an interesting article and neither agreed nor disagreed with it. Moreover, Mr. Thurrott doesn't influence Microsoft's decisions.

"Good grief...SIX refreshes to get a useable verification image? What gives?" Wow, I got two usable images IN A ROW! I'm thinking we could probably put our heads together and come up with a drinking game based on this predicament. Granted the last thing we need is a bunch of inebriated college students hanging around. You thought the discourse was already bad?...

"I find it odd that Microsoft would go after such a small market niche" If it is considered such a small market niche, why do the Apple/Mac fanatics laud so much praise on it? I agree with guru and orion...its irrelevent. A player is not the same as a PC. Each market has its own customer base and those customers will choose what they believe is best for them.

"All I said was the product may not fail. I never implied that people will "drop their iPods and get Zune players." Do you see the difference?" I think it's important to define "failure" here. If you are saying that Zune may be profitable, I agree that it's a possibility, although I doubt that it will be even that. But let's leave that aside and ask "How is Microsoft defining success or failure here?" Mere profitability? I think not, at least not in the beginning. The motivation here is clearly strategic. This is another attempt by Microsoft to expand beyond the computer software into the broader consumer electronic market. Microsoft is aiming at dominance, not at grabbing a small piece of the pie. As some Microsoft managers stated when setting out goals for the Xbox project, "Being a good #2 is not acceptable". If Microsoft merely manages to eke out a small profit with Zune but has a miniscule market share, the project will be deemed to be a failure by them.

"I don't think anyone's "lauding praise" on a market." At the very least, bonch is lauding praise on anything Apple does. In fact, in last week's rantings, he as much as admitted to having romantic feelings towards his Mac!!! Keep in mind...I think that Apple makes a good computer and a nice OS(in fact, I own a G5 iMac), but in the business world, MS and Windows still, and will continue to, holds a very substantial lead over Apple. But, as I've said before...they are only computers, and bonch cannot understand that fact. I have been reading Paul's sites for at least 10 years and I like this forum. I had never posted until last week when bonch's rants went beyond irritating. I wish that Windows IT Pro would add an ignore function to the comments section, so that we could all chose to have bonch's comments filtered out!! --tayme

"So far, the much-vanuted "Windows Ecosystem" hasn't been able to do a thing to dent the iPod's dominance, which is why Microsoft is apparently going it alone. There's a lot to be said for that. Just ask Apple." Yes. Microsoft's attempts at besting iPods have not met with much success and that's because it was all wrong. Of all Microsoft's partners, iRiver is the only one that makes products that can actually give iPods a run for their money. However, they lack the marketing muscle. clix was a decent product that failed because it wasn't promoted well. When was the last time you saw a clix ad? If Microsoft can make a good product and market it well, I don't see any reason why it should fail. In fact, if Microsoft can capture the non-iPod market, I think they'll be happy with that.

I have a nano. I would ditch it in a heartbeat if it can do what it says it will do. Hopefully it won't have that annoying "Do not disconnect showing forever when I connect to my pc. WiFi will be pretty cool.

My guess is that Microsoft doesn't like ANY market where Apple is the leader.

Remember that Microsoft has managed to sell 5 mn. Xbox 360s. If Sony continues to shoot itself in the foot the way it is now, Xbox may soon turn a profit.

Correction: first sentence: *Thurrott.

"there's no question of Thurrott being correct or wrong here. He never made any statement regarding this. As you mention, he was simply quoting someone else." You're partially right. I should have said, "If Mr. Thurrott's reporting is correct" (which I actually DID say in a later post.). Thank you for pointing out my error. BUT, you're wrong in saying Paul had no opinion. In fact, he wrote, "There's also some justification in believing that there's a point being made here. Cell phones, almost certainly, will surpass dedicated MP3 players (as they have cameras and PDAs). Has it already happened?" It's an interesting question, and a good one. Personally, I don't think cell phones will replace dedicated digital music players any more than they will replace cameras. It's irrelevant. They may supplement, but they won't replace, because the primary function of a cell phone is--and always will be--to make a phone call (something the carriers still can't quite master). Just as a good digital SLR takes a better picture than any cell phone, so does a dedicated digital music player perform better than a cell phone for its intended purpose (To wit: if you think battery life on your cell phone or digital music player is bad now, try combining the two). That's not to say they won't be popular, just underutilized. --- "If it is considered such a small market niche, why do the Apple/Mac fanatics laud so much praise on it?" I don't agree that it's a small market niche, and apparently, neither does Microsoft. I never said I agreed with the conclusions of Paul's reporting, I was simply pointing out that others are saying it's a small niche, and it's being reported as such. Clearly, Microsoft thinks otherwise. I don't think anyone's "lauding praise" on a market. That's a weird conclusion. Obviously, anyone who has an interest in the continued success of Apple Computer will be happy to see growth in this market, because the iPod ecosystem is a key component to their success.

I don't think we need to worry about MS making a profit on Zune anytime soon. The Xbox division has yet to hit black. And, if the reports of MS "buying out" users' iTunes libraries are accurate, the Zune division might get out of the red by 2025. The thing is, Microsoft is expanding into all these various markets with one HUGE assumption: The Windows/Office cashcow is secure; it will continue to bring in loads of money to MS every year. As a result, the company can afford to lose money in other markets. I'm not convinced that Windows/Office is as secure as Microsoft would like to think. Suppose more people continue switching platforms (as they've been doing) and Windows drops to, say, 75% marketshare - which isn't at all out of the question. That's a LOT of revenue that MS loses. Someday, they may find themselves in a sticky situation where Windows/Office revenue can no longer pay for the MASSIVE R&D of developing the next Windows version AND the huge lossess in non-core markets. Anyway, I'm always happy to see Microsoft flushing money down the toilet. When it comes to design and marketing, Microsoft can't hold a candle to Apple. Hell, HP had to hire ex-Apple marketing guys to get a decent ad campaign going! (Which, by the way, those commercials are pretty cool. Although I see no reason why the computer is suddenly "personal again." It's just another dull black laptop running XP.) To me, MS challenging Apple in design and marketing is like the 12 year-old spoiled, nerdy kid whose parents buy him all the best football equipment money can afford. The kid still gets his a s s kicked on the field.

nin55 -- read your paragraph again, except instead of thinking about Zune, think about the Xbox. Your paragraph, nearly word for word until the last sentence, could apply to the Xbox situation a few years ago. And look at the Xbox 1.0. It was a success. Sure, it may not have made them any money, but as far as the market is concerned, it was very successful, especially for a 1.0 product. And since the Zune is being designed/produced/marketed by the Xbox division, I think we can expect good things from the 1.0 version of Zune.

" don't expect him to "agree tor disagree" with it; that is not a reporter's job. Paul is a respected tech journalist, and as such, his reporting carries weight. His decision to cover this story and give voice (and credence) to an otherwise largely irrelevant website is very interesting." Yes, Thurrott is a reporter, but on his blog site, he has the freedom to express his opinion too. And although he posted this article, he never did express his opinion on it. All he said was that he found it interesting. So, once again, there's no question of Mr. Thurrott being right or wrong because he hasn't said anything.