Microsoft is to discontinue production of the Zune media player due to poor demand and will shift its focus to putting Zune software on smartphones and other devices, like consoles, instead.
The Zune was calculated to be Microsoft’s answer to the iPod and its online purchasing system aimed to rival iTunes.
While Zune software has successfully integrated with products built on the Windows Phone 7 operating system and Xbox 360 consoles, unfortunately for Microsoft Zune media player, devices failed to achieve the same wow factor as the iPod.
According to NPD group, the iPod led the market for media devices last year with a 77pc marketshare while the Zune had less than 5pc.
Nevertheless, Zune technology works and Microsoft seems intent on keeping the Zune ecosystem alive. And why not? It works perfectly on smartphones and consoles and is in effect a fine platform for distributing music and films.
The strategic mistake with the Zune
The key strategic error Microsoft made with the Zune was spending too long in North America before even attempting it elsewhere. As a result, the Zune was never allowed to flourish in markets where it might have achieved considerable success.
Microsoft did not make that mistake with the Xbox 360 nor the Kinect wireless controller, which sold globally and last week entered the Guinness Book of Records after selling 10m devices in just 60 days, outstripping sales of the iPad and iPhone in comparable periods.
The key lesson here is when Microsoft decides to do something unique as opposed to competing with an already successful technology – the iPod was introduced by Apple in 2002, the Zune entered the fray in 2006 – it can own a market.
At the same time, I can see synergies for the Zune ecosystem for distributing content that sits wonderfully in smartphones and consoles, so the game isn’t over for Zune yet.
And perhaps the episode has instructed Microsoft’s thinking in terms of platforms like the Windows Phone 7. Instead of trying to make its own hardware in the same way Apple has, forging alliances with handset makers, most notably Nokia, to allow the ecosystem to grow unhindered might just work.
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