Microsoft Speaks Up About the Zune Player

After taking much criticism of their latest product, the Zune Media Player, this week Microsoft spoke up about some of their plans for Zune and how this year is just a beachhead, or first landing, so to speak. They expect to sell 1 million players be the end of the fiscal year, June 2007, which would give them somewhere between 10 to 20 percent of the market currently enjoyed by the Apple iPod, which is not too bad of a first year. They also mention that some of the features that they don’t have compared to the iPod are ones that most users don’t use much, and are ones that they will be adding as time goes on.

Assuming that happens, Zune isn’t a total wash, as the number one non-iPod product in the over-$200 MP3 player market during last year’s holiday season only sold a tiny fraction of that amount. It’s also worth nothing that Zune went from the first whiteboard scribbles to finished product in about 10 months, a monumental feat for a company that isn’t particularly well know for moving quickly.

The key to Microsoft’s decision to make the Zune, I was told, is that while Apple controls 75 to 80 percent of the overall market for MP3 players, Apple completely controls the only parts of the market that make money (i.e. large capacity MP3 players). For all of its work creating the underlying technologies for the PlaysForSure initiative, Microsoft watched as its numerous hardware partners, collectively, managed only to steal tiny amounts of share in the low-end flash memory player part of the business. This is not a sustainable business model, I was told.

This holiday season, then, is a “beachhead” period for Microsoft, during which it is trying to change people’s perceptions of the MP3 market from “Apple and everyone else” to “Apple and Microsoft and everyone else.” From this perspective, the company has been somewhat successful. Despite lukewarm reviews, the Zune is a hotly debated topic among influentials. Looking forward, Microsoft intends for Zune to be profitable in 12 to 24 months. “This is the fuel we need to go after Apple on a long-term basis,” I was told. Source: WindowsITPro

They plan to launch and ship many updates for the Zune player and will be adding new devices with more unique features. They are currently readying the first update for some bug fixes and things current users will appreciate, but this update does not contain any new features, especially the one everyone wants, more WiFi stuff baby.

Microsoft is also readying its first software update for the Zune. The update will allow the Zune to work with Windows Vista, Microsoft’s just-finished operating system, which is now available to businesses and goes on sale to consumers in January.

The Zune software update, which is expected before Christmas, will fix some minor glitches and add some performance and other improvements, Microsoft said. The company won’t include major new features in the release, however. Source: News.com

Bill Gates said they are just going to do media, they are going to do more, and they expect to spend several hundred million dollars to develop and market the Zune Media Player.