Microsoft hints at Zune phone as market share falls

April 2, 2007

Microsoft hints at Zune phone as market share fallsA top Microsoft executive has hinted at a change of direction for the Zune, including the release of a Zune phone. According to a study by market research firm NPD Group, Zune’s market share of hard-disk-based media players fell from 10.2% in December, to 9.9% in January, to 8.7% in February.

According to NPD, much of Zune’s market share has come at the expense of smaller companies like Creative Labs, rather than Apple. In other words, the Zune has not turned out to be an iPod killer.

It should also be pointed out that hard-disk-based media players are only a small proportion of the overall media player market, with most media players using flash memory for storage rather than hard disks. This  means Microsoft’s market share of the total media player market is even smaller than it might appear.

An analyst from the NPD Group said he would give Microsoft a “B minus” for the Zune.

Despite the poor market share, Jason Reindorp, a Microsoft marketing director for Zune, told Computerworld that sales are on target, though there may be some changes in direction, including the introduction of a Zune Phone.

“We’re pretty content that they’re tracking how we’ve been spending our marketing money and where we are in the product life cycle,” said Reindorp.

“We’re looking at the introduction of Zune as being a matter of months and years, and not weeks and months. Stay tuned because we’re going to continue enhancing the design of the devices.”

Speculation about a Zune phone has been mounting since September last year when Microsoft executive, Chris Stephenson, confirmed that a Zune phone was a possibility. 

“As I said earlier on, the entire Zune platform and brand is about a family of devices. So to the degree that phones and other products exist in the family going forward, absolutely, that’s definitely where this is all going,” Stephenson told a news conference.

In February Microsoft lodged a FCC filing that seemed to foreshadow a new version of the Zune with broadband Internet access and VoIP. The FCC filing also indicated that versions of this new device might also be available from a number of other hardware partners, such as Dell and Hewlett Packard.

While Apple fans wait in excitement for the June launch of the much hyped iPhone, a Zune phone is unlikely to generate as much interest or excitement. It’ll be a brand extension for a brand that no one is particularly interested in.

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