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Compete Blog: Can Microsoft's Zune HD challenge the iPod?

October 22, 2009

By Conrad Beickler

Through a special arrangement, presented here for discussion is an excerpt of a current article from the Compete Blog. Compete Inc. is a web analytics company that focuses on understanding how consumers use the internet.

Hopes were high when Microsoft introduced the Zune in 2006. As the first MP3 player to feature Wifi and an FM radio, the Zune stood out by allowing owners to share music wirelessly with other Zuners. The concept never took off; Zune adoption was limited, while Apple's iPod line continued to dominate the media player space.

In late September, Microsoft launched its new Zune HD media player. Rather than simply upgrade and refine the original Zune concept, Microsoft seemingly followed the lead of the iPod Touch, building the device around a 3.3 inch touchscreen, internet browsing capability and games/application downloads via the Zune Marketplace. Apple made a series of announcements in the week prior to the Zune's launch, including improvements to iTunes, the iPod Touch and iPod Nano, providing Compete with an opportunity to compare consumer interest in the two media player brands.

Had the Zune gained any traction against the iPod or had Apple's announcements of the prior week tempered enthusiasm for the Zune HD launch?

To further explore this I looked at Compete's data to see how interest shown by online consumers in the Zune HD during its launch week compared to that of the iPod Nano and iPod Touch in the weeks surrounding their recent upgrades.

The addition of a video camera to the iPod Nano resulted in a 700 percent week-over-week lift in traffic to Nano specific pages at apple.com during launch week.

Traffic to Zune.net, on the other hand, only saw a comparatively modest 90 percent week-to-week increase when the Zune HD launched.

What's far more damaging to the Zune HD's prospects is that the iPod Touch, which hasn't changed drastically since its redesign in September 2008, drew virtually identical levels of interest from online consumers as the entire Zune.net site during the first two weeks immediately following the Zune HD launch.

Whether a result of Apple overshadowing the Zune HD's launch, or the lack of a differentiating feature, consumer interest in the Zune HD has been lukewarm. With Microsoft's decision to discontinue all other Zune products that competed with the iPod Nano and iPod Classic, the Zune HD remains as the company's only bid to compete with Apple. If early interest is any indication, the Zune HD could have a tough time grabbing a significant part of the market.

Discussion Questions: Is there anything Microsoft can do to compete better in the media player category? Why has the iPod so been successful at outdistancing itself from competitors?

Can Microsoft's Zune HD challenge the iPod? - Compete Blog

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Comments:

Of course it can. The Zune needs cutting edge technology, innovative design and an incredible price. Apple clearly has some technology, lots of design and a lousy price. If MS will just recognize how important this is, they can clearly start to develop a product that is ahead of the technology curve, provides a much better technology set, with innovative styling and an incredible price. Better screen, higher resolution camera, WiFi, Bluetooth, mega memory for an incredible price (and a small, thin shape) and MS will have a winner.

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Kai Clarke, President, Miraclebeam Products, Inc.

Game, set, match. It was over a long time ago.

I fear the same fate for the Microsoft stores.

The company has jewels that go unnoticed (anyone here ever use mesh.com? It's really awesome. Ever taken a look at Windows Home Server? A great product), but seems unable to cede any space. While this worked 15 years ago with Internet Explorer vs. Netscape, it hasn't worked with the Zune or XBox or Bing.

Every company has to accept that it's not going to win every battle, and then move on.

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Paula Rosenblum, Managing Partner, RSR Research

I agree with Kai; price and cutting edge technology can revive Zune. Microsoft needs to think faster than its competitor.

Shilpa Rao, Retail Consultant, Tata Consultancy Services

At first glance one might think this is merely a battle over who has the best technology brains, but I think it goes much deeper and is more mysterious. Here's a test for you. Think of the word "energy." Now think "Microsoft"--and then think "Apple." Even PC users generally have to admit "Microsoft" emits much less energy than "Apple" or even "Mac." The greatest technology without this energetic spirit around it will fail and so Microsoft can add all the bells and whistles it wants and it won't catch up.

Apple is not home free however, because it can lose this magical energy very easily. For example, which airline comes to mind when you think "energy?" For most it's either Virgin or Southwest. My observation is that Southwest is working hard to keep its energetic spirit after being faulted for several violations.

The lesson for retailers is that if this energetic factor is missing in your operation, you can have a 95% off sale and it still won't move merchandise.

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Ian Percy, President, The Ian Percy Corporation

iPod's success over Zune has nothing to do with MP3 players or technology. I'm afraid Zune could do the dishes and walk the dog and it wouldn't beat the iPod. This is about the overall fidelity of the Apple brand. In fact, the harder Microsoft tries, the more distance Apple picks up.

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Doug Stephens, President, Retail Prophet

I chalk it up to 'perfection in the customer experience which led to a cult-like following'. Microsoft is unable and/or unwilling to develop products and systems that deliver at the customer level. Have you ever had a problem with Windows 3.1 or XP? Ever try to to get a hold of support? Ever try to get support from Apple?

As my friends and network slowly turn their back on Microsoft and its products, I am seeing a bigger scale revolt. They could include a full size black forest cake with each Zune and I don't think it will help them. My advice to Microsoft 10 years ago: focus on your customer. Those Apple commercials aren't just whistling Dixie.

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Doron Levy, President, TheMortgageMachine.ca

I agree with most of the comments, the iPod isn't just about superior technology--it's the user experience. Apple has tied it nicely to so many other avenues and put a holistic experience in one nice and very attractive little package. The iPod line isn't without its flaws but how many people line up for 48 hours in front of a store to buy a Zune?

Scott Knaul, Director, Retail Strategic Services, Workforce Insight

It isn't Zune vs iPod. It is iTunes. Who wants to mess around with reloading your media library? The Zune could be 1/2 price and I'm still not going to mess with it.

Plus, they came out with that horrible brown Zune right away...what was up with that?

tim esse, recruiter, Virtual Recruiter

Forget what Apple and Microsoft are selling for a moment and think about what the customer is buying...and what they're buying from Apple (well beyond technology, as others have mentioned) isn't offered by Microsoft: reliability, convenience, coolness, 'the best', and other benefits not associated with either the 'Zune' name or Microsoft. The game was over before it even began. I have no idea what Microsoft was thinking in the first place.

Kevin Price, President, The Market Performance Group, Inc.

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Compete Blog: Can Microsoft's Zune HD challenge the iPod?

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