Summary
In my opinion, Zune has an uphill battle to try and capture the digital music market from Apple. Zune has significant challenges that will be very hard to over come. The primary challenge is a powerful thing called "brand" that drives every mass market trend and wallet.
Analysis
Apple, iPod, and iTunes have become the only brand that matters to consumers. No matter how hard Zune or any other competitor tries they will not become relevant to the masses anytime soon regardless of new features that may or may not been a benefit to consumers. One must remember that it is not always the coolest or best technology that wins the hearts souls and wallet of consumers but rather pop cultural trends. In reality is HD radio really that important to a music consumer who has their music in a database? Why listen to radio, which is unpredictable when you can create your own playlist from your favorite tracks.
Let’s face it, Microsoft has not been successful launching many new products. They failed multiple times in multiple areas, Let’s not forget failures to capture the search market, mobile phone platforms, music distribution/consumer sales, and the list goes on. With all of Microsoft’s capital they can’t seem to become relevant to the most important group, the pop cultural trend setters. Simply put, nothing Microsoft does is “cool” or trendy which in the music space is a key component to success. It is hard to argue that Apple is cool and has created stylish products and mechanisms to acquire music that is easy and quite honestly kind of fun.
Microsoft is and will continue to succeed with MS Office, Explorer, and Operating Systems and have proven not to be able to innovate products or software that capitalizes on consumer’s hearts and hunger to be cool. The fact is apple’s music products work, are widely used, and are more stylish and thus accepted by the masses.
Price is not highly relevant when it comes to what people want vs. what they do not. Would you rather spend $299 for what you want or $219 fro something that may cause your friends to give you an odd look as if to say you’re not “in the know”. Yes, the Zune device may work great but the world is an iPod world. Have any of you ever seen a 14-28 year old listening to a Zune? I can't say I have. The only Zune I have seen in use is the one that was given to me by a friend. I used it for about 2 weeks to cure my curiosity but quickly went back to my iPod because it was just more user friendly and familiar.
Many technologies have been created that were better than or had more features the one that in the end won the market and consumer wallet. A better product does not always mean a market place win and in this case Zune will not gain share simply by adding HD radio and touch screen navigation. They must become brand relevant to gain share and Microsoft has not proven they can do that. Yes, it’s appears to be a better Zune but in no way is it a device that can take share from Apple. The new Zune is a “me too” at best. In fairness I must preface this analysis by saying that I have not had the device in my hand and thus this analysis is from a market perspective and not a product review. Good luck Zune.
Alan Cohen consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
