Zune: Falling Down on Cool

(page 2 of 2)

Apple Customers' Loyalty in Doubt

In many ways it will be the same. The Zune will be tied to a single music store, the Zune Marketplace, and will be cutting RealNetworks' (RNWK) Rhapsody, Napster (NAPS), and others out of its little ecosystem, just at a time when it's increasingly clear to me that for the digital music market to grow, closed ecosystems like this will have to move toward interoperability (see BusinessWeek.com, 10/25/06, "Apple, Tear Down This Wall").

While Mac owners tend to be iPod owners too, and there's a good deal of evidence that owning an iPod tends to encourage switching away from Windows and to the Mac (see BusinessWeek.com, 6/15/06, "Apple's Growing Bite of the Market "), there's at least some evidence that consumers who own iPods don't necessarily bear terribly strong loyalties toward the product over the long term.

ABI Research recently found that of 1,725 adults surveyed, 58% of those who already own an iPod or other MP3 player said they'd consider buying a Zune in the next 12 months, after hearing about its features. Mind you, people don't always behave in real life the way they say they will in surveys.

For the Curious and the Haters

Additionally, I have problems with the methodology of the survey. I asked ABI analyst Steve Wilson if the results accounted for Mac users vs. Windows users. He said respondents were asked what kind of computer they used, but that the results were more or less equally distributed among them. But it's hard for me to imagine a self-aware Mac user who would consider a Zune as more or less equal to an iPod, mainly because the Zune won't work with a Mac. Still, I think the research suggests there's a market opening for Microsoft to exploit, but I'd argue that it's nowhere near as high as Wilson suggests.

There are some iPod owners—some frustrated, some simply curious, but all ready to try something different—who will try the Zune. And then there are the iPod-haters, like my friend mentioned above. For them, the best thing the Zune has to offer a potential consumer is that it doesn't bear the iPod name or the Apple logo.

And yet the iPod remains the hugely successful product, outshining its nearest competitors, such as Sandisk (SNDK), Creative, Samsung, Cowon, and others. And here is the reason I think the Zune will remain at a huge disadvantage: the cool factor.

Violating the Rules of Cool

Remember the three rules of cool, as documented by Malcolm Gladwell in The New Yorker almost a decade ago. First: The act of discovering cool causes cool to move on. If you accept that the iPod is still cool, as many still do, then the Zune can't help but seem an arriviste, an interloper, poseur product encroaching on well-defined "cool" territory. When the uncool discover a cool place, the cool take their business elsewhere. Microsoft's a little light on the cool bona fides, despite the Xbox 360.

The Zune will seem a not-pod, proving the second rule of cool: It cannot be manufactured, only observed, and then by those who are themselves cool. An iPod is a requisite accoutrement of cool. This is the result of a carefully constructed marketing effort on Apple's part. Any attempt that Microsoft makes to market the Zune will fall short of the high bar set by Apple, which has an almost natural sense for turning its ads into entertainment. Describe for me three Apple TV ads you remember from the last two years. Now, try to describe for me three Microsoft ads. Bet you can't. That's the Apple marketing machine at work.

Finally, there's the third rule of cool: You have to be cool to know cool. And since when is Microsoft cool? The iPod was cool from birth. The Zune will be seen for what it is: a me-too product that is expressing Microsoft's envy at not being cool. It will carve out its own niche of the market, but by this time next year, it will be considered a dismal failure.

Hesseldahl is a reporter for BusinessWeek.com.