Posted by: Stephen Wildstrom on December 7, 2006
A story by my colleague Jay Greene describes Microsoft execs’ happiness with the initial sales of the Zune handheld media player. But I suspect the sound out of Redmond is mostly whistling past the graveyard.
Zune hit number 2 in retail sales among music players during its first week on the market, according to data compiled by market researcher NPD, but fell back to #5 in the week ended Nov. 25. Data from Amazon.com suggest a bleaker picture. On Dec. 9, the black Zune (Amazon counts each stock keeping unit, or SKU, as a separate product) was the 60th most popular consumer electronics item with Amazon customers. That’s a good performance only in comparison with the brown Zune, which ranked 292nd, and the white model at 423rd, suggesting that if you want to sell a white music player, it had better be an iPod.
The best selling Zune was outsold not only by 13 iPod models (which accounted for 4 of the 5 most popular consumer electronics items) but by five non-Apple music players. The SanDisk Sansa M240 was the hottest of the un-iPods at #6.
Of course, given Microsoft’s deep pockets and staying power, it would be a serious mistake to write off the Zune this early. The company has yet to launch a serious promotional effort behind the player; instead Microsoft’s Devices & Entertainment unit has been putting its marketing heft behind Xbox 360 in its battle with the Sony PlayStation 3. This makes sense, since Microsoft has product to sell and Sony doesn’t.
Still, I have to believe that Microsoft expected a better launch than this for Zune. And the future is clouded by evidence that Microsoft is having a really bad time winning content owners’ support for the new platform. The get music from NBC Universal into the Zune Marketplace at launch, Microsoft had to agree to a precedent-setting deal that will pay Universal a royalty on every Zune sold. And there’s still no movie or television content available for download, negating the big screen advantage Zune has over iPod, at least for the moment.