RSSMS Pulled Zune Pricing at Last Minute
By Ed Oswald | Published September 18, 2006, 5:03 PM
At least one analyst suspects that Microsoft decided to forego announcing pricing of its Zune music player at the last minute due to the surprise announcement last Tuesday that Apple would drop the price of its smallest hard-drive based iPod to $249.
This seems to match information obtained by BetaNews over the weekend, which indicated that Apple's announcement caught Microsoft by surprise. The issue created an awkward situation for the Redmond company where a product was announced, but without any kind of retail pricing or availability guidance.
Sources within Microsoft indicate that the company is taking a "we will not be undersold" approach in its pricing structure, and was likely to announce a price that was either the same or lower than that of a comparable iPod. Undercutting the iPod is a major goal of Microsoft's upcoming effort, say these sources.
American Technology Research analyst Shaw Wu echoed such reports on Friday, saying that the firm believes "Microsoft is re-thinking its pricing strategy amid potential wider losses to stay competitive in the marketplace."
The iPod's new low price throws a wrench into Microsoft's plans. The company now needs to decide whether it can afford taking a second large financial risk by sticking to its previous pricing strategy, or hope its increased feature set can buoy the Zune at a price equal to or slightly higher than the iconic iPod.
Microsoft is already losing as much as $100 to $200 per Xbox 360 shipped, according to teardowns of the unit, but those losses are sometimes offset by game sales. In this case, consoles are usually seen as "loss leaders," which allow for faster adoption of the console and allows a broader audience to afford the product.
Things are different in the digital music realm. Save for iTunes, music stores have made very little in the way of profits due to the high royalties the services are forced to pay the record labels. Thus, these services need to sell substantial amounts of music in order to make any kind of considerable profit.
It is unclear if Microsoft executives or its shareholders would approve of yet another device that would lose the company money. However, sources said to expect the Zune to come at a price that is comparable to that of the iPod, even with the price drop. What that pricing may be is yet to be seen.
Requests for comment from Microsoft went unanswered as of press time.
Funny the strategy that M$ is taking is very similar to one that was taken by Commodore back in the early and mid 80's thus sparking the original console war with Atari. I wonder how this one will turn out.
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|Microsoft trying to 1up Apple...
ZOIKS! Apple just 1up'd MS... haha
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|Microsoft already plans to make a large investment in Zune in order to gain marketshare, so knocking the price down to undercut Apple's new iPod prices shouldn't be a tough decision.
I just hope they don't count on the wireless feature as offsetting the need to undercut iPod pricing. Wireless will appeal to early adopters but they need to entice everyone to go Zune.
- Harvey
www.Zunerama.com
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|Dear people buy Archos, I wonder how many people look at a brand names only instead of quality/pricing/usabilty.
www.archos.com
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|Although I think the Zune has some nice features, you are so right, the Archos is the way to go. Let the suckers keep their iPods while we have the best of the best. Bigger screen, better battery, free content - forget it... preaching to the iSheep is a waste of breath.
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|Yep, how dare iPod users value ease of use and a simple integrated music store over clunky software and relying on piracy to fill up a music player.
Sometimes I think that the real sheep are those who are irrationally anti-iPod.
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|Dealing with Apple or MS's implementations of DRM is a classic example of "ease of use", indeed.
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|While I'm not a fan of DRM myself, I've watched my kids and their friends using iPod + iTunes - reality is, as far as they are concerned, it works just fine.
The understanding of the pros and cons of DRM is not something the average person considers.
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|You had difficulty opening iTunes and clicking the "Authorize This Computer" menu option?
I am stunned.
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|What would iMilk be like?! Don't forget about OH!-range Juice.
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|although this sounds bad to some, ultimately, the consumer will have the best benefit to this, with both the heavy hitters bringing what they have on Christmas, what a good time to be in =)
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|Microsoft should just sell the Zune for $10 and kill that infernal iPod. And anything else that has a name starting with a lowercase i, e, or x. Unless somebody makes some extreme breakfast cereal to go with my iMilk and x-toast. That would be acceptable.
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|I was thinking the same thing, but for $1. It's not like M$ need the money. If they did that for a year they would cripple Apple and every other company out there.
And best of all I get a Zune for $1, hell I might just splurge and buy myself 20:-) LMAO
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|Microsoft will do anything to compete with odds are against them markets. Even run their entire company into the ground if it meant it would hurt another "competitor" in the process.
Microsoft knows that Apple is a threat in the pc market. Now at 1-2 percent of the market it doesn't seem like much. However now that apple has switched to the intel processor it is only a matter of time before oem's will give a choice between mac os and winodws or linux. So microsoft needs to weaken them by any means necessary. Microsoft knows Apple's primary revenue stream and market icon product is the Ipod. Take out the ipod, they take out apple's primary revenue stream. They weaken apple and hopefully will become victorious in a market dominated by their long time rival since the beginning of computing.
If I was a stock holder I would sell immediately. Microsoft doesn't know who it is or what it is here to do. They make off the wall decisions because they have no idea what to do with all their money. They finance products that are completely worthless as far as money making potential. Now what does everyone say a company is supposed to do? That is make money, so what is the point of this move? Weaken their nemsis, that's the only point possible. let's not forget they are screwing countless companies that support play for sure.
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|Yeah. That xbox didn't sell worth a crap either. Neither did Live One Care. Stupid investments.
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|I wonder when they'll have the launch when they actually release the product.
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|i did post this before right ??
i did mention MS should've lowered its prices ??
________
i almost feel my post to be pointless
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|Right on!
www.ZuneBoards.com
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|How could Microsoft not see this coming? Apple intros new devices every year, predictably, and lowers the price. They pull lower capacity products all the time, feature upgrade, etc.
Looks like Microsoft is thinking like a follower in this case, not a leader.
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|My guess is that Microsoft had intended on announcing prices very similar to the updated pricing model of the iPod in hopes of undercutting them by about $50. Now that the price of the iPod has fallen significantly, Microsoft must rethink if simply matching the iPod's price will be sufficient or if they will have to reduce margins even more in order to beat Apple on price. Either way it's a gamble and it's definitely not a no-brainer.
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|"Looks like Microsoft is thinking like a follower in this case, not a leader."
Well, at least they're being consistent. ;-)
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|It'll be interesting to see if they make the Zune a "loss leader" too...
It's not beyond the bounds of reason, after all. With all that money they can afford to keep running competing businesses into the ground in any new area they choose to enter. It's a shame that the concept of "leveraging a monopoly" being wrong hasn't established more of a following in the US.
Of course, if they did ever do this, how long would the prices stay low when the competition was gone?
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|"Of course, if they did ever do this, how long would the prices stay low when the competition was gone?"
iPod ever gone? :P
I doubt that would ever happen when it's the leader of portable media players sales all around the world, and Microsoft is entering the market years late.
What they can achieve is taking a piece of such market and profiting from it, but it seems that's even hard to do that now with the prices war that started before they even released something. Way to go to Apple!
And no, I would never buy a media player from Apple or Microsoft. I prefer other more cheap and open solutions.
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