RSSMicrosoft Matches iPod Price for Zune
By Ed Oswald | Published September 28, 2006, 11:29 AM
As first confirmed by BetaNews earlier this month, Microsoft said Thursday that it would match the price of Apple's 30GB iPod, and lower the price of its Zune portable music device to $249.99 USD. The announcement means that Microsoft will now lose money on every player - at least initially.
Sources told BetaNews in mid-September following Zune's initial official announcement that pricing and availability was pulled at the last minute due to the surprise cut in price of Apple's hard-drive based music players. They also said at the time that Microsoft would match the iPod's new price.
Microsoft confirmed this, along with announcing that the player would be made available starting on November 14. Songs in its Zune Marketplace music store will sell for 99 cents, while subscriptions to the service would be available for $14.99 USD per month.
Scott Erickson, senior director of product marketing for Zune, said that the player is part of a "multiyear strategy," acknowledging they would use the Zune as a loss leader.
With Microsoft's music player now selling for less than it costs to build -- as a company spokesperson told Reuters -- the company has two products on the market that are losing it money rather than generating profits. The Xbox 360 costs $100-200 more to build than it is sold for, and while a teardown of the Zune is not yet available, Microsoft has admitted it is looking at a "multiyear plan" to be profitable.
"Hard to see how they're making money at $249," JupiterResearch analyst Michael Gartenberg said. "They can't be getting the volume discounts Apple gets and that larger screen and WiFi all add to the bill of materials."
"The key, I suspect, was not being undercut by Apple and if they need to lose money on Zune to build market share, they will, much as they have done with Xbox," Gartenberg added. "For the moment, price against Apple will not be a factor."
While much of the specifications between the two devices are quite similar, it is the Wi-Fi connectivity that sets the Zune apart. The player will allow people to share pictures and music -- on a limited basis -- with each other over the wireless connection.
Apple has been said to be working on similar functionality, but it has not appeared in any of the company's devices as of yet.
"On Nov. 14 we're delivering not only a device, but a shared, social experience that will be shaped by the collective imagination of consumers," said Chris Stephenson, general manager of global marketing for Zune.
Microsoft wants to compete in this space aggresively but not in a stupid manner it is a pin in the side of apple isn't it? Apple has always innovated and come up with exciting products and features Microsoft wants to steal apple's thunder.
Microsoft can copy but I doubt this will be another windows vs mac os saga. Apple ownes the industry for portable music/video players and it is fairly mature market. Apple has an image that no one else can compete with even with the marketing power of windows itself I don't think microsoft will gain any ground. At least nothing significant. Also is apple losing any money on the player? I don't think so, microsoft will be losing alot and they know this, for no reason other then to take those few million away from apple.
I do believe however creative will be going under or pulling out of the market completely. That is the only real affect it will have.
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|Perhaps not - Creative is in an alliance with Apple now, post-lawsuits. It's possible by picking up Apple support they'll remain in the market a while longer.
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|what is the battery life going to be like with the wifi?
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|Think iPod/3. Still, most of the time I imagine the WiFi function would be inactive... or at least I hope that's the case.
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|Microsoft should come up with a trade up program for iPod owners. I think that I would gladly send MS my non video playing 4GB Nano for say a $100 or so Zune as long as i could convert my music to the Zune format.
Some kind of program like this would be a good way to take customers from Apple and Itunes quickly.
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|For the most part, people who to legally buy music online already have an iPod & use iTunes.
Unless MS can give people the entire library of whatever they've bought thru iTunes, there's not much incentive to change.
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|You nailed it. But of course, the question is, out of all the iPod owner, how many really buy from iTune?
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|"But of course, the question is, out of all the iPod owner, how many really buy from iTune?"
Quite a damn lot.
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|Actually, there was a study recently (I wish I could remember where) that stated that most iPod users get the vast majority of their music from CD ripping.
Apparently iTunes sells a lot of music but it's still a drop in the bucket compared to ripping from CDs.
Of course it's easy enough to strip the DRM from iTunes aac files and convert them to mp3, but there is a slight degredation from an already compressed format.
I only use iTunes to download music very rarely. With cheap CD clubs why would anyone regularly buy DRM crippled compressed files that are mere shadows of high fidelity CD content - and at almost the same price?
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|"For the most part, people who to legally buy music online already have an iPod & use iTunes.
"
That's ridiculous.
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|Go figure.
Never understood why anyone would buy anything like that to begin with, it's even worse when considering that a real cd almost costs the same.
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|"Never understood why anyone would buy anything like that to begin with, it's even worse when considering that a real cd almost costs the
same."
I guess you would have to ask one of the 10.5
million purchasers.
They have already sold over 1 billion I-Tunes.
Not exactly chump change..
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|Microsoft initially losing money on a product in order to establish market position...
hmmmm...sounds familiar. Remember the XBOX?
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|.... and the 360
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|Or any console for that matter. :P
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|"Songs in its Zune Marketplace music store will sell for 99 cents
with the rate announced by MS of about
80 cents per 100 points
and each song costing ACTUALLY "79 points"
i dont think the stated "99 cents" price is accurate ....
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|It's a motivation to get Microsoft points, since those are acquired through using other MS services. They'll just take the hit on the 20 cent discrepancy. If their other services are getting used then it's totally worth it to them.
I'll be curious to see how the whole system/player pans out with the public. I for one would like to give it a try. I'm kind of fed up with my iPod.
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|i hear ya, my ipod is more like a paper weight now, and its my second one, dont think i am going to get anything like it for quite some time, i will deal with my cd's
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|A couple of questions. Will Zune have built in crashability? ( A must as it's what Windows users like ) And, like Windows itself, will each successive reincarnation of Zune be worse than the last. If Microsoft can succeed in turning out crap like that, I see no reason why they shouldn't gain 95% market share very quickly. It's what the market likes.
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