Future of Microsoft’s Zune

Zune came on scene in 2006 when the iPod had 90% market share and was on pace to hit 100 million units. The Zune design was nothing short of an ugly brown brick of a device. Microsoft tried to differentiate the Zune by adding “the social” to the experience but the party was already over.

Apple had launched the iPod Nano a year earlier and the game was over. Apple’s unit volumes went up exponential and in no time,  everyone that was ever going to own a music device on the planet had an iPod. In Zune’s 2nd generation Microsoft started to get the software right and in many ways its superior to the iPod software but it seems too little too late. The puck is already shifting away from pure play music devices. 

At first you would think that this is a razor blade business. Sell the razor (hardware) for little to no profit and make all the money on selling razor blades (content and services). Except the paid content business is a horrible business. There is no money in that business, it just adds value to the device you are using. Apple makes all their profit selling hardware. So what is the future of Zune?

There has been a lot of specualtion that Zune will become a Microsoft phone. All of these rumors could not be farther from the truth. Zune is about the software. Its more of a strategy to compete with the growing dominance of iTunes than it is anything else. Microsoft needs a simple way to distribute software and services across the PC, phone, and TV. Right now Microsoft’s strategy for delivering digital content is extremely fragmented. For example, I cant get the same content on my Zune as I can on my Xbox 360. I also can’t easily share that content across other devices like my PC or phone. Microsoft has to fix this or they will never be able to compete with Apple for the consumer.