Five reasons Zune won’t seriously challenge iPod

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  1. The 30 GB Zune will be priced at $249 to match the 30 GB iPod, but while Apple makes money on every iPod sold, the Zune is priced at a loss to Microsoft. Even if the Zune was to take off, Apple could lower prices. Where’s MS to go?
  2. Apple’s iTunes store is simple. Want a song? Pay 99¢. Want an album? Pay $9.99. Microsoft instead relies on “Microsoft Points” (MSP). In the U.S., a point is sold for 1.25¢. While some advocate for the elimination of the penny, MS seems to think consumers will like to think about fractions of cents. So, a song in Microsoft’s store will cost 79 points, and album 700 points. Consumers will have no idea what that means.
  3. Touted as the killer feature of the Zune is music sharing over Wi-Fi. This is an application that relies on network effects. For this to be compelling, you need to know at least one other person that has a Zune. More likely, you’ll need to know many other people that have Zunes before the sharing feature becomes a selling point. In contrast, you didn’t need to know anyone else with an iPod to enjoy yours.
  4. Compared to the 30 GB iPod’s 14 hour battery life, the Zune gets 12 hours with wi-fi turned off. I haven’t seen anywhere how much the wi-fi eats, but wi-fi is a very power hungry application.
  5. Finally, the Zune was designed in Redmond. It comes black, white, and brown.

Sep 29, 2006 | Comments

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