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Apple's video iPod pricing catches Microsoft by surprise

post #1 of 107
Thread Starter 
Microsoft on Thursday official unveiled its Zune digital media player but refused to provide pricing details, likely because it was caught off-guard by Apple Computer's aggressive new pricing on its video iPod line, one Wall Street analyst says.

"Microsoft formally announced its Zune portable media player, with specs in-line with Toshiba FCC filings," American Technology Research analyst Shaw Wu told clients on Friday. "However, pricing and timing were not revealed likely because our sources indicate that Apple's aggressive pricing at $249 for its new 30 GB video iPod took Microsoft by surprise."

It has long been rumored that Zune, which also features a 30GB hard disk, would retail for $299. But Apple's unparalleled component supply pricing is allowing it to price new iPod models at levels in which no other corporation could both compete and turn a profit.

"We believe Microsoft is re-thinking its pricing strategy amid potential wider losses to stay competitive in the marketplace," Wu wrote in his note to clients.Â*"We remain underwhelmed with the much-hyped Zune, which is essentially a repackaged Toshiba Gigabeat, with limited differentiation vs. existing Windows Media devices.

Still, the analyst believes Zune will likely see some modest success due to Microsoft's vast resources and strong brand name. However, he expects this to come at the expense of its Windows Media "partners" including Creative, SanDisk, Sony, Toshiba, Samsung, iRiver, Archos, and others.

"Interestingly, Microsoft also hinted that it is working on a Zune cell phone (no timing announced)," Wu added. "We are not surprised by this as we believe that all PC vendors will likely participate in the cell phone space over time due to ongoing convergence in computer and communications technology."

In a research note released earlier in the week, Wu said he was both impressed and surprised by the progress Apple made in the key iPod areas of battery life, higher resolution video, and user interface. He said these enhancements to the new iPod lines will further distance Apple from its competition.

"To us, battery life has been the central issue with the previous video iPod and also in the development of its next-generation widescreen video iPod," Wu wrote.Â*"With the advancements in battery life of over 70 percent (30 GB video iPod moves to 3.5 hours from 2 hours, 80 GB video iPod to 6.5 hours from 4 hours, and nanos to 24 hours from 14 hours), we believe Apple is one step (or perhaps two steps) closer in adding widescreen and/or Bluetooth capabilities."Â* The analyst added that he now has higher conviction that those capabilities will show up in a device some time during the first half of 2007.

Wu reiterated a "Buy" rating on Apple shares with a price target of $91, saying the company's competitive advantages and growth prospects remain amongst the strongest in large-cap technology.
post #2 of 107
Priceless.

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #3 of 107
oh god, a zune phone, what the hell is that going to look/be like. just give up M$.....
"i find that if you keep talkin', your mouth comes up with stuff..." Karl Pilkington
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"i find that if you keep talkin', your mouth comes up with stuff..." Karl Pilkington
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post #4 of 107
"However, pricing and timing were not revealed likely because our sources indicate that Apple's aggressive pricing at $249 for its new 30 GB video iPod took Microsoft by surprise."

ms gets caught with its pants down and drops a brown zune
post #5 of 107
Quote:
Originally Posted by mbaynham

oh god, a zune phone, what the hell is that going to look/be like.

It'll be mauve or possibly taupe.
post #6 of 107
Microsoft is no stranger to loosing money.

They have done it several time before loosing money with a product using their size and wealth to push the product until the competition simply gives up.

This strategy so fat has had some success in gaming consoles, but Sony is still the leader.

It'll be interesting to see what happens with mp3 players.
post #7 of 107
Quote:
Originally Posted by iconsumer

"However, pricing and timing were not revealed likely because our sources indicate that Apple's aggressive pricing at $249 for its new 30 GB video iPod took Microsoft by surprise."

ms gets caught with its pants down and drops a brown zune

LOL!!
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jp ferreira: in my life..
http://www.jpferreira.com.br

ayala!goebb comunicação + negócios
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post #8 of 107
poor Microsoft...
they were taken "by surprise"...
booo-effin'-hoo...

that's a W for Apple
a big L for M$.

jtblq = jetblack in Ascarian
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jtblq = jetblack in Ascarian
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post #9 of 107
Quote:
Originally Posted by TenoBell

This strategy so fat has had some success in gaming consoles, but Sony is still the leader.

It'll be interesting to see what happens with mp3 players.

We probably won't know until next summer. I see Zune being around for quite some time, likely cannibalizing the existing Windows Media market before making any impact in the overall digital player market. Microsoft can afford to push this at a huge loss. They want to dominate any market they enter quickly. While Sony may still be the leader in consoles, the recent missteps in the previews of the Playstation 3 could indicate some erosion. The Xbox could well dominate consoles in another year.

Wireless file sharing is an interesting feature, and I wouldn't mind seeing that in the iPodiverse. But, like 90% of the features in Word, it may be tedious.
post #10 of 107
Quote:
Originally Posted by JTBLQ

poor Microsoft...
they were taken "by surprise"...
booo-effin'-hoo...

that's a W for Apple
a big L for M$.


As much as some want to root for Apple; Microsoft is huge. Like a previous poster stated this is just the beginning. Zune will be around for a while. This is good as it **will** keep Apple on the cutting edge of the digital portable market; otherwise they risk losing their profitable of the marketplace.
2.0 GHz Macbook, 2 GB RAM, 250 GB HD
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2.0 GHz Macbook, 2 GB RAM, 250 GB HD
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post #11 of 107
It would have been interesting if MS had done their introduction first. If this article is correct, then they would have come out with pricing, and perhaps the rest of the features.

If that had happened, they would have had a dilemma.

If their pricing was substantially higher, they would have either had to keep it, or would later have to drop it.

The problem there is that the higher prices will be a definite damper on sales, but dropping the price would be a public confession that they could not compete at the original price. Neither way would be a good way to start a campaign.
post #12 of 107
Well, it took MS 9 years to approximate about 80% of a palm ... so good luck to you MS ...

(review tidbits of recent MS PDA phones ...)

Word & Excel open and work better on the Palm ...

It takes 3 menu choices to select SPEAKERPHONE ...
post #13 of 107
It's true that Microsoft takes a loss on many (most except for Windows and Office) products. They can afford it. But that doesn't mean MS always "wins"--they OFTEN bail out of a failed market.
post #14 of 107
Quote:
Originally Posted by aegisdesign

It'll be mauve or possibly taupe.

Avocado & Harvest Gold are coming back in style.

Do what you will, but harm none.

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Do what you will, but harm none.

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post #15 of 107
MS can give away a Zune with every purchase of a Windows Vista Computer. They can afford it.
Make it idiotproof and they'll just make a
better idiot.
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Make it idiotproof and they'll just make a
better idiot.
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post #16 of 107
Quote:
Originally Posted by AppleInsider

It has long been rumored that Zune, which also features a 30GB hard disk, would retail for $299. But Apple's unparalleled component supply pricing is allowing it to price new iPod models at levels in which no other corporation could both compete and turn a profit.

I find it hard to believe that Apple can price the iPod below what it costs MS/Toshiba to bulid it AND make 49% gross margins like reported here: http://www.appleinsider.com/article.php?id=2052

Doesn't Toshiba manufactuer some key components of the iPod? I think they may have caught MS off guard, but not underpriced them to the point MS loses much money per unit.

edit 46% gross margins not 49% like I said.
post #17 of 107
Zune is all about formats. MS does not like that standardized formats like AAC and MPEG4 is preferred over their proprietary formats WMA and WMV.
While Apple pays license fees for AAC and mpeg4, MS does not pay any fees for WMA and WMV, and the more the WMA and WMV formats are used (by other companies) the more money they earn.
So this is MS trying to push WMA and WMV into a market that is dominated by open standards. If they succeed in catching lets say 30% of this market they have a guaranteed revenue stream. Just like they have on OEM licenses of Windows and site licenses (like the campus-license for collleges) of Office.
People like to talk about the "Apple-tax", meaning that you pay extra for using Apple equipment, but the real tax in todays computing landscape is collected by MS.
At my workplace we pay 100$ each year pr. worker to MS. This gives us the right to use MS software. But we have to pay pr. capita, not pr. user (of the software). And so, even if I do not use MS software we still have to pay 100$ for a license for me. This is the real computer-tax.
With Zune, MS tries to apply the same tax to music and video files.
So it doesn't really matter if the Zune is a good player or not. Zune is a bad idea for all users.
post #18 of 107
MS was very lucky that Apple announced the new price of the iPod before MS released the Zune. Now all that they have to do is reprint ALL promotional materials that have the price shown, re-negotiate with the retailers because the wholesale price is going to have to be changed ASAP (as are the other terms, like advertising allowances, etc.), change all TV ads. Lots of people working late in Redmond these days. Lots to do, plus they have to worry about all the changes on an international basis, which are in a lot of time zones. Yep, I believe that MS was very lucky.
Ken
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Ken
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post #19 of 107
Quote:
Originally Posted by TenoBell

Microsoft is no stranger to loosing money.

They have done it several time before loosing money with a product using their size and wealth to push the product until the competition simply gives up.

This strategy so fat has had some success in gaming consoles, but Sony is still the leader.

It'll be interesting to see what happens with mp3 players.

Yeah, but so far it hasn't really worked. Xbox shows no signs of recuping the losses anytime soon.
Cat: the other white meat
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Cat: the other white meat
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post #20 of 107
Just a reminder, kids:

Don't be a looser - use correct spelling.

Thank you.
post #21 of 107
Quote:
Originally Posted by elroth

Just a reminder, kids:

Don't be a looser - use correct spelling.

Thank you.

Siks munce ago i kont evan spal grafik dezinor, an now i are one.
I uze Apol to dezine lots of stuf. it iz a nise mashine to wurk on.
Me think zune a stoopid devise. Mikrosoft a bunch uv idiots.

tank you
post #22 of 107
Perhaps the iPod 30Gb was going to be $299 until Apple got word that M$ were selling the Zune for that price. That may explain the odd pricing with the 8Gb Nano and 30Gb iPod both being $249.
post #23 of 107
Quote:
Originally Posted by mcloki

MS can give away a Zune with every purchase of a Windows Vista Computer. They can afford it.

And it is giving away the Zune player on the dang computer that puts it in the mind of the consumer, especially the Wal-Mart consumer. They have to actually download or use a CD to get iTunes on a computer.

This is a long battle and even though I don't agree with the model, I think in the long term Apple is going to need to do some sort of inexpensive subscription or iTunes free radio based functionality to really defang the Zune.

MS could give away the Zunes, which they will have to do, just like XBoxes, but they can't possibly make it up in subscriptions or sales and even they have to please stockholders at some point. That is what I keep wondering about. Of all of their millions of stockholders you rarely hear them complain ... at least in the media I watch ... and at some point I keep expecting them to throw something at Balmer even if they think Gates was god.
The Mother of all flip-flops!!
Support our troops by educating yourself and being a responsible voter. Democracy and Capitalism REQUIRE Intelligence and Wisdom if they are to be worth a damn beyond...
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The Mother of all flip-flops!!
Support our troops by educating yourself and being a responsible voter. Democracy and Capitalism REQUIRE Intelligence and Wisdom if they are to be worth a damn beyond...
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post #24 of 107
Quote:
Originally Posted by tryd

Zune is all about formats. MS does not like that standardized formats like AAC and MPEG4 is preferred over their proprietary formats WMA and WMV.
While Apple pays license fees for AAC and mpeg4, MS does not pay any fees for WMA and WMV, and the more the WMA and WMV formats are used (by other companies) the more money they earn.
So this is MS trying to push WMA and WMV into a market that is dominated by open standards. If they succeed in catching lets say 30% of this market they have a guaranteed revenue stream. Just like they have on OEM licenses of Windows and site licenses (like the campus-license for collleges) of Office.
People like to talk about the "Apple-tax", meaning that you pay extra for using Apple equipment, but the real tax in todays computing landscape is collected by MS.
At my workplace we pay 100$ each year pr. worker to MS. This gives us the right to use MS software. But we have to pay pr. capita, not pr. user (of the software). And so, even if I do not use MS software we still have to pay 100$ for a license for me. This is the real computer-tax.
With Zune, MS tries to apply the same tax to music and video files.
So it doesn't really matter if the Zune is a good player or not. Zune is a bad idea for all users.

Excellent point!! I don't know about the details but that is the philosophical problem with MS and the problem with the underinformed consumers. Wal-Mart (not to pick on them, but hey) and MS do have hidden costs in this economy that economists and the media can't describe in a 10 second soundbite so no one thinks about it.
The Mother of all flip-flops!!
Support our troops by educating yourself and being a responsible voter. Democracy and Capitalism REQUIRE Intelligence and Wisdom if they are to be worth a damn beyond...
Reply
The Mother of all flip-flops!!
Support our troops by educating yourself and being a responsible voter. Democracy and Capitalism REQUIRE Intelligence and Wisdom if they are to be worth a damn beyond...
Reply
post #25 of 107
Quote:
Originally Posted by AppleInsider

Apple's aggressive pricing at $249 for its new 30 GB video iPod took Microsoft by surprise."

Touche...
post #26 of 107
Quote:
Originally Posted by mcloki

MS can give away a Zune with every purchase of a Windows Vista Computer. They can afford it.

Kind of like the way Apple gives away an iPod with every computer (well, until tomorrow)?
post #27 of 107
Quote:
Originally Posted by MacGregor

And it is giving away the Zune player on the dang computer that puts it in the mind of the consumer, especially the Wal-Mart consumer. They have to actually download or use a CD to get iTunes on a computer.

So Macs aren't considered computers anymore?

(sorry, I'm just in one of those moods)
post #28 of 107
Well, the Zune is supposed to play MP3, WMA, AAC, WMV, MPEG-4 and H.264. Still missing Ogg Vorbis and FLAC, but they are missing from the iPod too, unless you use Rockbox. And the Zune's display and interface look really really impressive, with the huge cover art, and a rather nice design and animations. The display is pretty huge, and seems to be good. It's better equipped than the iPod too, and we'll see what else they will do with the WiFi (internet? VoIP? ...). There definately is some potential. Apple should watch out.
post #29 of 107
Quote:
Originally Posted by bdj21ya

So Macs aren't considered computers anymore?

(sorry, I'm just in one of those moods)

Hey, if Zune Player even closely resembles WMP, I don't think we have anything to worry about. They'll still want iTunes.
post #30 of 107
Quote:
Originally Posted by mrtotes

Perhaps the iPod 30Gb was going to be $299 until Apple got word that M$ were selling the Zune for that price. That may explain the odd pricing with the 8Gb Nano and 30Gb iPod both being $249.

That's my suspicion. They timing of the price decrease strikes me as a coincidence with Microsoft entering the market. Although, it may also signal the introduction of true video iPod.
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2.0 GHz Macbook, 2 GB RAM, 250 GB HD
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post #31 of 107
Quote:
Originally Posted by bdj21ya

Kind of like the way Apple gives away an iPod with every computer (well, until tomorrow)?

Apple hasn't given an iPod away with every computer. Only with the Mac Books, as a pre-school season selling point. They also, as you must have noticed, gave away the ones that were about to be discontinued, not the new ones. It was for a limited time as well.

I know that you weren't posting in an entirely serious way, but I did think that it required some clarification.
post #32 of 107
Quote:
Originally Posted by kadajawi

Well, the Zune is supposed to play MP3, WMA, AAC, WMV, MPEG-4 and H.264. Still missing Ogg Vorbis and FLAC, but they are missing from the iPod too, unless you use Rockbox. And the Zune's display and interface look really really impressive, with the huge cover art, and a rather nice design and animations. The display is pretty huge, and seems to be good. It's better equipped than the iPod too, and we'll see what else they will do with the WiFi (internet? VoIP? ...). There definately is some potential. Apple should watch out.

So few people use those two formats that there is no reason why most companies would want to include them. Some companies whose sales are so small that every sale they make is significent might do so, but no others.
post #33 of 107
Quote:
Originally Posted by Eduardo

That's my suspicion. They timing of the price decrease strikes me as a coincidence with Microsoft entering the market. Although, it may also signal the introduction of true video iPod.

I don't think so. Flash is expensive. Miniaturization is as well.

You might as well ask why laptops cost so much more than desktops, even when the screen is included.
post #34 of 107
i'm hoping apple had two iPod announcements--the set they made sept 12, and another announcement or set of announcements re: a wide-screen iPod.

Rather than playing all their cards at once, they revealed a few.

this bluff prompted MS to reveal more about its Zune.

that allows apple to play its full hand and not be trumped by a later announcement. after all, we're all techies, and MS-or not, a bigger screen would be appealing to everyone who uses an iPod to view photos and vids, and the wireless feature will be fun to some.

this would put the strategic advantage back to apple. i hope that's the case. I can't see any reason the existing iPod couldn't harbor a larger screen oriented the other way instead. That change alone, it seems to me, would sustain iPod as the premiere device of its kind. it can be done. why not do it?
post #35 of 107
Quote:
Originally Posted by Eduardo

This is good as it **will** keep Apple on the cutting edge of the digital portable market; otherwise they risk losing their profitable of the marketplace.

that's a critical point. IF we believe apple has better things up its sleeves; IF we wonder why it's taken apple so long to introduce some new pod features (bigger screen; wireless; fm; take your pick) then pressure from MS should mean we'll now see them sooner rather than later.
post #36 of 107
Quote:
Originally Posted by rtdunham

i'm hoping apple had two iPod announcements--the set they made sept 12, and another announcement or set of announcements re: a wide-screen iPod.

Rather than playing all their cards at once, they revealed a few.

this bluff prompted MS to reveal more about its Zune.

that allows apple to play its full hand and not be trumped by a later announcement. after all, we're all techies, and MS-or not, a bigger screen would be appealing to everyone who uses an iPod to view photos and vids, and the wireless feature will be fun to some.

this would put the strategic advantage back to apple. i hope that's the case. I can't see any reason the existing iPod couldn't harbor a larger screen oriented the other way instead. That change alone, it seems to me, would sustain iPod as the premiere device of its kind. it can be done. why not do it?

I don't see why Apple would have to bluff at all. It takes quite some time to come up with a totally new player. No reason why they should have to give up any more of the holiday buying season than they would have to, if it was ready. Releasing the movie store without the bigger screen would have been foolish, if, again, it was ready.
post #37 of 107
Quote:
Originally Posted by mcloki

MS can give away a Zune with every purchase of a Windows Vista Computer. They can afford it.

Are you crazy?!? IIRC, there are around 200 million PCs sold worldwide ever year. If MSFT gave away a Zune with each PC, they would be losing at least $200 per Zune (probably more since it is a relatively complex, if poorly designed, device). That would be a loss of $40 billion per year on the Zunes, and they are only making around $10-15 billion a year in profit right now. So immediately they would be losing $25-30 billion/year. They would easily go bankrupt within two years.

Next time think for a second before you write something so completely outrageous. MSFT does make a lot of money, but even they cannot afford to just give products away on a large scale.
post #38 of 107
Quote:
Originally Posted by Eduardo

That's my suspicion. They timing of the price decrease strikes me as a coincidence with Microsoft entering the market. Although, it may also signal the introduction of true video iPod.

I wouldn't go this far. Both the larger and the smaller iPods got price decreases.
post #39 of 107
I believe the iPod didn't give the iPod's wireless for many reasons:


1. It would kill the battery-life, Apple is trying to increase the battery-life, not decrease it.

2. Not a hell of alot of poeple would have the new iPod's, so there would be very few to share your music with.

3. It's more of a gimic than a feature at this point. (look at point 5. for proof)

4. They're are saving that feature for the iPhone®, as it will be such a sought after gadget that everyone will have one, and battery technologies are only getting better.

5. Why share your music with your friends, when they can listen to samples of all the songs in the iTunes Store with your iPhone, and purchase them on a whim

6. And.. the iPhone® is coming out at Macworld.
Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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post #40 of 107
Quote:
Originally Posted by mbaynham

oh god, a zune phone, what the hell is that going to look/be like. just give up M$.....

The Zune Phone to modeled after the brown shoe phone used by Maxwell Smart. I always knew Gates and company worked for Chaos.
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