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Microsoft says Zune to sell for $249

post #1 of 175
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Microsoft Corp said Thursday its Zune digital media player will be sold at relatively the same price as Apple Computer's new 30GB video-enabled iPod and admitted that it will lose money on each sale as a result.

The Zune, which also comes with 30GB of storage, will retail for $249.99 (about 99 cents more than the iPod) when it goes on sale Nov. 14. Songs available for download at the Zune Marketplace service will cost about 99 cents a song, on par with prices at Apple's iTunes, Microsoft told Reuters.

The Redmond, Wash.-based software maker also told the media outlet that it needed to put a comparable price on Zune, even if it meant suffering a loss from the device's sales this holiday season.

"We had to look at what was in the market and offer a competitive price," said Scott Erickson, Microsoft's senior director of product marketing for Zune. "We're not going to be profitable this holiday but the Zune project is a multiyear strategy."

Microsoft has said it plans to spend hundreds of millions of dollars over the course of the next several years in a bid to catch Apple's iPod.

The Zune player is the first step in creating a new brand of portable devices, the company has said, adding that a Zune phone is also in the works.
post #2 of 175
If they are losing money as it is.. why not then go the full step and undercut the price of the ipod, instead of selling at the same price?
post #3 of 175
In-fucking-credible. Is there an MS product that isn't a loss-leader besides Windows and Office? I can't believe MS is still racking in the cash every quarter with so many loss-leaders.

Consumers should be kissing Apple's and Nintendo's collective asses for making Sony and MS sell their products cheaper than they can make them.

It's just sad that MS and Sony are trying to grab market share by throwing money at the problem.
post #4 of 175
The Xbox unit has lost billions. I full expect this to be the same, and to do more to cannibalize WMA player sales than to affect the iPod sales. Apple has managed to "sell cool" with the iPod, and it's not very easy to affect the selling of cool unless you are cool yourself. MS is not cool.
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post #5 of 175
The business model doesn't quite make sense to me... PS/PS2/PS3 and X-Box can soundly afford to be loss-leaders (sorta), because even if Sony and MS lose money for each unit of hardware they sell, they can make money selling software and through licensing to 3rd party software vendors.

What's the equivalent of software to the Zune? Music that they'll sell for 99 cents?

Last I heard, Apple was barely breaking even with music sold through iTMS. Apple's business model works ONLY because they rake in the money through hardware sales.

So let me get this straight. MS loses money on each Zune they sell. They will also only break even, if not lose money, on each song they sell through their service.


Sniff-sniff... do I smell failure in the air?
post #6 of 175
It would be funny if Apple dropped their prices again to $229/$329. It wouldn't accomplish anything other than pissing M$ off, so it's not going to happen.

Note that I think that Apple ought not to do something like this because then M$ might try to claim that Apple can sell for a lower price because they have a lower quality player than Zune. None of us would believe it, but what about everyone else?
post #7 of 175
Quote:
Originally Posted by rawhead

So let me get this straight. MS loses money on each Zune they sell. They will also only break even, if not lose money, on each song they sell through their service.


Sniff-sniff... do I smell failure in the air?

Perhaps it's the smell of a share-holder's revolt when they realise that there is no profitability anywhere to be found?
post #8 of 175
Jesus wept!

What a screamingly horrible bit of crap this zune thing is!

How can any company seriously think that sending this thing out to fight the Goliath that is iPod has any chance of success?

Honestly, who here thinks M$ just set themselves up for one giant kick in the nuts when Apple release the updated, real video iPod - that does everything the zune chunk does and more, sells for less and is waaaaaay cooler to own?

And M$ are releasing a zune phone? HA HA HA HA! Hang on a second, I think I'm gonna vomit from laughing too hard... I can just imagine the phone thing they'll release: no signal strength, 30 minute talk time, at least 2 security updates a week and it'll hang up on you when you least expect it. That and the fact that it'll only be available in 'avocado'.

These clowns just can't get anything right. It's gotten to the point where I'm thinking that Apple secretly bought out M$ a couple of years ago and are deliberately making crap products to make Apple look good!

Let's recap the zune hi-points:

It's available in brown.
It's got wi-fi so it's battery life will suck.
It's larger than the same capacity iPod.
It's only available for PC
They'll lose money on every unit sold.

In short, they're making a bad product and selling it at a loss?

Brilliant.
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post #9 of 175
Apple = good, M$ = evil, right? If apple is seeing mac sales going up because of the iPod 'halo' effect does that mean the zune could see increased sales from the xbox 'horny' effect?
post #10 of 175
What I don't understand is how does Apple make so much money on this but Microsoft can't?
post #11 of 175
Quote:
Originally Posted by uyman

What I don't understand is how does Apple make so much money on this but Microsoft can't?

Volume. Apple buys things in quantities with multi-year contracts that Microsoft can't (yet) match. That's why Microsoft thinks they can still pull this off... the theory is that once they get the volume up, the costs will decrease to the point where they break even. Of course, it hasn't worked with the XBox and that has hugely profitable game licenses behind it, so I personally think they're on crack and wouldn't want to own any MSFT stock just now.
post #12 of 175
The only thing I would fear from any potential "iPod killer" would be a dramatically lower price. Now that we know that Zune costs the same as an iPod, what would motivate a consumer to ditch the best device in the field?

<sarcasm>Microsoft has a rich history of making technology friendly to the consumer.</sarcasm>
post #13 of 175
lol i thought this might happen, well, i knew this would happen. they copy the concept, they copy the features and they copy the price. the only thing they cant copy is success.
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post #14 of 175
Apple can afford to drop their prices down to
$199 for the 30gb iPod
$249 for the 80gb iPod
$299 for coming Video iPod

Those prices are high enough for the product not to be seen as a commodity, but low enough to kill Microsoft's Zune initiative.

Though Apple has a more successful product now, Microsoft can afford to lose billions for years to come in hopes of dominating this space in the future ex. xbox.

Apple can't afford to lose ground here.
post #15 of 175
zune phone.






lol.
post #16 of 175
When Nintendo created the Game Cube keeping the production cost down was central during the whole process, which made them a successful company, earning money on every sold machine from day one. This is probably true for the Wii as well. I don't know how much money Apple earns on each iPod, but I guess they have a great deal of a gap to lower their prices and still be profitable should they want/need to. I think Apple by now has managed to tout everyones mind with the Apple seal of quality. Mac owners, and probably now iPod owners are prepared to pay more for the Apple experience.

Microsoft is probably gonna try hard, and they'll probably stir the market if they manage to keep up for the number of years required.
post #17 of 175
I enjoy bashing MS when they do stupid things just as much as the next guy but I try to do it without quite as much biased. Let me counter some of your points:

Brown - It may not be attractive to you but it atleast is something different. If you were looking for a white mp3 player would you choose the ipod or the zune? Same for black, but if you 'really' wanted a brown one then the zune is the player of choice. I'm sure they did some research and found that it might look nicer for people with retro components sitting on a bookshelf.

Wifi - It only enables Wifi when you are using it to transfer songs between zune players. So battery life is not a factor if you aren't using the feature. I personally doubt I would use it much but it would be nice to have since there is no downside for those times when you aren't using it.

Larger - I haven't seen one in person but the size seems comparable considering the increase in screen size. That said - I would bet that Apple's true video ipod will still be as sleek as the current ipods yet have the bigger screen.

PC Only - I doubt they feel like they would miss out on any sales from Mac and Linux users so is this really going to impact the sales for the zune?

Am I interested in a zune? No. But that doesn't mean it will fail.

Quote:
Originally Posted by deckard

Let's recap the zune hi-points:

It's available in brown.
It's got wi-fi so it's battery life will suck.
It's larger than the same capacity iPod.
It's only available for PC
They'll lose money on every unit sold.

In short, they're making a bad product and selling it at a loss?

Brilliant.
post #18 of 175
IMHO, MS is going to get raked by Apple for the next couple years at least, between this little ingenius price war that Steve started, the vPod, and the iPhone. It almost seems like Apple's saying, "come on - compete with us. we dare you!"

They've got a lot of catch-up work to do. Xbox 360 shows their capability to do exactly that, but sometimes I wonder if MS realizes it's not the 1900's anymore, and that they're up against a totally new Apple that has mastered its market - at least for now.
post #19 of 175
Quote:
Originally Posted by kim kap sol

Is there an MS product that isn't a loss-leader besides Windows and Office? I can't believe MS is still racking in the cash every quarter with so many loss-leaders.

It seems as though Microsoft (a software company) has some trouble being profitable in their hardware efforts. This situation is (retardedly) exacerbated by the fact that the Zune is not even made by Microsoft, it's a Toshiba product. Are they buying these things from Toshiba for more than they sell them for?
post #20 of 175
Fantastic post. Thanks for making me laugh.


Quote:
Originally Posted by deckard

Jesus wept!

What a screamingly horrible bit of crap this zune thing is!

How can any company seriously think that sending this thing out to fight the Goliath that is iPod has any chance of success?

Honestly, who here thinks M$ just set themselves up for one giant kick in the nuts when Apple release the updated, real video iPod - that does everything the zune chunk does and more, sells for less and is waaaaaay cooler to own?
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post #21 of 175
zune phone, wow

btw:


apple is TEH DOOMED!!! lol..

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post #22 of 175
It is possible that Microsoft is trying to get the profits down from one of Apple's main income streams. This would essentially slow the growth and market share of Apple and it's products, such as the OS, the phone market, software, etc. This may be why they don't care if they lose money, as they will lose even more as Apple gains market share and accelerated growth.
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post #23 of 175
Quote:
Originally Posted by uyman

What I don't understand is how does Apple make so much money on this but Microsoft can't?

It's not only volume, but also clever design that keeps the cost low.
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post #24 of 175
Microsoft has the cash to throw around. They are trying to buy mind share. They understand that it is unbelievably hard to compete with the iPod - just as they realized that XBox had a tough road up against the PS2. However, in a few short years, the line of people waiting to get an XBox 360 was unreal...and Nintendo isn't the #2 player in the home console market anymore (in the US). People would clearly say that the leaders now are Sony and Microsoft (although look for a strong comeback from Nintendo with the Wii).

Microsoft isn't dumb. They know that their first cut of the Zune will not take over the iPod, but if they can supplant the #2 player in this iteration, then they've accomplished a lot. From the #2 spot, they can start to exert a lot more pressure on Apple.

It seems that people here are thinking too short term.

8)

--DotComCTO
post #25 of 175
Any bets on how soon iTunes will suddenly stop working with Windows? After the next security patch maybe?
post #26 of 175
Quote:
Originally Posted by ReCompile

It is possible that Microsoft is trying to get the profits down from one of Apple's main income streams. This would essentially slow the growth and market share of Apple and it's products, such as the OS, the phone market, software, etc. This may be why they don't care if they lose money, as they will lose even more as Apple gains market share and accelerated growth.


I don't know how much it will erode profits and market share when you consider the high elasticity of demand for ipods which are essentially luxury items. If Apple lowers the price again, say to $199 for the 30 Gig iPod, they should still make profit on it (however at a lower margin) but they will also pick up a lot more sales. An increase in sales of iPods will only further strengthen the iTunes store which will give them better negotiating power with content providers, and will also lower their component costs because of increased volume. If Microsoft lowers the price of the Zune to $199, then they will lose even more money, and if they keep their price at $249, they will lose sales to the point of irrelevance.
post #27 of 175
Quote:
Originally Posted by DotComCTO

Microsoft has the cash to throw around. They are trying to buy mind share. They understand that it is unbelievably hard to compete with the iPod - just as they realized that XBox had a tough road up against the PS2. However, in a few short years, the line of people waiting to get an XBox 360 was unreal...and Nintendo isn't the #2 player in the home console market anymore (in the US). People would clearly say that the leaders now are Sony and Microsoft (although look for a strong comeback from Nintendo with the Wii).

Microsoft isn't dumb. They know that their first cut of the Zune will not take over the iPod, but if they can supplant the #2 player in this iteration, then they've accomplished a lot. From the #2 spot, they can start to exert a lot more pressure on Apple.

It seems that people here are thinking too short term.

8)

--DotComCTO

This is probably one of the most level-headed comments thus far posted on this thread. Intelligent and foward thinking and not reeking of emotions and 'fan-boy' rants.
Good comments.
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post #28 of 175
Quote:
Originally Posted by deckard

...when Apple release the updated, real video iPod - that does everything the zune chunk does and more, sells for less and is waaaaaay cooler to own?

I think you got a little carried away. Competition should never be casually dismissed. Consider:

--note your operative word: "WHEN" apple releases a better iPod. We'd all like that, but we've been waiting a long time. I was hoping it would be announced at LAST year's MWSF. Does it bother anyone that MS got to market first with a bigger screen, or an fm tuner? The warm fuzzies apple generates make me expect IT to bring me the newest MP3 player features, not rest on its laurels. Improved battery life is great; new colors are...meh. Neither constitute cutting edge advances.

--note there's no reason to believe that future model, whatever its feature set, will cost less than the 249 zune: the current "non-improved" vid iPods cost 249 and 349, respectively. It's great to hope apple will produce a touch-screen, bigger-screen, smart video iPod; it's quite another thing to think it'll cost less than 249.

I'm no fan of microsoft. But comparing apple's current offerings and MS's, the zune is more feature-rich and has a bigger screen. The iPod has momentum, and a reputation for quality and ease of use. If anything, as mac fanboys, we should hope zune prompts apple to get on with it, and get those next gen iPods to market.

When apple's big show iPod announcements seemed flat, I hypothesized that perhaps the company had held off its big announcement, to let MS position its zune first. Maybe the pricing decision by MS will be the trigger apple was waiting for, and maybe now we'll get that better (though not cheaper) new iPod. Wouldn't that be great?!
post #29 of 175
Quote:
Originally Posted by rawhead

Last I heard, Apple was barely breaking even with music sold through iTMS.

That is misinformation that Steve Jobs was putting out to...
1) discourage competition.
2) discourage investors from investing in the competition.
3) keep the record companies from getting greedy and wanting more of the profits.

It may have been true to some degree when Apple first launched the store.
But trust me when I say that Apple has optimized the heck out of the iTMS.
As they continue to sell in higher volumes their costs will not increase that much.
Selling music for .99 will only continue to become more and more profitable.
post #30 of 175
Quote:
Originally Posted by lkrupp

Any bets on how soon iTunes will suddenly stop working with Windows? After the next security patch maybe?

They won't stop allowing iPODs to work on Microsoft. It wouldn't be positive for apple or microsoft.

Anyway... it barely works on Windows as it is.
post #31 of 175
Quote:
Originally Posted by Eduardo

Microsoft isn't dumb. They know that their first cut of the Zune will not take over the iPod, but if they can supplant the #2 player in this iteration, then they've accomplished a lot. From the #2 spot, they can start to exert a lot more pressure on Apple.

It seems that people here are thinking too short term.

Their financial results and stock price over the last half decade say otherwise. MSFT had one good idea, which was licensing MS-DOS to other companies besides IBM. But beyond that, they are financial idiots. If they just concentrated on Windows and Office and ditched all the other crap, they could probably double their overall profit. Even if XBox 360 is substantially more successful than it has been to date, it still will not be able to make up for the losses on XBox...and the XBox franchise is one of their more "successful" spinoffs. On average, each of their new initiatives is a money-loser over the long term, and at some point someone high up (e.g., Ballmer) is going to get kicked out because of this. I say this as someone who has a stake in thousands of MSFT shares, and has seen firsthand how underwhelming their financial performance has been. From a financial perspective they are really quite pathetic...give me a monopoly over the OS market and office software market, and I guarantee you I will make at least 50% more profit over the next decade than MSFT will. Seriously.
post #32 of 175
Apple will have to move fast with the real video iPod here and now that the ball is on Apple's part, they should lower prices for the rest of the models.
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post #33 of 175
It seems to me that the primary new feature of the zune is this wireless sharing function. But the problem with it (aside from its likely impact on battery life), is that you need to know other people with a zune, and right now no one has one. It's the kind of feature that needs a critical mass of people who have them, like the iPod achieved after several years on the market. How do you get people to buy this, when they can't use the killer feature because they don't know anyone else who has one?
post #34 of 175
Quote:
Originally Posted by lkrupp

Any bets on how soon iTunes will suddenly stop working with Windows? After the next security patch maybe?

right that would be one of the stupidist things that apple could do. the vast majority of ipod users are running windows. i have to admit that i didnt have a clue about itunes or what an ipod was untill it started on windows. that was the reason for the amazing success apple have had with the ipod/itunes thing.
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post #35 of 175
As far as the "how can they sell this as a loss leader" question: I think it's pretty clear that MS intends the Zune to be the opening wedge in a multi-year, multi-device ecosystem build-out.

The real power and durability of the iPod empire is in the ecosystem lock-in, from car and accessory ports all the way to the ITunes Store and the Fair Play DRM.

Bringing out a new MP3 player, no matter how many bells and whistles it has, doesn't really address the iPod ecosystem, and MS knows this. It's also why they know they have to move against Apple in this arena, because it gives Apple a way of credibly attacking other areas, just like Windows has allowed MS to control the browser market. Just look at iTV and think about what it means for extending the "reach" of the iPod/iTunes Store phenomena into the living room.

MS hasn't really been very good at this kind of thing- integration across consumer devices that creates synergy-- although they've been able to kinda pretend they are because of Windows, which allows them to execute fairly poorly and still be the only game in town. They have done a pretty good job in extending OS functionality vertically for corporate markets, but that's quite a different kettle of fish.

Clearly they hope to make Zune the cornerstone of a WiFi enabled MS world of Media Center, Xbox, Phone, tablet, etc.

I don't think they can pull it off, because MS doesn't have the cohesion across development teams and overall strategic vision of what an easy to use digital world looks like that Apple has. They think they do, but their one and only solution to competing is "more features", which actually works against smooth integration of multiple devices.

I think Apple has a real opportunity here to show what they can do when they aren't completely hobbled by the Windows monopoly . It's what the last 5 years have been pointing at: easy to use, easy to integrate digital lifestyle building blocks with pervasive metaphors and UI elements.
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post #36 of 175
Quote:
Originally Posted by uyman

What I don't understand is how does Apple make so much money on this but Microsoft can't?

Those estimates only lists the cost of the PARTS inside the iPod.

There are many expenses related to running a business that those prices simply don't cover. Apple's typical net profit is around 10%, not 50%.
post #37 of 175
I think Microsoft can easily break even on the Zune. I think what they think will tip the balance is money that comes in through licencing compatible products. Apple takes $4 a unit license fee for every "Made For iPod" product. Every dock connector device you buy, be it an FM transmitter, boom box, dock, voice recorder, etc. puts $4 into Apple's treasury.
post #38 of 175
Quote:
Originally Posted by rtdunham

--note your operative word: "WHEN" apple releases a better iPod. We'd all like that, but we've been waiting a long time. I was hoping it would be announced at LAST year's MWSF. Does it bother anyone that MS got to market first with a bigger screen, or an fm tuner?

Sorry, but I don't see anyone walking around with a Zune yet. Microsoft may have been the first to ANNOUNCE their new product, but the launch date is...??? Some time this year? Early next year? We all know that MS is known to be late with everything. Apple is known to have their products available for purchase on the day it is announced.
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post #39 of 175
What I think is behind this is the various Windows Media formats, and the associated DRM.

My theory is that Microsoft is going after a monopoly position on all media -- software, video, music, games, electronic documents -- all electronic media of all kinds. They want anything that anyone does anywhere with any form of electronic media to be ultimately dependent on a Microsoft-owned operating system, Microsoft-controlled licensing, Microsoft-designed formats, and Microsoft-held DRM keys.

If Microsoft could pull this off, it would be hugely profitable, and it would guarantee solid, steady income for many, many years to come, without any need to shake off their growing corporate lethargy and inefficiency.

Microsoft can't get there with Apple in the way. If this kind of media monopolization is what they're after, they've got to throw something like Zune out into the market now, ready or not, short-term profitable or not. I don't think Zune, short term or foreseeable long term, will have what it takes to displace Apple's position. Zune is probably hitting the scene too late in the game as it is. But if Microsoft doesn't at least try to counter Apple and the iPod now, if they make no attempt at all, then the media-monopoly strategy I believe they want to pursue would be totally and complete lost, as opposed to merely unlikely to succeed.

The potential pay-off of a successful media monopolization strategy is so high that it's easy to imagine why Microsoft would risk eating a lot of near-term loss on Zune if they believe they have a chance at that possible huge pay-off in the future.
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post #40 of 175
to me the only logical reason i can see for this is not to compete with the iPod, but to protect windows...

the iPod for many people is a contributing factor to making "the switch"

microsoft realizes this.... forevery Zune player they put out, that is one less person that gets to experience the "Apple Euphoria"
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