Overly cautious Microsoft spurs first-ever Zune shortage

Posted:
in iPod + iTunes + AppleTV edited January 2014
Microsoft's cautious and surprisingly non-aggressive approach to the digital media player market has somehow resulted in a shortage of the company's new 80GB Zune player this holiday shopping season, reports iSuppli.



In a report Wednesday, the market intelligence firm said the well-reviewed model has been in short supply or backordered at many popular retailers like Amazon.com.



Creating some confusion, iSuppli noted, are media reports that have suggested that the Zune is outselling Apple iPods on Amazon.com, but the reality of the situation is those reports are referring to a sales spike for the older, deeply discounted Zune 30 model.



"The question is whether the 80GB Zune shortage is the result of high demand, short supply or some combination of both,? said senior consumer electronics analyst Chris Crotty.



Crotty added that, "Given the widespread criticism of the first Zune model, it is likely Microsoft erred on the side of caution when placing initial orders for the new Zunes, which include the Hard-Disk-Drive (HDD) based 80GB Zune as well as the flash-memory-based 4GB and 8GB Zune."



iSuppli in its report went on to suggest that Microsoft is moving tentatively in the portable media player (PMP) market because the company is treading some unfamiliar territory with the Zune.



"The first unfamiliar aspect for Microsoft is that the Zune uses a proprietary, closed operating system that differs from the open approach of the company?s flagship Windows software," the firm said. "Second, Microsoft is not the market leader in PMPs, an unusual situation for a company accustomed to dominating the areas in which it competes."



Still, Microsoft may feel a lot of self-imposed and media pressure to position the Zune as an ?iPod killer.? To that point, iSuppli noted, the new 80GB Zune competes directly with the new iPod Classic and the new iPod touch.



And while the firm's channel checks indicate strong demand for the iPod touch, it calls the model "somewhat of a contradiction" because Apple added a video-centric display to the device even though it only has limited storage capacity for video content.



"That disconnect raises the question of why Apple did not launch an HDD-based iPod touch. Apple may have expected flash memory prices to drop more quickly. When that did not happen, Apple may not have had time to develop an HDD-based iPod touch," iSuppli said. "The question now is whether Apple will continue to wait for flash prices to fall, or if the company will add a HDD-equipped iPod touch during the coming months."



At the same time, the firm suggests that the current Zune shortage is unlikely an indicator of things to come, as Apple still maintains its long-term competitive advantages of ever-increasing cost for switching among its customer base. That is, the longer a consumer owns an iPod, the more content that consumer purchases from the iTunes site.



"To move to a non-iPod player, the customer would need to repurchase the content or reformat through a cumbersome process that degrades quality -- and breaks the law," iSuppli said. "With its closed Zune system, Microsoft is trying to replicate these switching costs within its customer base, but the company may be starting too late."



As of press time, Apple's iPods dominated the first 9 slots on Amazon's best seller list, with Microsoft's black 80GB Zune snagging the 10th spot.
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Comments

  • Reply 1 of 37
    You mean they have sold them both already?
  • Reply 2 of 37
    Anyone know if they sell the second generation Zunes (4G, 8G, 80G) at a loss - like they did with the 1st generation?

    - or have they managed to work out how to make & sell hardware at a profit yet?!

  • Reply 3 of 37
    wallywally Posts: 211member
    Quote:
    Originally Posted by SpinDrift View Post


    You mean they have sold them both already?



  • Reply 4 of 37
    plusplus Posts: 54member
    I think iSuppli should confine their comments to actual supply/CoGS measurements & reporting, and refrain from comments on market dynamics about which they clearly are quite clueless!



    Quote:
    Originally Posted by AppleInsider View Post


    "The first unfamiliar aspect for Microsoft is that the Zune uses a proprietary, closed operating system that differs from the open approach of the company?s flagship Windows software," the firm said.



    Microsoft's open approach?



    Quote:

    "Second, Microsoft is not the market leader in PMPs, an unusual situation for a company accustomed to dominating the areas in which it competes."



    Actually, this is exactly backwards. Microsoft is NEVER the market leader in an area in which it actually competes (i.e., one in which there is fair competition instead of an illegally obtained and maintained monopoly). When actually forced to compete, they always fail! (Well, ok - in a select few cases (MS Money & Xbox360, for instance), they manage to be one of several players, and merely loose money. )



    Quote:

    "To move to a non-iPod player, the customer would need to repurchase the content or reformat through a cumbersome process that degrades quality -- and breaks the law," iSuppli said.



    Breaks the law?!? Excuse me? Transcoding purchased material from iTunes is explicitly supported by Apple. If it doesn't violate Apple's license/terms of use, how can it be breaking any law?
  • Reply 5 of 37
    melgrossmelgross Posts: 31,381member
    There are some really odd number floating around out there.



    Read this article from the Inq, remember, that it's either a typo (what else could it be?), or someone's been drinking too much coffee:



    http://www.theinquirer.net/gb/inquir...e-short-supply



    I tried to reply to the article pointing this out, but for some reason, as it's never happened before, each time I typed the security word, it wasn't recognized.



    EDIT: I just tried again, and it went through, now we'll see if the mod posts it.
  • Reply 6 of 37
    suhailsuhail Posts: 192member
    the shortage might be a marketing stunt to help raise awareness of the Zune and imply that it's the new hot thing in the market.
  • Reply 7 of 37
    Quote:
    Originally Posted by melgross View Post


    There are some really odd number floating around out there.



    Read this article from the Inq, remember, that it's either a typo (what else could it be?), or someone's been drinking too much coffee:



    http://www.theinquirer.net/gb/inquir...e-short-supply



    I tried to reply to the article pointing this out, but for some reason, as it's never happened before, each time I typed the security word, it wasn't recognized.



    EDIT: I just tried again, and it went through, now we'll see if the mod posts it.



    "

    "Overall, Microsoft has been surprisingly non aggressive in its approach to the PMP/MP3 player market," he said. Isuppli is predicting that it will ship 211.5 million units and revenues of $19.5 billion this year.

    "



    I think they mean the total market size & value - not what MS will sell!
  • Reply 8 of 37
    There is now a sizable 'anything-but-Apple' contingent out there that provides a strong customer base for Zune. (Indeed, it could soon become a matter of reverse snobbery to own a non-Apple PMP.)



    MSFT is a doggedly persistent company, and Apple would be unwise to not take them seriously as potential long-term competition.
  • Reply 9 of 37
    hobbeshobbes Posts: 1,252member
    Good lord, iSuppli is obsessed with the idea of HDD-based iPod Touch.



    We don't even know if OS X Mobile is designed to *work* with HDDs. It may very well expect flash memory for its speed and power consumption (would not surprise me).



    Seems obvious to me that HDD-based iPods are on their way out. As the price of flash memory falls, the capacity of the Touch will increase. By next year there will likely be a 64GB Touch model available.
  • Reply 10 of 37
    melgrossmelgross Posts: 31,381member
    Quote:
    Originally Posted by samurai1999 View Post


    "

    "Overall, Microsoft has been surprisingly non aggressive in its approach to the PMP/MP3 player market," he said. Isuppli is predicting that it will ship 211.5 million units and revenues of $19.5 billion this year.

    "



    I think they mean the total market size & value - not what MS will sell!



    I though of that as well, but it's not how it was written.



    Quote:

    "Overall, Microsoft has been surprisingly non aggressive in its approach to the PMP/MP3 player market," he said. Isuppli is predicting that it will ship 211.5 million units and revenues of $19.5 billion this year.



    Does that look as though they meant the entire market?



    It's one reason why I said there is likely a typo, but still, it's what they wrote.
  • Reply 11 of 37
    melgrossmelgross Posts: 31,381member
    Quote:
    Originally Posted by Hobbes View Post


    Good lord, iSuppli is obsessed with the idea of HDD-based iPod Touch.



    We don't even know if OS X Mobile is designed to *work* with HDDs. It may very well expect flash memory for its speed and power consumption (would not surprise me).



    Seems obvious to me that HDD-based iPods are on their way out. As the price of flash memory falls, the capacity of the Touch will increase. By next year there will likely be a 64GB Touch model available.



    A lot of people here were also obsessed with an HDD equipped iTouch.
  • Reply 12 of 37
    Quote:
    Originally Posted by melgross View Post


    I though of that as well, but it's not how it was written.







    Does that look as though they meant the entire market?



    It's one reason why I said there is likely a typo, but still, it's what they wrote.



    It's just the least number of facts to change to get it to make sense!

    - sometimes you have to make up your own facts with the Inquirer (and why not - they do!)

  • Reply 13 of 37
    Quote:
    Originally Posted by suhail View Post


    the shortage might be a marketing stunt to help raise awareness of the Zune and imply that it's the new hot thing in the market.



    Yea I think you hit the nail on the head there. Companies have always done that around the holidays ( You don't think they could have made enough tickle me Elmo's?)



    My brother bought a Zune when they first came out, a full month before Vista even was available to the public- It was awesome until he realized you needed Vista or else you could do absolutely nothing with the Zune. We didn't even have a PC at the time which could run Vista not to mention you couldn't buy it yet. Needless to say it really opened my eyes a bit to Microsoft practices.
  • Reply 14 of 37
    melgrossmelgross Posts: 31,381member
    Quote:
    Originally Posted by samurai1999 View Post


    It's just the least number of facts to change to get it to make sense!

    - sometimes you have to make up your own facts with the Inquirer (and why not - they do!)





    Well, they're quoting a statement from iSupply.



    Many articles from the Inq are annoying, meant to annoy in that British schoolboy sense of humor.



    But, they also do have a fair number of good, solid, technical articles, including those about Apple.
  • Reply 15 of 37
    gqbgqb Posts: 1,934member
    Quote:
    Originally Posted by anantksundaram View Post


    There is now a sizable 'anything-but-Apple' contingent out there that provides a strong customer base for Zune. (Indeed, it could soon become a matter of reverse snobbery to own a non-Apple PMP.)



    MSFT is a doggedly persistent company, and Apple would be unwise to not take them seriously as potential long-term competition.



    Funny... the only place I've heard 'anything but Apple' talk is from trolls on Apple rumor sites.

    On the other hand, there's a very large 'anything but MS' contingent in the wild.



    I have yet to see a Zune in the wild.
  • Reply 16 of 37
    Quote:
    Originally Posted by SpinDrift View Post


    You mean they have sold them both already?



    Yes, but I'm returning them since they didn't put my engraving on them. They were supposed to say "I wish I was an iPod"
  • Reply 17 of 37
    Quote:
    Originally Posted by melgross View Post


    Well, they're quoting a statement from iSupply.



    Many articles from the Inq are annoying, meant to annoy in that British schoolboy sense of humor.



    But, they also do have a fair number of good, solid, technical articles, including those about Apple.



    I really like The Inq - many articles are really good, and they throw in some humour



    - but the bit they got wrong isn't a quote - it's a mis-para-phrase....
  • Reply 18 of 37
    After Christmas most of those Zunes will be returned because the parents thought they were iPods and they made their kids cry on Christmas morning.
  • Reply 19 of 37
    Most people brought them thinking that they could download all their music in the 14 days during the free trial and keep the music, lol, not knowing that the minute you cancel the membership M$$ Nukes your entire music Library
  • Reply 20 of 37
    wigginwiggin Posts: 2,265member
    Just how many times in one article can iSuppli show their ignorance?



    "the new 80GB Zune competes directly with the new iPod Classic and the new iPod touch"

    - In what way does the Zune compete with the touch? Talk about totally different beasts!



    "disconnect raises the question of why Apple did not launch an HDD-based iPod touch"

    - As Hobbes already pointed out, power requirements and responsiveness. Add to that weight, thickness, and Apple's general desire to eliminate hard drives in iPods.



    "if the company will add a HDD-equipped iPod touch during the coming months"

    - No, or at least so unlikely that any analyst who had a clue would know better.



    "the customer would need to repurchase the content or reformat through a cumbersome process that degrades quality"

    - Considering that the vast majority of music on iPods does NOT come from iTunes, both of those issues are moot. I only need to repurchase or reformat a very small percentage of my music. Yes, re-ripping CDs can be time consuming (except mine are already ripped as Apple Lossless, so converting to MP3 is a few clicks and an overnight batch job), but does not result in a loss of quality. Any music obtained elsewhere (not CDs or iTunes) is probably already in a universally supported format such as MP3s.



    "and breaks the law"

    - Only if the RIAA wins it's stupid, currently pending, lawsuit that claims ripping my own CDs is illegal. If I legally obtained my music, I can legally convert it.
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