New Zunes likely to cannibalize everything but iPod - analyst

Posted:
in iPod + iTunes + AppleTV edited January 2014
A new line of Zunes introduced by Microsoft earlier this week signal forward progress for Microsoft in the digital media player market but pose a larger threat to the company's own partners than Apple, according to one Wall Street analyst.



"We view these new models as decent progress by Microsoft compared to the previous Zune, which interestingly Microsoft plans to continue selling," American Technology Research analyst Shaw Wu told clients in a research note Thursday. "However, as we have long believed, we view the Zune as more of a competitive threat to its Windows Media partners including SanDisk, Sony, Samsung, LG, Verizon, Toshiba, and Philips as opposed to Apple and iPod."



According to Wu, the portable media player market is essentially divided into two "camps" -- there's the "iPod + iTunes" camp, which represents the de facto industry standard, and then there's "everyone else." And while Microsoft now has a more competitive product line than it did last week, it still has no answer to the iPhone, iPod touch, and most importantly, the top-selling new "fat boy" iPod nano, he said.



In speaking to clients, the analyst said he found it "interesting" that the Redmond, Wash.-based software giant was matching Apple penny for penny with its $249, $199, and $149 price points on the new Zunes. However, he strongly believes that the company was unable to undercut Apple due to the iPod maker's world-class supply chain which gives it access to the lowest cost components, manufacturing, and distribution.



"We believe Microsoft will need to price much more aggressively in order to stand a chance against Apple," the analyst wrote. "We believe these Zune will likely continue to see modest success due to Microsoft's vast resources and strong brand name, but likely at the expense of its Windows 'partners'."



Wu advised clients to buy shares of Apple on any pull-backs in the stock price, saying he sees upside to his $185 price target in the next 6 to 12 months.



"While we remain concerned with potential softness in US consumer spending, it appears that Apple is once again positioned to buck the trend with its compelling product line and strong international exposure," he told clients.
«134

Comments

  • Reply 1 of 65
    dave k.dave k. Posts: 1,306member
    They have the potential to take a big bite out of Apple too. The Zune 2 seems (spec wise) to be a solid product...
  • Reply 2 of 65
    tbagginstbaggins Posts: 2,306member
    Quote:
    Originally Posted by Dave K. View Post


    They have the potential to take a big bite out of Apple too. The Zune 2 seems (spec wise) to be a solid product...





    Dream on... that's what some said about the hard-drive Zunes intro'd last year. They didn't do much. \



    The problem is that the flash Zunes, like the hard-drive Zunes, are 'me too' products, giving no compelling reasons to switch from the iPod. Apple is really well-entrenched here.



    Like the analyst said, they're more a threat to Microsoft's former partners in the mp3 player space, though I think SanDisk will continue to do well.



    .
  • Reply 3 of 65
    zandroszandros Posts: 537member
    Quote:
    Originally Posted by Dave K. View Post


    They have the potential to take a big bite out of Apple too. The Zune 2 seems (spec wise) to be a solid product...



    Hardware specs makes me want one, but when we get to software design and specifications (no lossless) I realise that it isn't all that.



    /Adrian
  • Reply 4 of 65
    Quote:
    Originally Posted by TBaggins View Post


    The problem is that the flash Zunes, like the hard-drive Zunes, are 'me too' products, giving no compelling reasons to switch from the iPod. Apple is really well-entrenched here.



    Precisely. Microsoft should be trying to beat Apple on the markets they have yet to overtake (i.e., the phone space -- may be too late here already -- and the living room with the 360 and Media Center).



    At best, these Zunes are "just as good" as iPods. However, if they continue to knock out such utterly baffling "features" as "wireless syncing -- if you are plugged into the wall or docked", they will continue to be looked upon as poor copies, with a distinct lack of iPod ease.
  • Reply 5 of 65
    tbagginstbaggins Posts: 2,306member
    Quote:
    Originally Posted by RidleyGriff View Post


    .

    At best, these Zunes are "just as good" as iPods.



    They're not even that. Thicker, and with a d-pad instead of the iPod's clickwheel (or in the case of the iPodTouch, a MultiTouch UI). And the Zune Store vs iTS? MS's software vs iTunes?? Please.



    The Zune would have to be significantly BETTER than the iPod to be a threat, and it's not even as good. Therefore... fizzle.



    If they're lucky, they may be able to beat up on someone like Creative or iRiver, maybe.



    ...
  • Reply 6 of 65
    melgrossmelgross Posts: 31,986member
    Quote:
    Originally Posted by RidleyGriff View Post


    Precisely. Microsoft should be trying to beat Apple on the markets they have yet to overtake (i.e., the phone space -- may be too late here already -- and the living room with the 360 and Media Center).



    At best, these Zunes are "just as good" as iPods. However, if they continue to knock out such utterly baffling "features" as "wireless syncing -- if you are plugged into the wall or docked", they will continue to be looked upon as poor copies, with a distinct lack of iPod ease.



    This isn't like coming out with a new OS. It's never too late for hardware, or software products, in most catagories.



    According to the last numbers I saw, Apple's percentage in the mobile player space had slipped.



    If MS can overcome some of its rivals, it will have a stronger hand, which will make it seem more viable to buyers. That will help it. The question is—how much?



    Apple is doing some pretty good things, but not all that they can.



    MS is having all of its machines use WiFi. Apple should have all of their machines, except for the Shuffle, do the same.



    Apple comes out with good features, but lags in other areas. It's odd.



    They should also spur independent game development, but they refuse to. Too bad there as well. That could boost sales by quite a bit, taking some away from the DS and PSP.
  • Reply 7 of 65
    cosmonutcosmonut Posts: 4,872member
    I still maintain that if Microsoft was able to sell Zunes for $50 less than their Apple counterparts that this game would be much more interesting.



    I see Joe Shmoe Dad going out to Best Buy this holiday season and asking the sales person which is better, iPod or Zune. Upon hearing, "They're about the same, really," Dad would buy a Zune over an iPod if Zune was $50 less. Now, Dad will just pick up an iPod because that's what little Cindy asked for and they cost the same as a Zune.



    Point Apple.
  • Reply 8 of 65
    dave k.dave k. Posts: 1,306member
    Quote:
    Originally Posted by TBaggins View Post


    Dream on... that's what some said about the hard-drive Zunes intro'd last year. They didn't do much. \



    .



    That is what SONY said with the XBOX. Last time I check the XBOX 360 crushed the PS3.



    Microsoft can compete with Apple still. If you don't believe that you are foolish.



    Zune 2 is not going to crush iPods, but it may take a small dent out of the iPod eco-systems.



    Dave
  • Reply 9 of 65
    macvictamacvicta Posts: 346member
    Quote:
    Originally Posted by Dave K. View Post


    That is what SONY said with the XBOX. Last time I check the XBOX 360 crushed the PS3.



    And the 360 is what, some $200 cheaper than the PS3? Considering Sony priced themselves out of the market and the PS3 arrived a year behind, I don't think that's a valid comparison.
  • Reply 10 of 65
    melgrossmelgross Posts: 31,986member
    Don't forget that most people have no digital player at all.



    Also, don't forget that there are a lot of people out there that WON'T buy an iPod because they won't buy an Apple product. I've met two people with Zune's, and that was the primary reason they bought one. That may not seem like much, but the fact is that Apple does not own the entire market. There's a reason for for that other than the lack of a tuner.



    I also speak to my daughters friends, and some of them think that the iPods break to easily, and are convinced that the Zune (the older one for now) won't. True or not, there is that thinking.



    I try to explain that all of these small devices are constantly being sat upon and dropped, and so eventually they will break. But, they are teenagers, and sometimes logic eludes them when they are convinced by other friends of their own age.
  • Reply 11 of 65
    melgrossmelgross Posts: 31,986member
    Quote:
    Originally Posted by Dave K. View Post


    That is what SONY said with the XBOX. Last time I check the XBOX 360 crushed the PS3.



    Microsoft can compete with Apple still. If you don't believe that you are foolish.



    Zune 2 is not going to crush iPods, but it may take a small dent out of the iPod eco-systems.



    Dave



    MS has always subsidized the XBox, and has run up billions in losses. Most of that time, Sony has made heady profits on the PS2. The PS3 is so expensive to produce, that they couldn't compete with MS on price (let alone the very cheap to produce WII), even thopugh they subsidize its price. It also came out almost a year after the 360. That is still costing Sony in game development.



    Sony will be coming out with a $399 model, and likely dropping the price on the 80GB model to $499, so we will see.



    But, from Ballmer's statements about why the Zune did not enter the European marketplace, MS is subsidizing the Zune as well, at least, the original model. If they didn't, it likely would have disappeared.



    Sandisk is the big competitor, and it will be interesting to see how these new Zune's will affect their sales.
  • Reply 12 of 65
    the new zune is a vast improvement on the old one..but they just dont have the software to back it up...I downloaded the Zune media player on my windows machine for fun and spent about 20minutes trying to create a playlist and completely gave up trying to add new songs to it. Call me stupid its probably easy to do these things but 90% of people out there wont have a clue like me, people who dont use computers alot will hate the zune. Itunes layout is simple and easy to use with its own ipod section once you've plugged in your ipod something zune media player again lacks, and the itunes store is again easy to navigate around and is a good source for music videos and the like.
  • Reply 13 of 65
    mjtomlinmjtomlin Posts: 2,028member
    It doesn't matter if I like the features or even the way they look, I can't buy one ... I use a Mac.



    Microsoft is only interested in one thing, keeping people anchored to Windows.
  • Reply 14 of 65
    gongon Posts: 2,437member
    I think what happens to the Zune 30+80 basically doesn't matter. The volumes are small, the iPod is close, etc.



    In the flash category, any particular reason Sansa would not beat Zune? It plays music. It can act as a USB memory stick and you can have it play files loaded in it from Finder. It's cheaper (16GB for $200). Ooh it's got recording now!

    But I want mic in. \
  • Reply 15 of 65
    Quote:
    Originally Posted by Dave K. View Post


    They have the potential to take a big bite out of Apple too. The Zune 2 seems (spec wise) to be a solid product...



    Except for battery life, screen size on the flash unit, thickness, etc. And who knows about interface and trackpad, not to mention their itunes substitute?



    Nothing is going to beat iPod unless it actually *beats* iPod, on features, price, or preferably both. The only advantage anyone will likely care about is the bigger screen on the HD model, and people in that price range will be looking at the touch and iPhone as well. I think it really says something that MS is only able to match prices instead of beating iPod prices, especially since we know they have been willing to lose money on products to gain market share.



    Wifi is a great feature if you're using it for internet, but just for syncing, especially if the zune implementation is as crippled as has been reported, is a waste of the hardware.



    Quote:
    Originally Posted by Dave K. View Post


    That is what SONY said with the XBOX. Last time I check the XBOX 360 crushed the PS3.



    Microsoft can compete with Apple still. If you don't believe that you are foolish.



    Zune 2 is not going to crush iPods, but it may take a small dent out of the iPod eco-systems.



    Let's see. Xbox gained Halo, a killer app that sold consoles, by buying bungie. Zune can't do the same by buying a record company. Xbox was sold at a BIG loss, the same can't be done with Zune since there's no game sales to subsidize the loss. And don't forget that Sony completely botched the PS3 release and basically handed a ton of sales to MS.



    It's certainly possible for someone like MS to take away the market from iPod. It's just not going to happen with the current generations from each company.
  • Reply 16 of 65
    addaboxaddabox Posts: 12,660member
    I think it's also important to distinguish between "taking away some market share" and "posing any kind of real challenge".



    Of course MS will sell some Zunes. Of course, some of them will be bought by the congenitally anti-Apple. Some people may decide that WiFi is a must have feature.



    But in numbers sufficient to mean anything? I don't see it.



    The new Zunes are OK. The WiFi thing is OK (hard to say without seeing the implementation) but isn't a game changer. Beyond that, there's nothing there to win over iPod users, or to turn the heads of newbies, beyond random taste.



    One thing I never see mentioned is the way the design and marketing of the Zune is so aggressively "this is what our marketing people told us teenagers like", whereas the iPod lineup feels much more "everybody welcome".



    How many iPods are sold to people over 25, do you think? How appealing is the Zune pitch to people over 25? Colors straight from the shelves of Old Navy, desperate flaunting of "social networking" buzz, ad campaigns with that high-contrast, flash-bulb "youth in mid-party" style.... it all has that slightly claustrophobic, smoking in the alley vibe.



    The whole Zune enterprise just reeks of calculated demographic whoring, compared to the iPod, which reeks of "we made the coolest MP3 players we could, then hired a good ad firm to sell the hell out of them."



    The marketing people look to be all over the Zune from the ground up, which is the fundamental difference between MS and Apple.
  • Reply 17 of 65
    rayconraycon Posts: 33member
    The article said that Microsoft will continue to sell the original Zune. My guess is they have a large stockpile of unsold merchandise they need to unload. The old Zune will be discontinued when they eventually run out, which may be... um, er, never?
  • Reply 18 of 65
    Quote:
    Originally Posted by RayCon View Post


    The article said that Microsoft will continue to sell the original Zune. My guess is they have a large stockpile of unsold merchandise they need to unload. The old Zune will be discontinued when they eventually run out, which may be... um, er, never?



    Um, maybe they can put them in as prizes in cereal boxes



    Just a thought...
  • Reply 19 of 65
    bigmigbigmig Posts: 77member
    Quote:
    Originally Posted by Lisamacnewton View Post


    Um, maybe they can put them in as prizes in cereal boxes



    Just a thought...



    Nah, they're better off selling them all to this guy at a 90% discount. He can rip out the guts and turn them into a sellable product in the retail space.
  • Reply 20 of 65
    eduardoeduardo Posts: 181member
    Quote:
    Originally Posted by mjtomlin View Post


    It doesn't matter if I like the features or even the way they look, I can't buy one ... I use a Mac.



    Microsoft is only interested in one thing, keeping people anchored to Windows.





    Please, Apple is also trying to do the same thing. Get people to buy iPods and iPhones in the hope they buy into the Mac-ecosystem.
Sign In or Register to comment.