On Wednesday, Adam Sohn, the head of public relations for Microsoft’s Zune division, told me: “Babies are born every day without an iPod. We will get there.”
That summarizes the challenge Zune faces from Apple — and Microsoft’s determination (at least for now) to meet it.
It’s hard enough trying to make a product that is more attractive, innovative, easy to use and cool than Apple does. But now many iPods are replacements by people who already have substantial music collections in iTunes. For those people, the choice is between buying an iPod that will simply work with all their music or investing the time and effort to try to convert everything into Zune’s formats.
No wonder that after two years in the music player business, Zune only has a 2 percent market share.
When the Microsoft delegation arrived last year to unveil the second generation of players, Chris Stephenson, Zune’s marketing head, said the company’s low market share in its first year was because it had only offered a hard-drive model at the high end of the market. With the addition of less expensive flash players, starting at $149. Mr. Stephenson said the company hoped to vault to No. 2 in the market, leaping past SanDisk.
“Fifteen percent [market share] would be great for us,” he said.
SanDisk still sells four times more music players than Microsoft does.
On Wednesday, Mr. Sohn dismissed SanDisk because most of its sales were for players that cost less than $100. Microsoft would rather add more features and sell players at higher price points, he said.
When Mr. Sohn got to the demo, I didn’t see anything in the third generation of Zunes that is going to shake up the market. Like Apple, it added capacity at its existing price points. It’s got a little trick to let you identify songs you hear listening to the FM radio and buy them from Zune’s music store.
Two years after introducing the only really groundbreaking feature on the Zune — its WiFi access — Microsoft finally will let users buy songs directly on the device using the WiFi. (Yes, Apple, which has had WiFi devices since the iPhone and iPod Touch, added wireless purchases last year.) And Microsoft has made a variety of tweaks to its PC software and to the social network it introduced last year.
I asked Mr. Sohn what the company’s research showed for why people actually bought the Zune. All these small-bore features, including the vaunted social network, weren’t on the list.
Some like the FM radio, he said. A geeky hard core likes the fact it can sync music with a computer over WiFi. And some video fans liked that the screen size of the hard-drive Zune was bigger than the iPod classic. He admitted that the new $229 starting price point for the iPod Touch, which has a larger screen yet, was going to cause some trouble in that corner of Zune’s tiny market.
Speaking of the Touch and the iPhone, I asked Mr. Sohn why Microsoft wasn’t adding more really innovative features. The evolution of music players into flexible handheld computers should play into Microsoft’s strengths as a maker of broad platforms.
Microsoft, Mr. Sohn said, is sticking to its initial conception that Zune is product that is devoted to music primarily and video secondarily. Microsoft’s entertainment and device unit, under the leadership of Robert Bach, tries to have much more focus and clarity than most other parts of the company. The Windows Mobile division, which Mr. Bach also oversees, makes software for smartphones, and one of these years will have an answer to the iPhone.
But even in music and video, it seems like Microsoft is missing the opportunity to make Zune a much more interesting platform. Most significantly, to my mind, is whether the devices can offer much more free content by the artful use of advertising. Unlike Apple, Microsoft has a big division devoted to advertising. The WiFi connections on all the Zune players would be ideal to stream ad-supported video and maybe music.
We’re working on it, Mr. Sohn told me. But last year J Allard, a top strategist for Mr. Bach, described an elaborate vision for Microsoft to be in the center of all media, none of which has come to fruition so far. Meanwhile, Apple continues to weave its way deeper and deeper into the music, video and now telephone business. And it has a shot at defining the next platform for handheld computing as well.
No wonder that Mr. Sohn is looking to this year’s crop of newborns as the real target market for Zune
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