As most all of you are aware, the Zune has never lived up to anybody’s expectations in terms of sales. In a far distant second place, Microsoft sells as many Zune players in a year as Apple sells iPods in a month. While it is a competent media device, there is nothing that really makes to Zune stand out as a must have device over the iPod with the exception of getting more GB for the price. Before I go any further, I should say that I am a Zune owner and will gladly point out its good points and bad when asked as I have no loyalty to a device or its manufacture. I merely purchased it because I got the 30GB version for $100 last Black Friday. Anyway, with a third version Zune still a ways away, Microsoft is trying to find any possible way it can to gain ground in the portable media marketplace.
Microsoft’s latest move to try to gain market share is around exclusive content. They are trying to take the idea behind the game console market and apply it to the portable media market. While the model of having exclusive content to sell the platform would likely work if it had a larger presence in the portable media player market, I don’t think it has much of a chance of working right now. Since Microsoft waited so long to get into the portable media player market, it is in a position where it has almost no chance of unseating Apple as the king of the portable media market. When you are in that kind of position, if you have any hope of gaining a reasonable amount of market share, you must have a product that is 50% or 100% better than your competitor. Microsoft didn’t do this and it has hurt them. There is nothing that separates the Zune from the iPod in terms of functionality. Without some kind of big distinction, they will have a hard time promoting themselves as something other than a cheaper alternative that doesn’t have the special things like the App Store. Microsoft must improve the base functionality that ships with the unit before exclusive content can make a real difference.
When you look at the gaming console market, the exclusive content model works great and always has, as demonstrated when consoles come bundled with games whether its the PS3 coming with Metal Gear Solid 4 or the NES coming with Mario Brothers. The reason that this model works here is because no console ever got to the truly dominant position or where one system tried to come out after another one already had 90% of the market. When a new generation of consoles is released, its around the same time, with similar technical specs (the Wii is a special case here as Nintendo went in another direction) so the software, the exclusive content is what really drives the sales of the consoles. Even though the Xbox 360 has similar performance to the PS3, if it wasn’t for exclusives like Halo, it would not be where it is today.
Microsoft is trying to do the same thing with the Zune, get outside media companies to make shows or other kinds of content exclusive for the Zune. While this is a perk for existing Zune users, its going to have little affect on the adoption rate of the Zune or its position in the portable media player marketplace because its not on an even playing field where it is just looking for something to set itself apart.
At this point, Microsoft almost has to wait for the next release of the Zune to have any hopes of competing with the iPod. Sure, firmware updates will get you a long way, but the hardware must be more capable before it can be a real threat to the iPod. At this point, Microsoft is just spinning their wheels with this unless they are using it as a launching platform for the third version of the Zune. If they can create a base of existing exclusive content to complement a vastly improved third version of the Zune, they might have a chance, but exclusive content on its own in this market situation is just a case of throwing money at a situation that isnt improving.