by Playfuls Staff |
29th December 2006
There has been a happy debut for Zune in November, but the end of the year shows very few people bought a Zune to make it a Christmas present for their beloved ones. iPod and iTunes rule the market.[more]
According to Gartner Inc., the mobile music market will grow strongly through 2010, to more than five times its size at the end of 2005, and reach $32 billion. Mobile operators stand to gain a lot, but face many hurdles in the race to be the main winners in this market.
So how are the two main competitors on the market doing? Well, it seems iPod maintained its undeniable supremacy this year too, while Zune only enjoyed a brief period of glory, right after its launch.
It looks like iPod’s success is not only ensuring Apple’s dominance in the MP3 player market, but it also skyrockets the sales on iTunes. In the pre-Christmas period, users literally attacked Apple’s music download service, probably overwhelming the company’s servers and exceeding even the most optimistic expectations of the Cupertino-based giant. This is why most of them started complaining about long downloading intervals and receiving error messages.
Hitwise reported that iTunes was visited by four times more people this Christmas than last year’s winter celebration. Apparently, the problems were solved on December 26.
The crowding at Apple’s store comes right on time after previous
rumors about a slight decay in sales.
Overall, Apple still maintains a tight grip on the MP3 players market, with 82.7 percent market share for the hard-drive iPods in the first half of December 2006, but down from the 86.8 percent registered last year. Considering both hard-drive and flash-based MP3 players, Apple holds an impressive 62.2 percent market share for its gadget, almost the same percent as in 2005 (63%).
As a comparison, Zune managed to obtain 9% market share in the first week since its launch in November, making it the second most important MP3 player, but far behind iPod. Zune’s success is diminished though when we consider that it took 9% of the
hard drive MP3 player market. These numbers also do not include sales from Apple retail stores, which sell only iPod players.
Despite the heavy investments in advertising and marketing, Zune was received by consumers with indifference. A survey of 40 retailers conducted by Piper Jaffray analyst Gene Munster found only 8% of the sales people recommended Zune compared to 75% recommendation for Apple iPod, and that most of the sales people did not even know what Zune was or who made it.
In the second week Zune was the 5th most sold player, with a 2.1% market share, according to the market research firm NPD Group. The figures do not include iPods sold directly from Apple.
Overall, SanDisk was No. 2 in December with 18.4 percent of the overall market, up from 17.5 percent last year.
Zune’s sales relative to other MP3 players continue to decline, with NPD Group placing its market share at 1.9% by the second week of December 2006.
According to Gartner, Microsoft's strategy of differentiating Zune through its ability to share songs over Wi-Fi is not particularly compelling, pointing to the fact that users can't buy songs through their player.
Gartner says: "Microsoft’s claimed differentiation for Zune is based on applying Web 2.0 community concepts to the music experience. With the inclusion of an integrated Wi-Fi/antenna, Zune users can exchange or share songs by transferring them to each other. Whilst Gartner believes this is a good, high level strategy that is potentially market leading, it is not clear that the scenario Microsoft describes is all that compelling.
Consumers will not be able to buy songs or videos from the Zune Marketplace directly from the device. Instead users “share”; songs and shared songs do not remain on the receiving device permanently; rather they can be played three times in three days."
Microsoft’s “iPod-killer” (one of the pre-launch nicknames for Zune) was also among trailing competitors for iPod on Amazon.com , with the black Zune- the top selling model- ranked only 47 among the bestselling electronics products on the site. By comparison, the black iPod was ranked No.1.
Despite the negative reviews for Zune and the lagging sales, Microsoft is confident that it will meet its goal of having about 1 million Zune owners by the end of June 2007.
Jason Reindorp, marketing director for Zune at Microsoft, said: "We're forecasting just over one million units for the fiscal year. We feel pretty good about that number."
"We think that's actually pretty awesome," said Bryan Lee, corporate vice president for Microsoft's entertainment group.
The Zune's 1 million figure "is spot on with where we thought we'd be," said Bryan Lee, corporate vice president of Microsoft's entertainment group. "Apple is the market leader. We didn't expect to beat them this holiday, but we wanted to be relevant and we wanted a chance to grow. I think we are on plan.”
"Over time, the market share will sort itself out," Lee added. He also expects Microsoft to eventually "be the leader" in the category, especially once the Redmond, Washington-based giant rolls out more models of Zunes and starts selling them internationally.
