by Playfuls Staff |
1st February 2007
Bryan Lee, the head of the Zune project for Entertainment and Devices Division at Microsoft, is leaving the company “to focus on the next chapter in his life," but analysts claim it’s something fishy about his departure.[more]
A spokeswoman for the Redmond behemoth declared that the corporate vice-president at the EDD is stepping down "to pursue personal interests.” Zune is Microsoft's digital portable media player and is also associated with the online music store (an iTunes rival). The portable MP3 player was released to the U.S. market with a 30 GB model for US$249.99 on November 14, 2006.
The EDD planned a $100 million advertising campaign for Zune, with "music the way it wants to be" as a major theme. Microsoft has enrolled approximately 300 "Zune masters" to advertise the device on American college campuses. They receive free merchandise, including a Zune; in return, they are expected to promote the item and run Zune-related events.
But apparently this was not enough. The Zune (previously called “the famous iPod-killer”) didn’t scratch the surface of the iPod.
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 last year 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.
"This is clearly a sign of trouble in Zune-land," said Van Baker, industry analyst at Gartner Inc., citing sales results for the Zune device. "It had an acceptable launch week, but then it immediately slowed down."
Molly O'Donnell, a Microsoft spokeswoman, said Lee's decision was "not at all" a sign of any concern over Zune sales. She said the company remains on track to sell 1 million Zunes by the end of June. Lee announced that target in December, describing the results to that point as "pretty much spot on" with the company's projections.
"Bryan felt that Zune was launched and on track, and now would be a great transition time for him, to focus on the next chapter in his life," she said.
In the second week since its launch 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 continued 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 said: "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” was also among trailing competitors for iPod on Amazon.com last December, 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.
The company said J Allard, a corporate vice president who oversaw the Zune’s design and development, will now take over Lee’s duties. Allard is a longtime Microsoft executive who also has played a key role in the company's Xbox video-game consoles.
Lee, a Microsoft corporate vice president who has been with the company for six years, wasn't available Wednesday to comment on his plans or reasons for leaving. Microsoft said he will stay for several more weeks, to help the transition. The company described his departure as a retirement.
With Lee heading the business side of the Zune initiative, the company struck an unusual agreement to share a reported $1 of the $250 purchase price of each Zune device with Universal Music Group. The move was seen as a way for Microsoft to build relations with major labels.
Lee was previously the chief financial officer of Microsoft's Entertainment and Devices Division. In a statement, Robbie Bach, the president of the division, said he hired Lee in 2000 to oversee business development for the original Xbox.
