Zune Death Watch: Microsoft Zune Revenues PlummetJan 23rd, 2009 | By Elisabeth Lewin | Category: Featured Story, iPods & Portable Media Players, Podcasting
According to the filing, “Zune platform revenue decreased $100 million or 54% reflecting a decrease in device sales.”
The Zune was heralded as a product that would give the Apple iPod some real competition for market share. Zune users are a dedicated bunch, and the Zune Marketplace has some great original content that isn’t available on any other platform. However, their late entry into the portable media player market gave the iPod a head start that has been difficult to overcome.
“We make significant investments in new products and services that may not be profitable. We have made and will continue to make significant investments in research, development, and marketing for new products, services, and technologies, including the Windows PC operating system, the Microsoft Office system, Xbox 360, Live Search, Windows Server, Zune, Windows Live, the Windows Azure Services platform, and other software plus services offerings.
Investments in new technology are speculative. Commercial success depends on many factors, including innovativeness, developer support, and effective distribution and marketing. If customers do not perceive our latest offerings as providing significant new functionality or other value, they may reduce their purchases of new software products or upgrades, unfavorably impacting revenue.
We may not achieve significant revenue from new product and service investments for a number of years, if at all. Moreover, new products and services may not be profitable, and even if they are profitable, operating margins for new products and businesses may not be as high as the margins we have experienced historically.”
So, will Microsoft keep investing in the Zune, even as sales are way down and Apple’s iPod sales are up? Microsoft reportedly loses money on each xBox 360 system sold (and having to replace many units due to the widespread “red ring of death” hardware failure — our kids’ console has been repaired/replaced three times!), and yet, Microsoft has stood behind its gaming platform. Customers have stayed true to the xBox, too, given the popularity of games only available for use with that system.
Will the same hold true of Microsoft’s commitment and investment in the Zune? And what about Zune users?
Update:Â Adam Sohn, the Zune’s director of marketing, says several factors had contributed to the large drop in Zune sales.
- “Some of them are environmental,” he said. “Everyone knows that the economy is not what it was a year ago and that is hurting some folks.
- “We are in a position where the category is also shrinking. So I think those are things that affected everybody’s sales, including Apple.”
- “Last holidays we were introducing new devices,” he adds.Â ”We knew we were going to be at a lower volume simply because of the external factors and what happened with the 30s,” he said.
- Sohn alsoÂ once againÂ insisted that the company was not giving up on Zune hardware.