Microsoft Said to Stop Releasing New Zune Models as Demand Ebbs
Microsoft Corp. (MSFT) will cease introducing new versions of the Zune music and video-player amid tepid demand, helping the company shift its focus to mobile phones, according to a person familiar with the decision.
Context & Ripple Effects
The Zune has been a five-year struggle for Microsoft: it launched to a slow start against the iPod in 2006, and even when holiday supply of the second-generation player ran short in 2007, Microsoft was reduced to blaming popularity for what looked like modest volumes. By May 2010, Bloomberg reported the company was weighing cutting Zune music pricing to contend with Apple and online services — a signal that hardware alone wasn't carrying the franchise.
Today's report — picked up the same day by Engadget and Silicon Alley Insider — says Microsoft will stop introducing new Zune models entirely, per a person familiar with the decision, and fold the effort into its mobile push. That mobile bet has momentum of its own this week: the Windows Phone 7 Marketplace crossed 10,000 apps on March 11, though updates to the platform itself have lagged, leaving users waiting on the NoDo update past its rumored early-March date.
First-order effects
- Microsoft's hardware team stops investing in next-generation Zune players, redirecting engineering and marketing toward Windows Phone 7 at exactly the moment the marketplace app count is accelerating.
- Existing Zune HD owners face an aging device with no successor announced, while the report frames Zune software and services as the surviving layer rather than the player itself.
Second-order effects
- Apple faces no remaining first-party challenger in dedicated media players, locking in the iPod's share of a shrinking-but-still-lucrative category.
- Music subscription and download services tied to the Zune brand now compete on Windows Phone and other screens instead of bundled hardware, changing how Microsoft monetizes music — the pivot its own 2010 price-cut deliberations anticipated.
Third-order effects
- If the pattern holds across the industry, the standalone media player disappears as a product category, absorbed into smartphones where carriers and app ecosystems — not device makers — set the terms.
- For Microsoft, exit from consumer hardware niches it cannot win reinforces a services-and-platform identity, concentrating its consumer fight with Apple and Google on phones rather than devices.
The trend: Dedicated media players are being retired into smartphone platforms, with Microsoft folding Zune into Windows Phone as the iPod era gives way to the app-phone era.