The Zune is Microsoft's version of the portable MP3 music player, developed to compete with the iPod. Microsoft had a pricing strategy to make the Zune a more popular portable music player than Apple's, but the sales figures don't reflect that it has happened.
Lower Pricing
Microsoft released the Zune at a much cheaper price than the iPod to try to outsell Apple. When the Zune was released in late 2006, the iPod was $250, while the Zune was around $100. By doing this, Microsoft lost money on every Zune it sold, hoping to make the difference back on increased sales through the Zune marketplace, which works in a similar way to Apple's iTunes store.
Grabbing the Market Share
Even though Microsoft would lose money for each Zune unit it sold, the philosophy was to create a certain saturate the market so that people would turn to the Zune marketplace over the world of iTunes that had been established by the iPod. Microsoft experts guessed it would cost the company around $300 to $400 million to grab the market share of the digital download and portable MP3 player business but it would be worth in the long run as they released newer versions of the Zune player over the next few years and charged as much as an iPod costs. With an established market and popularity from their previous sales, the product would actually start to make money, the thinking went.
Results of Microsoft's Strategy
Zune reported that its sales were above its target in the first year of release through the summer of 2007, but after that these numbers remained relatively flat, through 2009. While they sold the first million units within the first year, it took two more years for the next million to be sold, while iPod units skyrocketed with the release of the new iPod touch-screen model. In one quarter alone, Apple sold 10.6 million iPods, more than five times Microsoft's cumulative Zune sales to that date, according to Electronista.
Tags: first year, iPod Microsoft, music player, portable music, portable music player, Zune marketplace
