Sorry Zune, Apple's Won MP3 Market

Try as it might, Microsoft's (MSFT) mobile media player Zune still can't touch Apple's (AAPL) iPod Touch. And it may not get the opportunity to. Ever.

Microsoft rolled out its latest iteration of its flagship music and media device recently with some decent hardware and software upgrades — including the ability to stream music over the Web to a PC. The Zune can also link to a television. Apple's Touch can do neither.

The Zune should capture more share will the refresh cycle, analysts say, however, it still faces an uphill battle against Apple's iconic iPod, which accounts for a commanding 70% of the overall pure mobile-media player market in North America by some estimates.

RBC's Mike Abramsky says the impact of the Zune is "neutral" to sales of the iPod and therefore he reiterated his Outperform rating on Apple's stock vis-a-vis MSFT.

Moreover, he said in a Sept. 15 note to clients that the new Zune is launching into a declining standalone MP3 market with users shifting MP3 use to Smart phones.

iPhone has a huge, perhaps unassailable, lead in Smartphones and an easy upgrade path from iPod [iTunes, account info, content, apps all transition easily] whereas Zune — at this juncture — remains a standalone strategy into a shrinking market.

Comments

[Derek Stivers:]

Fortunately, MSFT has a lot more to ride on than the Zune, while AAPL is riding the wave of popularity of their sleek product lines. MSFT has their hands in consumer electronics as a whole. You mention competition to the iPhone, but don't mention that MSFT provides a great majority of the iPhone's competing smartphones' software. While MSFT can afford to lose the Zune completely, AAPL would be lost without their iPod. I don't think these companies can be compared solely on the MP3 player that they provide. I prefer the iPod, and own a few. I also own PCs that run on MSFT components and software.

Sep 18 07:09 AM

[mollytjm:]

As smartly mentioned in this article, Apple is already seeing people shift from the iPod to the iPhone, so in no way would it be 'lost' without the iPod. The difference between the companies is compelling. Apple not only seems to have a take on the pulse of the future, but it's also taking us there. No other company innovates like this. So the iPod and iPhone will not be the last great products...there are more coming. It doesn't mean there isn't room for others, just that Apple is here for the future and it's stock is a wonderful long term investment.

Sep 18 08:50 AM

[User 332757:]

Derek wrote: "MSFT provides a great majority of the iPhone's competing smartphones' software."

That used to be the case, but today WinMo has been dropped by nearly every major smartphone manufacturer, and it's numbers are shrinking daily.

Sep 18 09:24 AM

[bobthenoob:]

"Derek Stivers: While MSFT can afford to lose the Zune completely, AAPL would be lost without their iPod."

At least Apple makes money on everything they sell, unlike MSFT which loses money on Xbox and Zune sales. I don't see anyone else gaining ground on the iPod, it so dominates the mP3 player market that Apple competes with itself when they introduce new models.

Sep 18 09:30 AM

[pk de cville:]

"MSFT has their hands in consumer electronics as a whole."

In terms of making $$$$, the picture is very different:

- XBox - not profitable - Current Annual Profit is in, but they still have billions to pay back in R&D costs.

- Zune and ZuneHD - money loser, still

- Plays for Sure - no comment

- MSFT Retail - I wonder how this will turn out. (NOT)

- Msft support of HD Video - huh?

- Msft's Zune branded cell phone - coming in 2011! (Wait for it.)

Msft owns the enterprise (Heard of Stockholm Syndrome?). They have millions of micro surfs in IT and media doing their bidding because these guys earn their living by sucking at the msft cash machine teet.

Disclosure: Not long msft

Sep 18 09:35 AM

[JWCinNC:]

"The Zune can also link to a television. Apple's Touch can do neither."

Yes it can, just not in HD. However the HD movie that you downloaded plays in HD from your Mac. I'm wondering how many Zune users will carry around their connection package to plug into HDTVs? I wouldn't do it with either my iPod Touch or my iPhone.

Sep 18 09:48 AM

[Tom B:]

"Fortunately, MSFT has a lot more to ride on than the Zune"

Well, gee, they have a primitive, legacy operating system which has not made the transition to UNIX (as Apple did, a decade ago); will NEVER be secure; and doesn't have the performance to keep up with a world that gets more multimedia-intensive every day. And they have a widely used Office suite which is be nibbled away at by "the Cloud".

These are their PROFITABLE franchises. For now. My feeling is the Windows cult will soon be about as relevant as the OS/2 Warp loyalists. No, MSFT "going anywhere" (they have tons of cash), but they ARE much like GM, in a lot of ways.

Sep 18 10:27 AM

[bobthenoob:]

"...including the ability to stream music over the Web to a PC. The Zune can also link to a television. Apple's Touch can do neither."

From Apple.com:
"Apple Component AV Cable
Connect an iPod to your television with the Apple Component AV Cable, gather up your friends, and watch videos or slideshows together on the big screen. You can also connect the Component AV Cable to your stereo or powered speakers for a room-filling audio experience."
store.apple.com/us/pro...

You can also stream music from iPod Touch or iPhone:
lifehacker.com/317787/...

Sep 18 10:53 AM

[GetMeOnTop:]

As mentioned, you can fairly easily watch your iPod using an available cable. As far as music, just download Simply Media app and the accompanying software for your computer and voila, simple as 1, 2, 3!

Sep 18 11:17 AM

[BankOfTooBi...:]

It's no longer the device per se that is the gateway to opening new markets. The strength Apple has in the consumer space is iTunes. It's become an incredible market hopping machine. With 100 million customers (credit cards in iTunes data base), moving to another market with another 'i-something' is a lot easier for Apple than most companies. Once a new market can be defined for digital content, it's a matter of creating a hardware to fulfill that space and leverage iTunes' base as an instant market only Apple has access to. This reduces risks in a new market tremendously. The AppStore aspect of iTunes also introduced new digital content distribution/sales/profit sharing with anyone. This is compelling like nothing else in the market for consumer electronics. It's putting in the eBay component of getting individuals to profit from your platform by creating their own digital content. From this, Apple has become a major Mobile SW distributor with 1.8 billion downloads in 14 months. No one has this scale of content distribution/profit sharing/sw/hw model. This is what Microsoft, Nokia, RIM, Verizon, Samsung, Sony and others are really competing against. The hw is only the spearhead. What's behind it is a lot bigger and harder to replicate.

Sep 18 12:05 PM

[JWCinNC:]

I don't understand the hype about the radio. I have five free apps - AOL Radio, Pandora, Radio Disney, CBS Radio and NPR. I use them like presets on a radio - except with Pandora (the most used) I can get a better radio "feel". I guess I'm just not a radio junkie. I suppose if you don't have free apps then you need the radio.

I'll also never understand the subscription music model - sure it's like an all you can eat buffet - but really how often do you get your money's worth. Think about it - if all-you-can-eat was such a good deal for the consumer, how do Golden Corrals stay in business? So you lock yourself into paying $180 a year. You get to keep 120 songs max (if you remember to download 10 per month). But to listen to the other 4 million songs you still have to continue to pay? And really often are you going to turn into the music your not into, for instance do heavy metal listeners really need the full bluegrass listings? Just like at Golden Coral - I still don't eat the Brussel sprouts even though they are there.

Just not for me I guess.

Sep 18 01:14 PM

[brewer:]

Funny you think that iPod can't link to TV. No one told that to any of my iPods! Buzzzzzz, guess again. Otherwise though, not a bad article.

Sep 18 01:51 PM

[brewer:]

Derek wrote: "MSFT provides a great majority of the iPhone's competing smartphones' software."

What???? WinMob is the LAUGHING STOCK of the cell phone industry. Nothing more.

Sep 18 01:54 PM

[Harryd:]

Do not be to harsh with Derek, he obviously drank to much of Redmond's koolaid... ... Zombis!? Who said Zombis?!

Sep 19 02:33 AM

[Constable Odo:]

The Zune HD doesn't have iTunes so MS might as well just concentrate on beating the crap out of Google with Bing. Multimedia content delivery is going to win the war of PMP players and the Zune is going to come up way short no matter how good it's hardware is. Anyone who has spent any time at all in the iTunes store should realize there's more than a lifetime of content there of movies, TV shows, podcasts and iTunes University. Once Apple starts adding daily newspapers, comics, novels and magazines for their tablet device, the Zune HD is done.

Content is king for the iPod/iPhone and the Zune HD is a pauper.

Sep 20 12:21 PM

[Tom B:]

You don't think Bing will actually steal share from Google, do you? I tried it; Google seems to give better results and has a much better interface.


On Sep 20 12:21 PM Constable Odo wrote:

> The Zune HD doesn't have iTunes so MS might as well just concentrate
> on beating the crap out of Google with Bing. Multimedia content
> delivery is going to win the war of PMP players and the Zune is going
> to come up way short no matter how good it's hardware is. Anyone
> who has spent any time at all in the iTunes store should realize
> there's more than a lifetime of content there of movies, TV shows,
> podcasts and iTunes University. Once Apple starts adding daily newspapers,
> comics, novels and magazines for their tablet device, the Zune HD
> is done.
>
> Content is king for the iPod/iPhone and the Zune HD is a pauper.

Sep 21 08:31 AM

[Infinite loop:]

"including the ability to stream music over the Web to a PC. The Zune can also link to a television. Apple's Touch can do neither."

My iPod Touch is doing both as I write this. Not sure where you are getting your info from, but it is quite wrong. Also, it will cost you $90 for the Zune TV adaptor, while my Apple adaptor cost $30. Moreover, I can name 70,000 things the Touch can do that the Zune will never. Therefore, my Touch can do more for less money..........Can you say "Microsoft tax"?

Sep 21 09:17 AM

[Derek Stivers:]

Again, MY opinion is that both companies have room to grow, and don't believe that it's the MP3 player that poses the threat to the other. Having two companies that [attempt] to continually best the other is simply possibility for growth, profit and better products for the consumer.
But thank you for the "I hate MSFT, because...; iPod is so much better, because..." comments, they're always entertaining. It's not a surprise that the consumer will either go with the most function for the dollar, and each will have their followers until the end of time.
AAPL will never lose the iPod, that was hypothetical. And to say that the iPhone is not an iPod with cellphone function would be naive.
I guess the better direction to take these comments would be:
How high will AAPL go?
What kind of impact will W7 have on MSFT? Will it flop like Vista? What about releases of new products in gaming? MW2 release + holidays, should equal some gain for SNY, MSFT, ATVI, etc. Or, are we not that far out of the "recession" for it to matter?
Where will the companies go next?

Applesoft is better.

Sep 25 06:58 AM