Microsoft Zune Eats Apple iPod Dust in Holiday Sales

OK, it's really no shocker that Apple's iPod touch trounced Microsoft's Zune HD in holiday sales. But couldn't the Zune have at least done a little better? Amazon's list of Bestsellers in Electronics has the iPod touch in the second and third spot, (8GB and 32GB models), while the Zune HD (32GB) languishes at number 89.

Sure, the hugely popular iPod touch benefits from Apple's marketing brilliance, the iPhone glow, and the lure of 100,000-plus games and other time-wasters in the App Store. It also has the major advantage of being cool with the younger crowd: Kids want an iPod touch, not a Zune HD.

But the Zune HD, which received favorable reviews from the tech press when it debuted in September, has a lot going for it too. PC World contributor Dan Tynan sums it up nicely:

"From its luscious multitouch OLED screen to its slick social media tools, the Zune HD is as cool as anything that doesn't have an Apple logo. The HD stands for both high-definition radio--the new Zune handles music and data streams from multicasting radio stations--and high-def video. Using an external dock, you can connect the Zune HD to your HDTV and watch movies at 720p. Log on to the Zune Marketplace via Wi-Fi, and you can buy tunes and shows, [and] stream music."

Want more proof? The Zune HD was ranked #22 in the PC World 100: Best Products of 2009.

Unloved Zune

Several factors contributed to the Zune's lackluster holiday showing. First, the MP3 market has reached the saturation point, at least in the U.S.

"MP3 players have been down year over year over the holiday season. The whole category has really been struggling," says NPD Group consumer electronics analyst Ross Rubin, who points out that MP3 functionality is migrating to smartphones.

But the Zune HD isn't your run-of-the-mill media player. And if the MP3 device market is tanking, why is the iPod touch still selling like crazy?

"The Zune HD is a higher-end product, obviously designed to compete with the iPod touch, which has done well for Apple, but which has had the benefit of leveraging the iPhone's success, and applications and [the App Store] ecosystem," Rubin says.

"Microsoft has released some games for the Zune. The device has the Tegra processor, so it's pretty capable from a 3D [gaming] perspective," he adds. But Microsoft has not opened up the Zune to third-party developers the way Apple has with its iPod/iPhone platform.

Other Plans for Zune?

Microsoft didn't exactly go all out to promote the Zune HD to holiday shoppers, which leads one to wonder: What are Redmond's long-term plans for its media player?

"Microsoft has said the Zune, moving forward, is going to be less of an integrated device and service, and more of a media brand available across multiple platforms, such as Xbox, where it already is," Rubin says.

The Zune HD's best features, such as its OLED screen and multitouch interface, may migrate to Windows Mobile devices over the next few years. But the device's future as a standalone media player isn't looking very bright right now.

Contact Jeff Bertolucci via Twitter (@jbertolucci ) or at jbertolucci.blogspot.com.

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