Ever since Microsoft reported a 100 million dollar decline in Zune revenue, there’s been some question about whether we’ve seen the last of Zune from Microsoft. In a fairly candid statement, Microsoft says that’s not the case. Adam Sohn on the Zune team makes it pretty clear.
We have a broader vision than just selling MP3 players, we are thinking about more connected entertainment experiences driven by the Zune software and services for not only Zune device owners but other ‘tuners’ as well. This vision requires continued investment in the business as we grow the capabilities of what the service needs to do for other screens and devices.
I’ve speculated some different directions Microsoft could take Zune. One way Microsoft could go is uniting the Zune desktop client and Windows Media Player. It makes no sense for them to have two desktop software plays. Beyond that, they could the Zune software and port it to Windows Mobile and make that the de-facto mobile media platform. While Microsoft could continue to support the legacy Zune devices, this could serve as an exit strategy from a device business that has not served them well and allow them to make their stand in the place that makes the most sense for them, in software as a client on their phone platform. But my current thinking is Microsoft is going to stay in the hardware business and that means that they will need to re-think what devices they need to bring to market. Previous generations were OK but for the most part, reflected where Apple had been with the iPod 12-18 months prior.
Zune hardware isn’t going to help Microsoft win against Apple at this point without a major differentiation. It’s got to be about software services on desktop and mobile making the case. Doing so would solve the weak media story that Windows Mobile now tells and at the same time, resolves the desktop mess they’ve created with competing platforms. It’s also much more in line with Microsoft’s DNA. If it’s going to be hardware business as well, it means being able to strongly add value and clearly differentiate from the iPod
Is Zune dead? No, I don’t think so but I do think it could be evolving beyond being a runner up to Apple to a credible story for Microsoft to tell, linking the desktop and mobile devices through client software. There could even be a compelling hardware play here as well. Time is running out. This fall is the time where Redmond is either going to make some inroads against Apple or cede the market for portable media.
If you were in charge of Zune, what would your strategy be?