March 15, 2011 8:07 pm

Microsoft poised to axe Zune player

Microsoft is to stop making new versions of the Zune player, once the focus of its efforts to counter Apple in digital consumer electronics, as it shifts its focus to a broader software strategy to try to outflank its rival.

The failure of the Zune hardware marks an admission, after four versions of the device in five years, that Microsoft never dented the iPod’s dominant market share.

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But with smartphones, tablets and other devices creating new ways for consumers to access audio recordings, a software-only strategy for Zune could put Microsoft in a position to build a successful digital music business, said Mark Mulligan, an analyst at Forrester.

“Most of the music market hasn’t been addressed. There absolutely is opportunity,” he said. The software company’s smartphone alliance with Nokia could open a new market for Zune, given Nokia’s own failure to build a successful digital music brand, he added.

Launched in 2006, the Zune device and online store were designed as a direct competitor to Apple’s iPod and iTunes, after an attempt by Microsoft to create an “open” digital music system involving other online music services failed to catch on.

The launch of a direct copy, followed by frequent updates designed to improve the product, reflected Microsoft’s traditional “fast follower” strategy for emulating rivals.

However, the approach has not worked in consumer markets, said Michael Gartenberg, an analyst at Gartner, since Microsoft made the mistake of copying existing products rather than anticipating how those devices will evolve.

“Xbox excluded, their consumer efforts have been late,” he said. The failure of Zune hardware could be a warning for Microsoft’s efforts in the tablet market, where it has fallen far behind Apple, he added.

Microsoft refused to comment on the fate of the Zune device, but sought to shift the focus to its software strategy, which involves linking Zune to other platforms, notably smartphones and games consoles.

“We are thrilled by the consumer excitement for Zune across many new platforms, including Windows Phone 7 and Xbox 360. Our long-term strategy focuses on the strength of the entire Zune ecosystem across Microsoft platforms,” the company said.

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