Microsoft ‘may need a rethink’ on Zune

The mixed early reception for its Zune music player means Microsoft will have to make early tweaks if it is to stand any chance of rattling Apple’s dominance of the digital music business, according to analysts.

That should mean announcements early in the New Year of new versions of the player and more wireless facilities, they said.

Microsoft “has to build momentum” to establish Zune as a music platform to rival iPod in the long term, said Mike McGuire, an analyst at Gartner. “If they don’t make a dent this Christmas, they’ll have to move fast” to improve the product.

Launched little more than two weeks ago, the player and accompanying online music service were developed and rushed out for the Christmas season in just eight months after Microsoft made an about-turn in its digital music strategy.

Initial sales in US stores put the Zune second to the iPod. The player accounted for 9 per cent of MP3 players sold in its first week, according to NPD, a market research group, compared to Apple’s 63 per cent.

But there have been signs that early interest in the Zune has faded fast. On Amazon.com’s listing of most popular electronic products, considered one measure of broader demand, Zune on Friday morning stood at number 62. That was well below rival MP3 players from SanDisk and Creative.

While some US stores sold out of Zune players early on, with demand particularly strong in urban areas near universities, others have seen weaker sales, said Richard Doherty, a digital media analyst at Envisioneering.

The launch has also been beset by problems with the machines – from limitations on sharing music with other Zune owners wirelessly, to the incompatibility with other online music systems.

“Somewhere around version three, they [always] get it right,” said Mr McGuire at Gartner. “But I’m not sure they have that sort of time,” given the speed of iPod product development. Analysts said Microsoft should use the Consumer Electronics Show, in early January, to announce new wireless capabilities for the Zune, and launch a whole new version of the player by the spring.