Outgunned 8-to-1 in share by the unstoppable iPod, Microsoft is overturning its marketing strategy for Zune -- and will rely more on traditional media to go after the white blight.
It was a year ago that Microsoft launched Zune, an MP3 player that competes with Apple's higher-priced products and has flipped the two companies' rivalry on its head. With a modest ad budget by Microsoft standards, $9 million in measured media for 2006, Zune gained a 10.8% market share in the $250-plus-hard-drive segment, barely a shadow of Apple's 86.1% share, according to NPD. Microsoft's share of all MP3 players is a mere 2.2%.
As if that wasn't enough pressure on Zune going into the big gift-giving season, SanDisk and Samsung are gaining momentum in the lower-priced, $100-to-$200-Flash-based-player segment. "In the past year, the market has taken a dramatic shift to Flash-based devices, which are less expensive and smaller," said Ross Rubin, director-industry analysis, NPD.