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Zune Doesn't Shake iPod's Market Lead

Posted on: Saturday, 16 December 2006, 09:00 CST

By Troy Wolverton

Microsoft's Zune had a decent debut last month, but Apple Computer's iPods continued to dominate the MP3 market, according to new data from market research firm NPD Group released this week.

Although Microsoft didn't release the Zune until more than halfway through November, the company was the second-leading manufacturer of hard disk drive-based media players, capturing 9 percent of the U.S. retail market, according to NPD. Including both flash memory and hard disk drive players, Microsoft came in fourth, with 1.9 percent of the market.

The company's much-hyped entree into the MP3 player market appeared to have little affect on industry leader Apple. Although Apple's share of the hard drive market fell to 82.7 percent from 86.8 percent a year ago, its share of the overall market came in at 62.2 percent, essentially even with the 63 percent it posted a year ago.

SanDisk was No. 2 with 18.4 percent of the overall market, up from 17.5 percent last year.

Revamped versions of the flash-based iPod nano and iPod shuffle boosted Apple's overall results. Sales of the shuffle doubled year over year in November, while those of the nano grew 37 percent.

"All in all, that's a pretty good performance," said Stephen Baker, an analyst with Reston, Va.-based NPD.

Apple has dominated sales of MP3 players almost since it entered the market five years ago. In contrast, there are already questions about how sustainable Microsoft's Zune sales will be. NPD's own weekly data had Microsoft falling from the No. 2 vendor of MP3 players in its first week to No. 5 in its second week.

On Amazon.com, one of the leading vendors of electronics products online, the Zune has become a distant also-ran behind the iPod and other MP3 players. The black Zune -- the top selling model -- was recently ranked No. 47 among the bestselling electronics products on Amazon. At the same time Apple's black 30GB iPod -- the Zune's direct competitor -- was ranked No. 1.

The Zune even trailed Creative's rival 30GB Zen Vision, which was ranked No. 27.

And there are indications that Microsoft may have misread the market. The company is offering a dull brown version of the Zune in part to stand out from the competition and because it got favorable reviews in its pre-market research. But according to NPD, the brown Zune accounts for just 19 percent of all the Zunes sold, about the same amount as the white model. The black model accounts for about 63 percent of all sold.

That dynamic plays out on Amazon as well, where the brown model is ranked no. 192 and the white no. 312.

Microsoft expressed little concern about the sales. Jason Reindorp, director of product marketing for Zune, said, "We are happy with the position Zune currently holds in the market, and are on track to meet our sales projection of 1 million units by end of the fiscal year."

Contact Troy Wolverton at (408) 920-5021 or twolverton@mercurynews.com.

Source: San Jose Mercury News

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