Investing in the 21st Century
Unraveling the Zune vs. iPod Battle
September 14, 2006
Take a closer look at Microsoft and Apple’s new portable digital media players, and their prospects for the upcoming holiday season.
The wildly popular Apple (AAPL) iPod has finally met a worthy competitor in the Microsoft (MSFT) Zune. Both Apple and Microsoft uncovered their new portable digital media player models this week, promising a very exciting holiday season. Apple currently claims about 75% of the market for digital media players in the United States. Both the Zune and iPod boast innovative features, yet remain distinctive in their capabilities.
Microsoft’s foray into the digital music market will not be a financial boon, but is sure to make a splash in the marketplace. In similar fashion to the Xbox, the Zune unit will not be profitable for several years. Microsoft hopes to establish a foothold in the flourishing market and attempt to take a bite out of Apple. Other competitors like Creative Technology (CREAF), SanDisk (SNDK), and Sony (SNE) have experienced limited success in drawing consumers away from the ubiquitous iPod.
The Zune is capable of eroding some market share away from the iPod because of a strong marketing campaign, and its ability to boast several unique features. The Zune will feature a screen of three inches – a half inch larger than the new iPod’s. The most intriguing aspect of the Zune is its wireless capability. In addition to having an internal FM tuner, you will be able to share music files with friends, after purchasing them from Microsoft’s new Zune Marketplace of course. The Zune Marketplace will be a direct competitor to Apple’s iTunes service. Purchasing a song from the Marketplace will allow you to wirelessly share the song up to three times in three days with peers.
Toshiba will manufacture the Zune with a 30 gigabyte capacity. Pricing for the product has yet to be announced. Microsoft has also not given any indication on what it will charge users to download music. Apple currently charges a flat 99 cents per song to download through iTunes. Additionally, Apple launched a movie download service this week that charges between $9.99 and $14.99 per film in near-DVD quality.