Zune Case Study

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The core problem is a lack of overall innovation from Microsoft in entering the digital music Player market. Their core strategy of providing this device as a networking tool only appealed to 11% of the target market. Their use of innovation around the integration of wireless technology was not taking advantage of a key component, connecting to the internet to download additional media. The lack of innovation was also depicted by their proprietary use of the media that was compatible with the devices. You could only purchase music from the Zune Store, alienating partners such as Napster who standardized on the Microsoft PlaysForSure standard. There was also a lack of innovation in its marketing launch and overall campaign of Zune. The brand introduction of "Welcome to the Social" is confusing and non appealing. The limitations with sharing music in a "social" and "networking" capacity were in themselves limiting, providing only 3 days and 3 times of playing a song for even those songs that haven't yet been copy written. Microsoft, who was the leader in alliances and marketing, missed the mark with a lack of innovation here as well. Microsoft in many aspects wrote the book on alliances and partnering (Dell, HP, IBM, etc) and missed a significant opportunity in leveraging their own existing partners, such as Napster.

1. Forming key alliances that offered some element of exclusivity, with artists, retailers, or

market leaders. Microsoft needs some element of unique feature/function and access

that the market leader, Apple could not touch.

Pro's: By forming an alliance with Napster or the Rolling Stones, as they had in

the past launching their Windows 2000 operating system, would give them immediate

credibility and access to a significant existing market, an install base to capture.

Con's: To the partner, they'd have to overcome the threat of alienation of Apple

and other leaders in the MP3 market, Creative, iRiver, SanDisk and Sony. Does Microsoft

have enough brand equity to make such a power move, I think so, with the right, chosen

alliance partner.

2. Foregoing their proprietary digital access via Zune Store. By allowing a broader access to

other downloadable media, they will have expanded their market automatically by tapping

into those subscribers who may have lifetime memberships with other media services.

Pro's: Broadening their access to the 20% existing US digital media market share and

giving their core business and enterprise clients additional access points. There are core, die-

hard Microsoft clients who would adopt this technology as well if only it followed suit

to itscurrent brand messaging of open and accessible systems. Zune does not appear

to have the same level of access and open architecture that Microsoft has built its brand


Con's: By opening itself up to other access points for media downloads, it risks

it's repeatable subscription based revenue stream by locking people into the Zune Store.

However, if you look at Apple's ability to capture the market and their openness to other

media outlets, their customers seemed to have evolved to the iTunes store anyways, even

if they had other options, partially due to brand loyalty. Consumers don't seem to enjoy

being locked into only one option. Furthermore, the devices themselves should have

enough margin built in not to rely so much on the renewable subscription based model to

sustain and ensure a profit.

3. Microsoft's inability to capture the billions of CD library owners, globally who do not know or are technologically unable to convert their vast CD (WMA) collections to these portable devices. With Apple capturing the young culture so effectively, Microsoft already has an existing base of professionals who tend to be older (35-65+). If Microsoft could put a marketing campaign together, coupled with an...
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