Strategic Analysis of Microsoft’s Introduction of Zune Into the Portable Media Player Market
Strategic Analysis of Microsoft’s Introduction of Zune into the Portable Media Player Market
MGMT 463 November 28, 2006 C. Braden-Moore Jeremy Hartman Brannan Schell
Executive Summary The Evolution of Portable Multimedia Players Portable multimedia players (PMPs) will top many consumers’ wish lists this holiday season. It is estimated that PMPs will exceed the $497 million generated in 20051. Portable multimedia players or PMPs are broadly defined as electronic devices that can store and play files in one or more media formats using hard disk or flash memory. Digital Audio Players Digital audio players (DAPs), more commonly known as MP3 players, are the most rudimentary version of PMPs. In 1998, Eiger Labs introduced the first MP3 player, the MPMan F10, to the U.S. market. It was a 32MB portable device that retailed for $69. However, the first mass market DAP was the Rio PMP300 introduce by Diamond Multimedia during Christmas of 1998. The overwhelming success of the Rio ignited the demand for digital music beyond the innovators market segment and jumpstarted the race for smaller, lighter, and higher storage capacity audio devices. Between 1998 and 2000, the adoption of USB connections and the utilization of hard drive memory allowed new manufacturers to introduce easier to use and more robust devices which expanded the penetration of DAPs amongst early adopters. In 2001, MP3 players crossed the chasm with the introduction of Apple’s iPod.2 With the combination of the iPod and the iTunes software, Apple provided pragmatists with the solution and convenience of managing their portable audio entertainment. At a hefty price of $399, Consumers could finally catalog, manage, and play uploaded music from CDs and legally downloaded music from online anywhere, anytime, and most importantly, very easily. Based on the three million iTunes
1 2
“Digital: Digital Wrap-Up”, Antony Bruno, 18 November 2006, Billboard. “Digital Audio Player’, 27 November 2006, Wilkipedia,
MGMT 463 November 28, 2006 C. Braden-Moore Jeremy Hartman Brannan Schell
Executive Summary The Evolution of Portable Multimedia Players Portable multimedia players (PMPs) will top many consumers’ wish lists this holiday season. It is estimated that PMPs will exceed the $497 million generated in 20051. Portable multimedia players or PMPs are broadly defined as electronic devices that can store and play files in one or more media formats using hard disk or flash memory. Digital Audio Players Digital audio players (DAPs), more commonly known as MP3 players, are the most rudimentary version of PMPs. In 1998, Eiger Labs introduced the first MP3 player, the MPMan F10, to the U.S. market. It was a 32MB portable device that retailed for $69. However, the first mass market DAP was the Rio PMP300 introduce by Diamond Multimedia during Christmas of 1998. The overwhelming success of the Rio ignited the demand for digital music beyond the innovators market segment and jumpstarted the race for smaller, lighter, and higher storage capacity audio devices. Between 1998 and 2000, the adoption of USB connections and the utilization of hard drive memory allowed new manufacturers to introduce easier to use and more robust devices which expanded the penetration of DAPs amongst early adopters. In 2001, MP3 players crossed the chasm with the introduction of Apple’s iPod.2 With the combination of the iPod and the iTunes software, Apple provided pragmatists with the solution and convenience of managing their portable audio entertainment. At a hefty price of $399, Consumers could finally catalog, manage, and play uploaded music from CDs and legally downloaded music from online anywhere, anytime, and most importantly, very easily. Based on the three million iTunes
1 2
“Digital: Digital Wrap-Up”, Antony Bruno, 18 November 2006, Billboard. “Digital Audio Player’, 27 November 2006, Wilkipedia,