GameStop, which makes nearly all its money selling videogames, told TheStreet.com that it made the decision about a month ago to stop selling the Zune because of weak demand. The company planned to continue selling the device online until it clears out its inventory.
"We have decided to exit the Zune category because it just did not have the appeal we had anticipated," a GameStop spokesperson told the business news site. "It [also] did not fit with our product mix."
GameStop did not return calls for comment, but Microsoft was quick to issue a statement saying its relationship with retailers remained strong.
"We have a set of great retail partnerships that give Zune a strong presence at retail including Best Buy, Target, Wal-Mart, and others," Adam Sohn, director of marketing for the Zune, said. "We will continue to invest in deep retail partnerships, and have seen good momentum online and at retail over the last few months including a great response to our recent spring update."
GameStop has more than 5,400 stores worldwide, and plans to open between 550 and 600 new stores this year. The company on Thursday reported that profits soared by more than 151% in the first quarter of the year to $62.1 million. Sales rose nearly 42% from the same period a year ago to $1.8 billion.
While dropping the Zune is unlikely to affect GameStop, it presents one more obstacle to Microsoft, which has failed to make any headway against the market-leading iPod. GameStop sells a lot of videogames for Microsoft's Xbox 360 consoles, so there had been a possibility that Xbox users might consider a Zune.
Despite a big investment in developing and marketing the Zune, which Microsoft launched in 2006, the device in the first quarter of this year accounted for only 4% of the U.S. portable music player market. The iPod, on the other hand, accounted for 71%.