Microsoft Zune Sales Slow Following Strong Launch

Sales of Microsoft's heavily marketed Zune digital music player appear to have slowed following a strong launch.

On Wednesday, Microsoft's answer to Apple Computer's popular iPod was nowhere near the top 10 consumer electronics on Amazon.com. In fact, the black Zune was the only Zune model to crack the top 100, coming in at the mid-60s. By comparison, six of the top 10 items were iPod models, and one was a SanDisk Sansa player. The rankings are updated hourly.

But Microsoft was unfazed by the apparent lack of market enthusiasm.

"We are very happy with consumer reception to Zune and its sales over the past two weeks," Jason Reindorp, marketing director of Zune, said in a statement. "All signs indicate that we are on track to meet our internal business projections, and we're confident that Zune will only continue to gain traction and momentum through the holiday season and beyond."

For the first four days following the Nov. 14 launch, Zune accounted for 9% of unit sales and 13% of revenue in the portable media player market, the NPD Group reported Wednesday. The device held the No. 2 position during that time, just ahead of SanDisk but well behind the iPod, which grabbed 63% of unit sales and 72.5% of revenue.

"It was a successful launch week for Microsoft, considering it's a relatively high-priced device in the overall category," NPD analyst Ross Rubin says.

At $250, Zune is competitive with the iPod. But experts expect Zune to initially grab market share from competitors other than Apple. While many of those devices, including the SanDisk Sansa, can't match the 30-Gbyte storage capacity and other features of Zune, they're much less expensive, a factor that impact sales during the holiday shopping season.

"We'll see how [Zune] does this holiday season when price competition is very strong," Rubin says.

Interestingly, devices that use Microsoft's Windows Media copyright-protection technology outsold Zune collectively during its first week on the market, Rubin notes.

Devices using Windows Media fall under the "Play For Sure" brand, which means they can play music downloaded from any online store supporting the format. But there have been compatibility problems with the players, and Microsoft is using a different technology with Zune, which is tied to its own online store. Apple uses the same proprietary strategy between the iPod and the iTunes music store.