Zune Price Drops: Reality Check

[Jason Dunn]

<div class='os_post_top_link'><a href='http://microsoft.blognewschannel.com/archives/2007/05/01/zune-on-sale-bad-sign/' target='_blank'>http://microsoft.blognewschannel.com/archives/2007/05/01/zune-on-sale-bad-sign/</a><br /><br /></div><em>&quot;Joe Wilcox writes that many retailers are starting to offer steep discounts on the Zune, which may indicate they are having trouble moving units. Staples is selling it for $199.99, fifty dollars off, Circuit City has it for $220. Amazon also has it for $220. So, what does it mean? Well, it could mean poor sales, absolutely...the other theory: Zune Version 2 is coming, and retailers know it, and are trying to offload inventory before that happens. It&rsquo;s certainly possible.&quot;</em><br /><br />I was reading this blog post by Nathan Weinberg and I was thinking that the online world sometimes gets so irrational it's funny. In this instance, we have a price drop on the Zune - Weinberg speculates it's because the product isn't selling very well. Possible? You bet - since you can get a 30 GB iPod for between $230 and $250 USD, the Zune at $249 isn't competitive on price at all. And when you're the underdog you need every advantage you can get - I always thought the Zune should have come out at $199 and undercut the iPod by a solid $50 margin. Weinberg's second theory is that since the second generation Zune is &quot;coming&quot;, the price is dropping to clear the current inventory.<br /><br />Reality check time: no company with an ounce of sense in their head releases a produce in November and obsoletes it by releasing a second version only five months later. I think some people were so disappointed with the first-generation Zune they're hoping it will fade away and become a memory, rapidly replaced by a newer, thinner, better version. That's going to happen eventually, but not five months after launch! That's just idiocy, and Microsoft may be a lot of things, but they've never been accused of shipping products too fast.<br /><br />I believe there's a Flash-based Zune right around the corner - perhaps coming out this summer - but I wouldn't expect a second generation hard-drive based player to show up until holiday 2007.

[Sage]

Reality check time: no company with an ounce of sense in their head releases a produce in November and obsoletes it by releasing a second version only five months later.

Cell phone manufacturers do this all the time. It's the only way to keep up with the competition.

I think it's hard to speculate on prices. I'd assume that online retailers give a discount on most products they sell (Amazon certainly do in the UK). It's only because Apple demands that no-one discounts their goods that we haven't seen similar price reductions on the iPod.

[DesertLarry]

The prices have dropped for the original colors. The pink ones are still $249. This could also be a move by Microsoft to get more units out there to increase the number of subscriptions.

[David Tucker]

Cell phones are a different industry. You've got somewhere around a billion sold year I believe. That leaves a lot of room for new phones daily.

I agree, MS isn't coming out with Zune 2.0 this summer. A flash Zune? Sure, I can see that one.

I think we will also, finally, see a real firmware upgrade. I hope. ;)

[Jason Dunn]

Cell phone manufacturers do this all the time. It's the only way to keep up with the competition.

No they don't. You will not see Motorola launching a new version of the RAZR or KRZR five months after it's released. Different phones? Sure - they have a "rolling thunder" approach to product releases. But I'm talking about a new version of a phone only five months after it's released...I've never seen that happen, even from a cell phone company.