23 Jan 09 Zune sales are down 54% from last year

No industry is safe from our current financial crisis. Yesterday Microsoft reported that they were planning to cut 5,000 jobs over the next 18 months, including many from their Entertainment division (Xbox/Zune). More gloomy news surfaced today as it appears Zune sales revenue is down $100 million, or about 54% from last year.

There are a few factors for this of course. We're in the midst of a deepening recession and things like MP3 players take a backseat to paying off credit card bills and the mortgage. For those that are in the market for a new player, the Zune is simply not a safe bet compared to iPods. People want a product that they've seen others have success with, rather than trying something new that might not work as well. It's the reason iPod sales continue to dominate this industry, even when the market is stable. Truly thinking different is risky it seems.

My last contributing factor is the lack of any new Zunes. There hasn't been a new Zune for over a year now. This is one of the major downsides to releasing new software updates, but not making any hardware changes. Sure it's beneficial to existing Zune owners, but your average consumer isn't aware of a new software update. Thus, all they see is the same product that's been on the shelf since November 2007. Apple on the other hand releases a new iPod once or twice a year and that helps to keep their momentum going. A new color Zune, higher capacity, or a"Special Edition" isn't going to lead to a steady increase of sales. It might provide a small bump, but nothing compared to a new player.

Although this news looks bad on the surface, I'm not too worried about the Zune. It has become the clear alternative to iPods and Microsoft isn't going to abandon it so prematurely. They just need to release something new. If I had to guess what that was, I'd say a touchscreen Zune is what they need and what many of us want.

SEC report

via engadget

Thanks zip22