Zune Sales Down 54 Percent: Will Microsoft Fight to Save Its Digital-Music Player?

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The ongoing saga of the Zune has reached another sad chapter as Microsoft revealed that sales of their digital-music player were down 54 percent in the fourth quarter of 2008 compared to the same time period in 2007. According to an analysis on industry blog Coolfer, Zune revenues amounted to approximately $117 million in Q4, down $100 million from the '07 total. Meanwhile, over the same period, iPod sales were up. While Zune held on to four percent of the market share for portable digital-music players, iPod maintained a whopping 71 percent.

In recent weeks, Microsoft has been ready to kill off the Zune and "deeply committed" to the Zune. Confusing, no? Like most other companies during this recession, Microsoft has had their fair share of problems, including an 11 percent drop in second quarter earnings and the company's first ever round of significant layoffs. So it seems likely that the company would want to unburden themselves of their dead weight, which given its 4th quarter numbers might be the Zune.

Another problem facing the Zune is the device's reliance on an outdated $15-per-month subscription fee. Given the economic situation, plus the widespread nature of illegal downloading, consumers seem less willing to pay a monthly rate for the service. Yet fans of the Zune cite its wireless-sharing capabilities and interface as reasons to right for their player. Perhaps the crushing financial figures will be the wake-up call Microsoft needs to make adjustments and deliver an even stronger product, rather than simply hand the category over to Apple.

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