Zune Price Cuts, Updates

Price cuts on flash-based Zune portable music players and the ability to download 10 permanent songs per month as part of the Zune Pass subscription could help Microsoft spur sales over the holidays. At the same time, a new advertising campaign focuses on the Zune brand and software rather than the devices, paving the way for an expansion to phones and perhaps other devices.

What’s Changing

In Nov. 2008, two months after introducing its third iteration of the Zune players and software, Microsoft has made the following changes.

Price cuts. Microsoft has cut prices on its flash-based players, as follows:

• The 16GB player is US$179.99 instead of US$199.99
• The 8GB player is US$139.99 instead of US$149.99
• The 4GB player is US$99.99 instead of US$129.99

The 16GB and 8GB Zunes are US$20 and US$10 cheaper, respectively, than Apple iPod Nanos with the same capacity. (Apple does not make a 4GB iPod, but offers 2GB iPod Shuffle models—which lack a screen—for US$69.) The price cuts also make the Zune more price-competitive against SanDisk, the low-price leader in the MP3 player space. According to a May 2008 report from NPD (the most recent publicly available), Apple’s market share of MP3 players was over 70%, while SanDisk was second at 12% and Zune came third with 4%.