GameStop stops selling  Zune, but it's fair play

So, GameStop has decided to stop selling the Zune, Microsoft’s portable media player. It’s a decision that seems to make sense.

The large retailer of all things gaming “may have originally elected to carry Zune with the expectation that it would become more gaming-focused over time, and that really hasn’t happened,” said Susan Kevorkian, portable media player analyst for IDC Research.

“Zune comes out of the same group at Microsoft that produces the Xbox,” she said. “And when Zune was introduced in fall, 2006, there was a lot of buzz around the possibility of offering game content on Zune, and more of a tight, interconnection between the Zune ecosystem and the Xbox ecosystem. That hasn’t come to pass.”  (Msnbc.com is a joint venture of Microsoft and NBC Universal.)

The Zune “is still very much a music-focused device, and for a gaming-focused retailer, it doesn’t necessarily fit into their product mix.”

Microsoft’s counterpoint to Apple’s hugely successful iPod has faced an uphill battle in many ways since it launched.

So far, more than 2 million Zunes have been sold, compared to more than 100 million iPods, which have been on the market since late 2001. In the first quarter of this year alone, Apple sold 10.6 million iPods.

There are also other highly regarded portable media players out there, from companies such as SanDisk, Creative Technology and Samsung. But Apple dominates the field with about a 70 percent market share. The Zune’s is between 3 and 4 percent.

“The Zune has always struggled, but every competitor in the segment is having difficulty standing out from underneath the shadow that Apple casts on the market,” said Rob Enderle, president of The Enderle Group, a consulting firm that studies technology trends.

“Nobody has seemed to find the right product to penetrate the iPod armor.”

Now, in addition to its music offerings, Microsoft has expanded Zune’s emphasis to TV downloads. Earlier this month, the company started selling episodes of some shows from NBC, Comedy Central and the Sci-Fi Channel at its Zune Marketplace Web site. Apple has been selling TV episodes from its iTunes store since late 2005.

‘Good momentum online’
GameStop "decided to discontinue selling the Zune as it was not working with our product mix," said Chris Olivera, vice president of corporate communications for the Texas-based company, which has more than 5,200 stores in the U.S. and in 15 countries worldwide.

Zunes are still available through GameStop until the product "runs out of its current inventory," he said.

Adam Sohn, Zune’s director of marketing, issued a short statement about GameStop’s decision.

“We have a set of great retail partnerships that give Zune a strong presence at retail including Best Buy, Target, Wal-Mart and others,” he said.

Microsoft has “seen good momentum online and at retail over the last few months, including a great response to our recent spring (software) update.”

That update, version 2.5 of Zune software, includes improvements to the what is known as “Zune Social,” an online community for Zune users, as well as improvements to the device itself to allow for “gapless playback,” multiple-device syncing and advanced song information editing, according to the company.

Gaming isn’t really mentioned at the Zune software site, although there is this reference: “Plug your Zune into your Xbox 360 console, and listen to your music while playing your favorite games, or stream media to your Xbox 360 over a home wireless network.”

That literal connection may not have been enough of one for GameStop to continue carrying Zune.

“Microsoft has been slow to address some of Zune’s shortcomings to make it more appealing to portable media owners and potential buyers,” said Kevorkian.

“For example, ever since its inception, Zune has had a very attractive color display that would suit video content,” she said. And yet, the screen was not being used to full advantage until recently when the company decided to offer “downloadable videos outside of music videos.”

Also, “since launch, the Zune has had Wi-Fi support, which is a great innovation in portable media players,” she said.

“However, Zune’s Wi-Fi can only be used to connect with other Zune users, of which there are relatively few, instead of enabling users to connect directly via Wi-Fi to an online site selling compatible content” for downloads, “without having to use the PC as an intermediary.”

Still, Kevorkian said, “Now is an opportune time for Microsoft to be making those changes because the portable media market is maturing. Some of the companies that were previously very strong competitors have faltered recently. So it’s an opportunity for Microsoft, which has the resources and commitment to the space, to further push its product. But it can’t do that without refining it a bit further first.”

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