Microsoft’s Zune was dealt a blow recently when one of its large retail partners opted to not sell the Zune any longer. GameStop says that it decided to remove the Zune from its product line because of poor demand from its customers.
According to TheStreet, a GameStop spokesperson said, “We have decided to exit the Zune category because it just did not have the appeal we had anticipated. It (also) did not fit with our product mix.” GameStop did say that it would continue to sell the Zune online until it depletes its inventory of the devices.
According to Microsoft, it still has a line of big-box retailers distributing the Zune including Wal-Mart, Best Buy, and Target. GameStop profits aren’t expected to be affected by removing the Zune from the line up because most of its profits come from video games. Microsoft and GameStop expected a significant cross selling opportunity since many GameStop customers also own an Xbox 360. This cross sell opportunity never materialized.
TheStreet says that the Zune has only about 4% of the total digital media player market while rival and category leader Apple has a much larger portion of the market with its class leading iPod players. Microsoft sold around 2 million Zune's since the device launched in 2006 whereas Apple has moved 10.6 million iPod’s in the last quarter alone.
Microsoft is tweaking its Zune to provide users more features and recently introduced some significant updates for the device in the 2.5 update. Among the new Zune features were a subscription music service, new downloadable TV shows, and gapless playback among other features.