Zune HD, as good as last years iPod

Microsoft’s Zune  sales for 2008 show a 54% year over year decline. In other words, after a dismal start, Zune sales fell off a cliff. The decline in revenue is partially explained by heavily discounted Zunes. I’m talking about the, “Hey buddy, here’s $20 if you take this Zune” kind of discounts. 

Today Microsoft officially announced the Zune HD, due out this fall. Microsoft is famous for entering markets with terrible products, and then improving on them until they end up with something good enough to compete in the marketplace. The Zune HD will be Microsoft’s third attempt in the MP3/portable music player market.

I hereby predict that the  Zune HD will not be “good enough.” I further predict it will achieve results in the market quite similar to Plays 4 Sure devices and the existing Zune: dismal.

When used in public, the Zune is a device that gets you sympathetic looks, “aw, you asked for an iPod and got that.” The Zune has one ‘advantage’ over the iPod, its subscription model. It’s too bad that the vast majority of consumers have pulled out their wallets and voted for the $0.99 per song model. The market share Microsoft “gained” with the Zune came at the expense of their Plays 4 Sure partners, who offered that same subscription model.

By the time the Zune HD arrives, Apple will have released updated models of the iPhone and iPod Touch. The killer feature of the iPhone/iPod Touch will have added another 10,000 apps to its portfolio. The Zune HD won’t be eating dust in November. The iPod Touch is so far ahead that the dust has settled before the Zune HD arrived on the track.