Microsoft Still Not Killing Zune, Tries Zune Exec Team Shakeup


Microsoft (MSFT) has tried everything it can think of to turn things around for the Zune, which saw sales fall 54% last holiday season. Price cuts didn’t work. Free wi-fi at McDonald’s didn’t work. Music recommendation didn’t work. Microsoft even tried astrology — didn’t work.

But still not giving up: Now Microsoft is re-orging its Zune executive team, which means a Zune shutdown is probably off the table for quite a while:

CNET: Microsoft has quietly reorganized its Zune team, splitting up the hardware and software teams…

The software and services portion of the Zune team–the bulk of its staff–will be added to the portfolio of Enrique Rodriguez, the vice president who currently runs Microsoft’s Mediaroom and Media centre TV businesses. The hardware team, meanwhile, will now report to Tom Gibbons, who also leads the hardware design efforts within Microsoft’s Windows Mobile unit…

In an hour-long interview on Thursday, Rodriguez said the move was not made in response to recent Zune sales, but rather as the company looks to create a more unified entertainment business and gears up to expand the Zune service to be available on more than just Microsoft’s own devices.

That’s at least consistent with Microsoft has been saying for months: The company sees the Zune idea as Microsoft’s way into the music distribution business, with the Zune hardware just a stepping stone along that path.

But we ask the Zune apologists in the audience (and there are Zune fans!): With the Zune a spectacular failure, with negligible market share years after launch, on what basis does the company think people will flock to the Zune on another device?

There’s enough worries for Microsoft: A competent but unexciting Windows 7 coming, MS-Office competitors getting better every year, and a MSN badly in need of an overhaul. Far better to focus on core competencies, cut losses on the Zune and move on.