Zune faces long road to selling 1 million by June

Microsoft expects to sell more than 1 million Zune digital media players by the end of June, an executive said Wednesday.

"It's pretty much spot-on with where we thought we would be at this point," Microsoft corporate vice president Bryan Lee said of the company's first public-sales forecast for the player.

Based on Zune's performance since hitting the market Nov. 14, Microsoft may have a tough time reaching its goal, said Stephen Baker of market researcher NPD Group.

"It's not out of the realm of possibility, but I think given what they've done the first couple weeks, it's probably a stretch," he said.

In its debut week, Zune was second behind Apple's iPod with 9 percent of the market. It slid to 2.1 percent the following week, largely because other manufacturers such as SanDisk slashed prices to kick off the holiday-shopping season, Baker said.

The actual number of Zunes sold, which neither he nor Microsoft disclosed, was relatively stable for both periods, he added.

Lee downplayed the importance of the weekly sales numbers, as did NPD, which doesn't usually report on sales so frequently.

One thing that surprised Lee from the first three weeks of sales is that the Zune appears to be expanding the market for digital music players rather than taking market share away from competitors.

Lee reiterated the message of other Microsoft executives: Zune is a long-term effort, and the company doesn't expect to unseat iPod right off the bat.

"It's really a 10-year goal, if you will, and our goal in the first phase is to become relevant in the space, to get out and make sure that the music industry, press, retail, analysts all look at it and say, 'Yep, Apple is still the market leader, but Microsoft is out there. They are making an inroad, much like they did in gaming five, six years ago,' " he said.

Also, Lee noted, Microsoft is offering only one product, compared with the many flavors of iPod. He said the 1 million-unit forecast is based on only the 30-gigabyte, hard-drive based Zune, which sells for $249, and is for sale only in North America.

Apple's iPod, on the market for five years, comes in varieties including high-end hard-drive players and tiny clip-on devices that use flash memory and sell for as little as $79. Apple sold more than 14 million iPods during the last three months of 2005 and commands about three-quarters of the market today.

During the iPod's first five months on the market in late 2001 and early 2002 — a time when the market for digital music players was still developing — Apple sold about 182,000 units. It quickly expanded its iPod line in 2002.

"Without more offerings, especially at lower prices, it will be hard [for Microsoft] to build volume," Baker said.

Microsoft is planning to expand the Zune line, but Lee offered no specifics, other than to say the company will build on the wireless sharing feature that differentiates Zune from iPod.

"The fun thing about wireless is there are a thousand things you can do with it," he said. "The challenge is how to pick the right three or the right five."

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com