Week 8 EOC: Disasterous New Products

First released in November 2006, the Zune was Microsoft’s “me too” answer to the iPod. While it had some nifty product features that the iPod lacked (like sharing music from player to player), the Zune, despite an expensive marketing effort by Microsoft, never really caught on. At its best, it was able to crack into low double-digit market share while the dominant iPod took around 65%. More ominously, in a filing with the SEC in January, Microsoft disclosed that it had seen Zune revenues decline 54% in the preceding quarter. (At the same time, iPod revenues increased by 3%.) Of all MP3 players listed on Amazon.com currently, the first Zune model comes in at 36 behind an army of iPods and a few Sansoms.Why did it fail? On a design level, the Zune lacked style and the simplicity of Apple’s interface. The Zune seemed clunky in comparison. Perhaps more importantly, though, the Zune could not be used with Apple’s iTunes program, an even more dominant product in its market than the iPod. By integrating the music experience (from cradle to grave, so to speak), Apple created strong disincentives to any competitor that just could not be overcome.

Betamax was the first home video recording tape to hit the market in May 1975. Sony, however, was not the only company that had been working on recording video data on magnetic tapes. In 1976, JVC rolled out the VHS format and a format war began. As every American born before the DVD era knows, Betamax lost. But why?Several explanations have been advanced to explain Betamax’s market failure. Sony was slower to license the technology to other manufacturers. VHS was, for a time, less expensive. Sony refused to let the pornography industry use Betamax. The main problem, though, was time. When VHS was first introduced, the tapes could hold two hours of video compared to Betamax’s one. By 1977, when JVC partnered RCA, VHS could hold four hours. As everyone knows, an hour does not a movie make. As a result, forty production companies adopted VHS instead of Betamax. In 1988, Sony conceded defeat and began producing its own VHS VCRs.