iPod recommended 75%

Many big-box retailers are recommending Apple's iPod to customers asking about MP3 players about 75 percent of the time (up from 63 percent in June of 2005 and 68 percent in November of 2005), while Microsoft's Zune player only received roughly 8 percent of recommendations, according to checks performed by research firm Piper Jaffray. The firm spoke with 40 big-box retailers to gauge which MP3 players salespeople were suggesting for more than $200, revealing that some salespeople had never even heard of Microsoft's Zune player when approached during the checks, despite the fact that the devices were sold in their stores. Zune held the 7th spot on Amazon's top 10 best-selling MP3 players list during its launch week in mid-November, but the player abruptly fell out of the top 10 after the initial buzz subsided. Piper Jaffray maintains its 'outperform' rating on Apple shares with a price target of $99.

The black Zune reached the 7th spot on Amazon's top-selling MP3 players list during its launch week, but fell to the 13th spot by November 20th. Seven days later the brown Zune model ranked 22nd on Amazon's list with the white model taking the 42nd spot. The black Zune fell to no. 18 by November 27th, signifying that the buzz Microsoft was able to generate for the player's early launch helped in the first week. Much of the publicity surrounding the Zune device took the form of Zune/iPod comparisons, according to Piper Jaffray, but Microsoft's competitor failed to match up in the eyes of consumers to Apple's dominating digital media player.

Zune reviews have revealed neutral-to-negative results since the player launched on November 14th, leading the research firm to believe that the Zune will not materially impact iPod sales in the December 2006 quarter. "While it is way too early to make a call on December 2006 iPod results, our analysis of the first month of NPD data (October) for the quarter suggests iPod units of 14-15 million," said Piper Jaffray senior analyst Gene Munster. "And since the data did not reflect the early November launch of the new iPod shuffle, our current estimate could prove to be low."

Responses from clerks asked about which MP3 players they would suggest over $200 included "I've never heard of the Zune," "To be honest, I don't really know much about the Zune," "Zunes are good, but you can't play games on them like you can on the iPod," and "Who makes that (the Zune)?" Checks with industry experts revealed that the Zune advertising campaign is targeting trend-setting teenagers, and that Microsoft is placing Zune ads in magazines such as Rolling Stone and Esquire to reach its target audience. Further checks indicated that Microsoft is placing Zune ads more selectively than iPod ads: Target, Circuit City, and Best Buy ads over the holiday weekend revealed just one Zune ad, while all three stores presented iPod ads.

"These checks are in-line with our thesis that the Zune is off to a slow start; from sales perspective as well as the marketing perspective," Munster said.

Zune's tagline reads 'Welcome to the social' to emphasize the player's ability to share music via Wi-Fi -- a feature notably absent in Apple's current competing video iPod model. Zune users must purchase 'Microsoft Points' in $5 increments in order to buy songs online from the Zune Marketplace. Users receive 400 Microsoft Points for $5, with each song costing 79 points -- which equates to roughly $0.99 per song.

by MacNN Staff