Five things Microsoft must do to make Zune a success

Five months after its introduction, industry experts give Microsoft Corp.'s Zune media player barely passing grades in terms of its marketplace success while Microsoft insists the device is on course.

"I'd give them a B-minus," said Ross Rubin, director of industry analysis for market research firm NPD Group. Other analysts gave Microsoft roughly the same marks.

"We are very definitely on target," insisted Jason Reindorp, a Microsoft marketing director for Zune. He said there will be some changes in Zune's direction, including, possibly, a Zune phone, but said Microsoft is satisfied with Zune's progress.

However, citing market studies, the analysts note that Zune has yet to make a dent in the large market lead of Apple's iPod. They also pointed to five specific areas in which Zune must improve.

Where it stands

Five months out, here's where Zune stands, according to market studies.

NPD's figures show that Zune captured about 10.2% of the market for media players with built-in hard drives in December and just under 10% in January. Zune's market share slipped to about 8.7% in February.

Those numbers were roughly confirmed by Shawny Chen, a research analyst for Current Analysis, who said her statistics showed Zune with an 11% to 12% market share among hard disk-based media players. The two firms measure market share somewhat differently, accounting for the slightly different numbers.

Both analysts noted that hard drive-based devices only account for a quarter to a third of all media players sold. The rest use flash memory for storing media, so Microsoft actually has only a small percentage of a small percentage of the market.

Microsoft's Reindorp did not dispute those numbers.

"We're pretty content that they're tracking how we've been spending our marketing money and where we are in the product life cycle," he said.

So far, Microsoft has failed in one of their market goals -- to take market share from Apple Inc.'s iPods, Rubin and Chen agreed. Rather, it has taken sales away from smaller vendors, most notably Creative Labs, which previously was in second place behind Apple.

"It makes sense they'd pass Creative because smaller companies with lower marketing budgets will get trampled by a company like Microsoft," Rubin said.

To put the hurt on iPod, Microsoft must deal with some serious issues, the analysts agreed. Here are five steps they said Microsoft must take to get itself into the game.

1. Forget the social

Microsoft tried differentiating Zune by stressing how its built-in Wi-Fi capabilities would allow users to exchange music with other Zune users. Zune's marketing mavens called this capability "the social." That was a bad idea and should be dropped as an emphasis in Microsoft's marketing efforts.