Microsoft to drop all Zunes except for HD model

IDG News Service - Microsoft plans to drop all of its Zune models except for a new high-definition (HD) version that is due out in two weeks, the company confirmed Wednesday.

Microsoft said it will continue to offer the flash Zune 4GB, 8GB and 16GB devices and the 80GB and 120GB hard-drive devices until they are sold out. However, the Zune HD device -- which will be available Sept. 15 and features a touch screen, HD radio, HD video-out capabilities and an Internet browser -- will be the sole Zune device the company manufactures going forward.

Microsoft also plans to launch updated Zune software and service when the Zune HD becomes available. Additionally, a Zune video service will be available on Xbox Live, Microsoft's marketplace for its Xbox game console and related products, later this year, the company said.

News that Microsoft was dropping all of its Zunes except for the HD version was reported Wednesday on longtime Microsoft watcher Paul Thurrott's Supersite for Windows blog.

The Zune HD, the first touch-screen version of Microsoft's multimedia player, is meant to bring the product on par with Apple's iPod Touch and give Microsoft a stronger competitor against other high-end MP3 and video players.

The Zune, introduced first nearly three years ago, has not fared particularly well against competitors. Microsoft dissolved its separate Zune division some time ago and the product now is part of its TV, video and music business, which Corporate Vice President Enrique Rodriguez oversees.

Microsoft's move to focus only on the Zune HD is to cut its losses at the low end of the market and prepare the way for next-generation Windows Mobile smartphones, which likely will have some of the features Zune has now, said Matt Rosoff, analyst with Directions on Microsoft.

"They still want to be in this business primarily as a way to keep the brand alive, keep the service going and maybe pave the way for the next generation of the Windows phone, which I assume will have similar form factors and have the Zune software integrated into them," he said.

Rosoff added that the Zune HD actually has some attractive features that go above and beyond what Apple's iPod Touch offers -- such as the ability to buy a monthly subscription to listen to an unlimited supply of music from the Zune Marketplace via a Wi-Fi connection. However, Microsoft was so late to market with a richly featured device that it lost consumer interest very quickly, he said.

"They launched weak," Rosoff said. "By the time they got it right nobody cared."

Zune HD faces other market challenges ahead of its launch Sept. 15. One is that Apple has scheduled a Sept. 9 press event at which many expect the company will move iTunes and the iPod products forward.

Another is that Microsoft's general manager of marketing for Zune, Chris Stephenson, recently resigned from the company and plans to leave on Sept. 4 before the Zune HD's launch, Microsoft confirmed Wednesday. Stephenson is leaving to become the chief marketing officer for Interscope Records in Los Angeles.

Through its public relations firm, Microsoft said it remains committed to its Zune strategy to provide a "great entertainment experience through software and services across multiple screens and devices," and Stephenson's departure won't deter the company's commitment to the Zune HD.