Case Zune - Clash of Giants: Challenging the iPod...

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ADMS4250 Marketing Strategy York University Professor A.Rusetki 1 Clash of Giants: Challenging the iPod Everything was set up to take the long lasting rivalry between Apple and Microsoft to the new heights on November 14 th 2006. On this date Microsoft was going to start its frontal attack on Apple’s golden egg – the iPod – by launching its own portable digital music and video player called “Zune”. In 2001 Apple whose market share in computers was flat and unimpressive pioneered a market of digital music players by introducing the iPod – a stylish little gizmo allowing to download, store and play music. The move paid back: in five years in the United States alone the market exploded from $1.9 billion in 2001 to $5.7 billion in 2006. The market for accessories followed, growing from $50 million to $2 billion. And in 2006, Apple was the uncontested king of the industry (see Figure 1), offering variations of its iPod to different groups of customers: from cash-starved teenagers to affluent people looking for style and status. Creative Labs 3.6% SanDisk 3.1% Samsung 2.8% Apple Computer 75.9% Other 14.6% Creative Labs, 4.3% SanDisk, 9.7% Samsung, 2.5% Other, 7.9% Apple Computer, 75.6% 2005 2006 Figure 1: Shares in the digital music player market For five years Microsoft observed Apple’s runaway success but decided to join the game when video capability has been added to the iPod in October 2005. In less than a year, Apple sold more than 35 million videos through its iTunes web store. Only in the 2 nd quarter of 2006, iPod-related sales brought in $1.5 billion in revenues! Factor in more than 58 million devices and billion songs sold by Apple in 5 years, and it will become apparent that such market could not be ignored for long. But entering it posed a challenge even for a giant like Microsoft. The cornerstone of Apple’s success was the seamless integration between the device and the online iTunes download service that Apple provided. Following time-proven company’s philosophy, iPod and iTunes were proprietary systems that could only work together: songs downloaded from iTunes
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This homework help was uploaded on 04/08/2008 for the course ADMS A83925 taught by Professor A.rusetski during the Winter '08 term at York University.

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Case Zune - Clash of Giants: Challenging the iPod...

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