Tuesday, November 20, 2007

Microsoft, IBM, and the seven dwarfs:

Well, I'm writing abut Microsoft's Zune again. Microsoft has released new Zune models. Unlike the original ones, these music players are not a joke. Microsoft is trying to crack the music player market, starting at a great disadvantage, and it is fascinating to watch them and see what they can do.

The music player market is itself quite peculiar. Apple owns the overwhelming share with its iTunes products, and then a whole bunch of manufacturers come in second and third with less than (or much less than) 10% of the market. Microsoft claimed to be the second strongest manufacturer based on their original Zune products, but their sales numbers are suspect, because they announce how many players they send to stores, not how many are actually purchased by actual users.

It occurred to me that this player market looks a lot like the computer mainframe market of the 60's and 70's. That market was overwhelmingly dominated by IBM. There were a few also-rans, which we called the "seven dwarfs." Over time, the dwarfs disappeared, one by one. (Actually I believe two of these companies still exist, but they are not in mainframe competition as their old selves; they have evolved into different markets.) The history of the dwarfs suggests that in the player market, Microsoft has simply positioned itself to gradually fail. It just might sell players longer than, say Creative Zen, Moby or Sansa.

But of course Microsoft has a few other sources of revenue. They can weather storms that would have destroyed the seven dwarfs as long as they care to. Can they stay the course and gradually catch up? One opinion I've heard is that Microsoft has established itself in the player market as a great catcher-upper, while Apple is the established innovator. That's not good enough for old MSFT. We'll see.
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