Can't say this is surprising, but Microsoft is expected to pull the plug on the Zune media player line. They will keep the Zune-branded software and music services as part of Windows Phone 7, but no new versions of the Zune hardware itself will be released.

http://www.bloomberg.com/news/2011-0...mand-ebbs.html

IMO, Microsoft should have seen this coming four years ago when the first Zunes came out to tepid reviews and sales. By that time, growth in the media player market had already slowed down, and the smartphone was starting to ramp up as the new growth platform.

All too often, the Zune came across as a reactive "me too" device, that seemed to constantly copy whatever the iPod was doing a year earlier. During that time, I kept saying that the Zune matching the iPod on specs and adding a new feature or two would not get it done, because the iPod had a whole ecosystem that had developed around the iPod platform, adding significantly to its utility.

Consider that the original Zune, which copied the iPod Classic, came out two months before Apple announced the iPhone and effectively turned the entire market upside down. And then, Microsoft announced the their first flash-based Zune (which copied the iPod Nano) right after Apple released the iPod Touch. Microsoft didn't have a touchscreen Zune until late-2009 (more than two years after the iPod Touch came out).

For the Zune to make any inroads on the iPod, Microsoft had to come up with something compellingly better. By all accounts, the Zune was a decent product, and some would say a better value than the iPod. However, it was failed strategy because it brought nothing new to the table, and led to a rather predictable result -- a perennial also-ran in a declining market. Then again, I think Microsoft got exactly what they deserved, since their introduction of the Zune basically screwed their "partners" in the PlaysForSure platform -- yet another failed Microsoft media player.

With all that said, I think this does signify that the standalone media player market is effectively dead (i.e., commoditized). Apple has maintained iPod revenues by shifting sales into the more expensive iPod Touch, which is more a pocket computer than just a media player. But, the rest of the media player market has seen declining revenues and unit sales. It looks like the iPod will continue to dominate, as profit opportunities in rest of the segment wane, and Apple is able to leverage iOS to keep high margins in its share of the media player market.