It was a year ago that Microsoft launched Zune, an MP3 player that competes with Apple's higher-priced products and has flipped the two companies' rivalry on its head. With a modest ad budget by Microsoft standards, $9 million in measured media for 2006, Zune gained a 10.8% market share in the $250-plus-hard-drive segment, barely a shadow of Apple's 86.1% share, according to NPD. Microsoft's share of all MP3 players is a mere 2.2%.
As if that wasn't enough pressure on Zune going into the big gift-giving season, SanDisk and Samsung are gaining momentum in the lower-priced, $100-to-$200-Flash-based-player segment. "In the past year, the market has taken a dramatic shift to Flash-based devices, which are less expensive and smaller," said Ross Rubin, director-industry analysis, NPD.
Pulling a 180
Microsoft's solution: Raise its ad budget considerably, ditch its tagline and turn to a new ad agency.
"It's a launch to get the brand going -- our first big campaign," said Chris Stephenson, general manager of global marketing, Microsoft Entertainment. He would not disclose spending, but it's already almost twice last year's entire budget -- $17 million for the first six months of the year, according to TNS Media Intelligence.
Zune's launch campaign had a big emphasis on alternative marketing, such as its Zune Arts program consisting primarily of a website, zune-arts.net, featuring short films and music from up-and-coming artists, all of which focused on the theme of sharing and friendship. The program has wound up in the New York Museum of Modern Art. Independent shop 72andSunny, El Segundo, Calif., remains agency for Zune Arts' planned relaunch later this month.
But ad duties for Zune overall were shifted to McCann-Erickson's new San Francisco T.A.G. unit -- and because Zune needs mass reach and fast, it will be very heavy on TV.
Straddling new, old
"We're in a transition phase in media," Mr. Stephenson said. "We recognized the opportunities in community and online and digital, but we're still in a space where TV has a place in aggregating audience," he said. "The reality of media today is that TV aggregates the best audience."
The new campaign includes 60- and 30-second spots illustrating a journey inside the Zune. Spots will run on cable's Comedy Central, ESPN and other cable channels, as well as during network prime-time programming such as "Grey's Anatomy" and "Desperate Housewives." The effort also includes ZuneJourney.net and banner ads, as well as print buys and cinema.
Moreover, Zune is dropping its original strategy, which painted the iPod as an isolating device and Zune as more social because its tunes can be shared among users. Now the campaign is centered on the individual and tagged "You make it you." The iPod "has become a superficial status symbol," said Mike Harris, partner-strategy for T.A.G. Zune is more personal, he said.
But personal or not, some believe that Microsoft has zero chance of unseating iPod. "Like the song. Like the visuals," wrote commentator Johnny Chimpo on tech site Gizmondo. "Like the new Zune. Not enough to make me upgrade my 5.5 iPod, though." Commentator Apeguero noted, "Hell, I might even by a Zune now. Oh, wait, it's not Apple compatible."
Such sentiment has, of course, put mighty Microsoft in a more humble position when it comes to MP3 players. "We are very much aware of the strength of our competition, but once our company gets into something, it will not give up," said Mr. Stephenson, painting Microsoft as a challenger brand. "It's good being in the No. 2 place -- we can fight the good fight."
He said that despite the share disparity, Microsoft has a huge opportunity for Zune. "If you look at how many people have any iPod globally, it's less than one half of a percent," he said. Much of music and entertainment is driven by software, and "no company's is better positioned to deliver on that software than ourselves."
Doesn't sound much like a challenger brand at all, does it?