Report: Microsoft shelving Zune player, not brand

Reports of Zune's death may not have been greatly exaggerated.

Citing a source familiar with the decision, a Bloomberg report this afternoon echoes rumors from mid-February, saying that Microsoft plans to discontinue making its Zune player. The Zune brand, however, will live on as media player software on Windows Phone 7, and on the Xbox 360, Bloomberg says.

The apparent reason for the shelving of the device is "tepid demand".

A Microsoft representative issued the following statement to CNET:

"We're absolutely committed to providing the best movies, music, and TV show experiences through Zune on Xbox, the PC, Windows Phone 7 and Zune devices. We'll share more information about the evolution of the Zune entertainment service and Zune hardware as future plans develop."

Reports surfaced last month that Microsoft planned to phase out the Zune brand, further splitting up the intellectual property among various product groups. Original speculation had centered on a lack of the Zune's presence among Microsoft's various product integration plans it had shared with members of the press and investors in the company's announcement of its strategic alliance with Nokia.

Microsoft's response to ZDNet US' Mary Jo Foley at the time was a similarly-worded denial:

"We're not 'killing' any of the Zune services/features in any way. Microsoft remains committed to providing a great music and video experience from Zune on platforms such as Xbox Live, Windows-based PCs, Zune devices and Windows Phone 7, as well as integration with Bing and MSN."

The Zune was originally introduced by Microsoft in 2006 at a time when competitor Apple was already on its fifth-generation iPod and just two months shy of the original iPhone. The launch of the product had played a more important role of showing that the company was willing to take risks, including competing with its business partners.

The original Zune offered a handful of advantages over the iPod at the time, with features like an FM radio and a much larger screen that detailed album art. It was also attached to Microsoft's Zune marketplace, which offered users an all-you-can eat music subscription service, something Apple still has yet to offer.

Other things Microsoft did differently from competitors were Zune's launch colors, one of which was brown; this was at a time when others were going for more basic tones. Microsoft also introduced a way to transfer songs between subscribers' players, so as to encourage music discovery on the go.

Despite these benefits, Microsoft was unable to put a sizable dent in Apple's already dominant music player market share. The player market also began to shift, as consumers began to buy hardware less frequently, instead opting to listen to music on smartphones with playback software. Microsoft attempted to address that shift with the Kin, its short-lived smartphone meets feature-phone experiment that had the Zune software built in.

As Bloomberg points out, other cracks in the strategy centered on Microsoft's team management. Less than three years after the Zune launch, the company rejiggered its approach, splitting up the product group to let the software team focus on porting the Zune software experience over to other platforms. This left the hardware side of the Zune equation to languish, with the last product refresh taking place in 2009 with the Zune HD. Even so, Microsoft has continued to put the device on store shelves, even in bulk in places like Costco, which began phasing out Apple products last year, and replaced iPods with pallets of Zune HDs in some stores.

There were also big shake-ups at Microsoft near the middle of last year, with entertainment and devices unit head Robbie Bach and CTO J. Allard both leaving the company and thus the project. The two had been instrumental in the development and launch of the Zune, along with Office, Xbox and Xbox Live.

One important thing to note here is that even if the Zune player goes kaput, the Zune desktop software continues to play an instrumental part in Microsoft's Windows Phone efforts. It acts not only as a way to sync content back and forth between PCs and phones, but as the means to update the phone's system software. It's also one of many conduits to the company's digital-content marketplace. What ends up happening to that particular piece of software will be interesting to watch.