Recs

3

Changes Coming Zune

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Toss one more chunk of charcoal on the Microsoft (Nasdaq: MSFT  ) fire sale.

The software giant is hoping to reignite interest in its Zune Pass by improving the music subscription program's value proposition for Zune users. The monthly price of the "all-you-can-stream" service will remain $14.99, but now subscribers will be able to download 10 MP3s every month and keep them, at no additional charge.

For active buyers of MP3s, that adds up to a value of $9 to $10. Oh, if only there were more Zune players out in the wild.

Microsoft's portable media player is still a niche device. Despite the allure of its Wi-Fi functionality and backed by Microsoft's colossal brand and marketing budget, it hasn't made a dent in the market since its debut two years ago.   

Q1 2008

Market Share

iPod

71%

SanDisk

11%

Zune

4%

Creative

2%

Source: NPD Group.

With Apple's (Nasdaq: AAPL  ) market-defining iPod and flash-memory giant SanDisk (Nasdaq: SNDK  ) still a force with its Sansa players, Microsoft remains a distant third in this space.

Zune Pass was supposed to be Microsoft's response to Apple's iTunes ecosystem, but it just remains too small.

That doesn't mean the Zune Pass shift will go unnoticed. Open-ended music subscription providers RealNetworks (Nasdaq: RNWK  ) and Best Buy's (NYSE: BBY  ) Napster will need to respond.

Making the Zune Pass more attractive also makes the Zune more attractive, by default. It won't be enough to get the player back into GameStop (NYSE: GME  ) , where it was unceremoniously dumped earlier this year. However, in a tight economy, tacking on something tangible (such as keeping MP3s) to something intangible (such as a music subscription smorgasbord) is a great move.      

Other Zune-rific leads:

Microsoft and Best Buy are Motley Fool Inside Value picks. GameStop, Best Buy, and Apple are Motley Fool Stock Advisor picks. The Fool owns shares of Best Buy. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz can't recall the last time he saw a Zune out in the wild. Howns no shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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Rick Munarriz
TMFBreakerRick

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he now lives a block from his alma mater.

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