Can Obama Save the Zune?

President-elect Barack Obama has his hands full these days. Curing the ailing economy is just one of the many challenges that await him in the White House. However, he can now cross "Save the Zune" off his list. All he had to do was to power one up while jogging on a treadmill next to a newspaper reporter earlier this week.

"He hopped on the machine next to me and broke a mean sweat while reading a copy of USA Today and listening to his Zune," wrote Philadelphia City Paper reporter Neil Santos.

Conspiracy theories swelled. Wasn't Obama an Apple (Nasdaq: AAPL  ) fan? Didn't Michelle Obama buy her husband and two daughters MacBooks so they could all stay connected during the campaign? Wouldn't an iPod be the obvious portable media player choice?

Oh no! Microsoft (Nasdaq: MSFT  ) got to Obama.

Coming Zune to a White House near you
The incredulous reaction to spotting any Zune in the wild --  much less one in the hands of the country's next leader -- found Santos posting a follow-up yesterday afternoon.

"I vividly remember Obama pulling out an MP3 player with his left hand while exercising on the machine," he clarifies. "It had a dark case protecting it, and from what I saw, he was using a Zune. I've seen a Zune in action. I know what it looks like."

Was it a Zune? Is it his Zune?

Obama with a Zune wouldn't be outlandish. He has had no problem reaching across the aisle in the past. Turning over his Research In Motion (Nasdaq: RIMM  ) BlackBerry next month -- not an iPhone -- has him bummed out.

Like the other 96% of media-player owners who chose a different product, I poke fun at the Zune ... but I can see Obama with one. He's taken on a strict gym regimen lately, and Zunes come with built-in terrestrial radio transmitters. I would rather have the country's leader tuning in to current events as he jogs on a treadmill than merely shuffling through the best of Bananarama.

However, if this story is accurate -- and you know that the media is going to love grabbing clips of Obama in motion -- Zune just scored the mother of all product placements, at a time when it needed it the most.

Death sentence retracted
"Kill the Zune," I suggested back in May.

I was serious. Even the Xbox-centric GameStop (NYSE: GME  ) stopped stocking Microsoft's media players, and all that Microsoft had to show for two generations of device, after two years and a huge marketing blitz, was a 4% sliver of the market.

Q1 2008

Market Share

Apple iPod

71%

SanDisk

11%

Zune

4%

Creative

2%

Source: NPD Group.

Microsoft doesn't have to catch up to Apple to be a success, but when even flash-memory giant SanDisk (Nasdaq: SNDK  ) is squinting to see you in its rear-view mirror, you know you're running a losing race.

If Obama gives the Zune more high-profile exposure over the next few years -- and honestly, even Santos isn't 100% sure that it was a Zune -- how can Zune's market share not grow? When you're at 4% as Zune was earlier this year, it's hard to fathom things getting much worse.

Oh, sorry, Creative Labs. I didn't see you there.

Gym rummy
Apple is certainly vulnerable on the iPod front. Its revenue in that segment inched just 3% higher in its latest quarter. If the market for portable media players is peaking, that's definitely bad news -- but it may not be the case. Apple is also moving a ton of iPhones, and they have the complete functionality of the iPod touch.

In other words, the iPod is still growing in popularity. Now, if only the Zune can catch a break.

Speak of the devil...
Kaufman Bros. analyst Shaw Wu issued a note yesterday, warning of spot outages of select iPods through several retailers, including Amazon.com (Nasdaq: AMZN  ) and Wal-Mart (NYSE: WMT  ) .

A quick check on Amazon last night revealed that the 8GB iPod touch won't be in stock until next week, but most of the other models are readily available. That isn't enough to send shoppers scrambling to SanDisk and Microsoft. In fact, 17 of the 20 bestsellers on Amazon's media-player list were iPods. SanDisk claimed the other three slots, with the first Zune clocking in at No. 21.

However, Wu did see the run on iPods growing as the holiday drags on, with wider shortages to follow. Zune has rarely caught a break since its 2006 rollout, but now it seems to have caught a pair.

Obama? Outages? The Os have it.

Speaking of Zune, did you hear the Zune Phone rumor?

Wal-Mart Stores and Microsoft are Motley Fool Inside Value recommendations. GameStop, Amazon.com, and Apple are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz doesn't own a Zune. He does not own 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.


Read/Post Comments (3) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 04, 2008, at 10:57 PM, FeastOrFamine46 wrote:

    What a headline!

  • Report this Comment On December 05, 2008, at 2:06 AM, CHughIV wrote:

    The only reason IPods are doing better is because they A- Came out first and B- Have more advertising. I have owned every type of Zune to come out, and I have NEVER had a problem with it. Yet EVERYONE that I know with a IPod has had some type of problem.....

    Buy a Zune.

  • Report this Comment On December 05, 2008, at 8:26 AM, TMFBent wrote:

    I was thinking of swapping away from the "brown t*rd" Zune I got on launch (a collectors item someday, I hope) for an iPod, but I have never been able to do it.

    1) The Zune UI is much improved and I like it much better than any of the iPod UIs.

    2) The subscription service is a great way to get new music, and they upgraded it so you can download and keep 10 tracks per month at the same price ($15 per month). Those tracks can include high-quality, DRM-free MP3s

    3) Zune's online service, with mixview, is really great.

    4) There are great personalization choices at http://www.zune.net/en-us/mp3players/zuneoriginals/default.h...

    5) If you have high-end vista (with the media center) you can send recorded programs straight to your newer Zune.

    What Zune needs to do (besides getting Obama to show his around) is:

    1) Make a tiny flash portable. Something "shuffle" sized.

    2) Work on battery life.

    3) Get the overall size down on the mid-sized Zunes. They're far too big, and their screens are too small.

    4) Work on the "buy from radio" feature. It's very unreliable (mostly owing to the junk text strings attached to the song tracks played by the radio stations, but some smarter software might be able to sift out the junk text).

    5) Set up partnerships with Starbucks, and others, for WiFi use for song purchases.

    6) Promote the WiFi sharing player-to-player. When it works, it is a very cool way to be introduced to new stuff.

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