Looks like Zune is dragging down the Microsoft Entertainment Division with poor sales of the portable media players putting a dent in the sales of Xbox and Windows Mobile Devices. The Zune hardware lineup is rather weak at the moment and it’s understandable that sales are flat when you have basically one player on the market.
The push towards Zune mobile services is going to take some time to play out in sales of Zune Pass or Zune video services and this may be the case for another year or more. The Zune mobile devices slated for release soon are not going to boost Zune sales unless Microsoft is able to turn these into subscriptions for their Premium Content Services.
How long this takes or whether or not it actually happens remains to be seen but I expect sales at Zune will remain weak until Holidays 2010.
The Entertainment and Devices division – which houses Windows Mobile as well as Xbox/ games, Zune and hardware accessories – saw flat revenue. This was bad for mobile – Xbox 360 and its games enjoyed increased sales, which meant the rest of the products were down. The Microsoft statement said: “Non-gaming revenue decreased $98m or 14%”, though it insisted that the worst performers were not Windows Mobile – whose share of the smartphone market fell from 12% to under 10% in the second calendar quarter – but PC hardware products like mice, Zune and embedded device platforms.
