Report: Microsoft puts the brakes on Zune player development

Microsoft (NASDAQ:MSFT) will halt development of its Zune digital media player as a result of tepid consumer demand for the iPod rival. Citing a source familiar with the decision, Bloomberg reports that Microsoft will no longer introduce new Zune hardware products but will continue to incorporate the Zune multimedia platform into mobile devices like Windows Phone 7 smartphones. Zune services include the Zune Marketplace online store (which offers millions of MP3-format music downloads) and the Zune Pass music subscription initiative (promising unlimited downloads and streaming solutions).

Microsoft declined to comment on its Zune hardware plans. "We have nothing to announce about another Zune device--but most recently have introduced Zune HD to Canada via the Zune Originals store and remain committed to supporting our devices in North America," the company said in an e-mailed statement. "We are thrilled by the consumer excitement for Zune across many new platforms, including Windows Phone 7 and Xbox 360. Our long-term strategy focuses on the strength of the entire Zune ecosystem across Microsoft platforms."

Microsoft introduced the first Zune player in late 2006. The device failed to catch on with consumers: Research firm NPD Group states that Apple's (NASDAQ:AAPL) iPod led the digital music player market in 2010 with 77 percent of unit sales, while the Zune failed to crack the top five despite a price cut.

Zune services are a critical component of Windows Phone 7, the mobile operating system Microsoft formally launched late last year. Windows Phone 7 includes a series of "hubs" bringing together related content from the web, applications and services--the hubs include Music + Video, which integrates the Zune media player to offer content from the user's PC as well as online music services and built-in FM radio. "Every Windows 7 phone will be a Zune," Windows Phone vice president Joe Belfiore said during a February 2010 press event touting WP7's release.

For more:
- read this Bloomberg article

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