According to Gartner Inc., the mobile music market will grow strongly through 2010, to more than five times its size at the end of 2005, and reach $32 billion. Mobile operators stand to gain a lot, but face many hurdles in the race to be the main winners in this market. So how are the two main competitors on the market doing? Well, it seems iPod maintained its undeniable supremacy this year too, while Zune only enjoyed a brief period of glory, right after its launch.

It looks like iPod’s success is not only ensuring Apple’s dominance in the MP3 player market, but it also skyrockets the sales on iTunes. In the pre-Christmas period, users literally attacked Apple’s music download service, probably overwhelming the company’s servers and exceeding even the most optimistic expectations of the Cupertino-based giant. This is why most of them started complaining about long downloading intervals and receiving error messages.
 
Overall, Apple still maintains a tight grip on the MP3 players market, with 82.7 percent market share for the hard-drive iPods in the first half of December 2006, but down from the 86.8 percent registered last year. Considering both hard-drive and flash-based MP3 players, Apple holds an impressive 62.2 percent market share for its gadget, almost the same percent as in 2005 (63%).

As a comparison, Zune managed to obtain 9% market share in the first week since its launch in November, making it the second most important MP3 player, but far behind iPod. Zune’s success is diminished though when we consider that it took 9% of the hard drive MP3 player market. These numbers also do not include sales from Apple retail stores, which sell only iPod players.

Despite the heavy investments in advertising and marketing, Zune was received by consumers with indifference. A survey of 40 retailers conducted by Piper Jaffray analyst Gene Munster found only 8% of the sales people recommended Zune compared to 75% recommendation for Apple iPod, and that most of the sales people did not even know what Zune was or who made it.

In the second week Zune was the 5th most sold player, with a 2.1% market share, according to the market research firm NPD Group. The figures do not include iPods sold directly from Apple.  Overall, SanDisk was No. 2 in December with 18.4 percent of the overall market, up from 17.5 percent last year.  Zune’s sales relative to other MP3 players continue to decline, with NPD Group placing its market share at 1.9% by the second week of December 2006.

According to Gartner, Microsoft’s strategy of differentiating Zune through its ability to share songs over Wi-Fi is not particularly compelling, pointing to the fact that users can’t buy songs through their player.  Gartner says: “Microsoft’s claimed differentiation for Zune is based on applying Web 2.0 community concepts to the music experience. With the inclusion of an integrated Wi-Fi/antenna, Zune users can exchange or share songs by transferring them to each other. Whilst Gartner believes this is a good, high level strategy that is potentially market leading, it is not clear that the scenario Microsoft describes is all that compelling.

Source: Playfuls