Microsoft announced yesterday that its new Zune music player would retail at the same prices as the similar capacity iPod, even though that means the IT giant will initially make a loss on its new venture. The 30GB Zune, due to launch in the US on 14 Nov, will retail for $249.99, just 99 cents more than the equivalent iPod.
The company's Senior Director Of Product Marketing, Scott Erickson, told reporters: "We had to look at what was in the market and offer a competitive price. We're not going to be profitable this holiday but the Zune project is a multiyear strategy."
While the Microsoft players will match Apple's pricing, they will not attempt to compete by undercutting their rival. Insiders say Microsoft hope they can compete with the market dominant iPod on features rather than price.
Michael Gartenberg, an analyst for research firm JupiterKagan, told reporters: "They're not getting into a pricing war. It will be a competition of features versus features, form factor versus form factor, winning the hearts and minds of consumers with something other than price".