"The key to Microsoft's decision to make the Zune, I was told, is that although Apple controls 75 to 80 percent of the overall MP3 player market, Apple almost completely controls the only parts of the market that make money (large-capacity MP3 players). For all its work creating the underlying technologies for the PlaysForSure initiative, Microsoft watched as its numerous hardware partners managed to collectively steal only tiny amounts of share in the low-end flash memory player market. This business model clearly isn't sustainable, given the amazingly low numbers that even all $200-plus PSF devices combined sold over the last holiday season. "There is still a future for PlaysForSure," Caulton said. "But we can't just wait for the iPod to blow over." Eventually, Caulton says, the portable MP3 player market will settle down into a less rapidly evolving, less innovative space. This will allow consumer electronics companies to commoditize things, as happened with the personal computer industry. But the personal computer market was vertical for at least 25 years, before the IBM PC and its compatible clones took hold."
If you have a few minutes to spare, and most importantly, if you want some insight into Microsoft's marketing decisions and what the company has in store for the current-generation and future-generation Zune devices, check out Paul Thurrott's Zunestory
. It's a great read.