Here's an interesting post on how to save the Zune over at digital lifestyle blog Last 100. The blogger is Michael Pinto, creative director of Very Memorable Design, a design company that specializes in youth marketing.
To summarize: Microsoft needs a super-cheap Zune--maybe $25--to compete against the $50 iPod Shuffle, and should create limited-edition Zunes associated with fashionable brands, artists, comic books, and sports heroes. He also suggests preloaded content, including selling cheap Zunes loaded with concert recordings immediately after the show ends, as some artists are already doing with.
Memo to Microsoft: offer this guy a job if you haven't already.
That said, I disagree that Microsoft needs to focus more on the form factor and the fashion instead of the technology. It needs to work on both simultaneously.
I was a fan of the company's original goal of reaching out to hard-core music lovers, similar to how the first Xbox tried to appeal to hard-core gamers with a built-in hard drive and Ethernet port, two features that the PS2 lacked at that time.
But I think that focus got blurry last year when Microsoft tried to move down-market with the flash-based 4GB and 8GB Zunes, which were neither cheap enough to capture the casual youth consumer that Pinto's talking about nor sophisticated enough to take market share away from the high-end iPods.
So yes, cheaper Zunes would be great. But I still think there's room at the high end of the MP3 player market for Music Freak Zune, with features such as a gigantic hard drive (160GB to match the biggest iPod Classic), more EQ choices and volume balancing, support for more codecs (Apple Lossless, Vorbis, and FLAC, for instance), a line-in or built-in microphone for capturing live shows, and an analog recorder in the software for ripping tunes from vinyl, DVDs, and other sources.
They could even build out a competitor to GarageBand and offer it as an add-on to the Zune software--imagine users putting their own tunes onto a Zune then exchanging them wirelessly with other users or posting them on the Zune Social site. Hard-core.
Then sell the high-end device below cost--maybe $300, which is $50 less than the 160GB iPod Classic--and continue to deepen the catalog of music on the Zune Marketplace (3.5 million songs so far, with two-thirds of those now available in DRM-free MP3 format), and I think they'd start to build some serious market share.