Analyst: Zune finding some willing ears

But sales strength is coming from West Coast cities and not college towns, says market researcher Current Analysis.

Although Apple still dominates music player sales with its iPod, the Zune is starting to make some inroads, particularly against the video iPod, according to one market research firm.

Current Analysis said that its data show Microsoft holding greater than 10 percent of the dollars spent in the retail market for digital audio players that sell for between $200 and $299. That's down from the 24 percent the Zune garnered in its initial week, but still better than the firm had expected.

"Right out of the gate it was a little bit better than I expected," said Current Analysis research director Samir Bhavnani, who noted that the Zune "got killed in the press."

The Zune has averaged about a 13 percent share of revenue for its price range over the past three weeks, while Apple's share has taken a hit, according to Current Analysis' figures.

Those numbers are not all-inclusive, however. The firm tracks sales at five major retailers--Best Buy, Circuit City, Staples, CompUSA and Radio Shack--but does not include Apple's own retail stores, as well as many other large outlets such as Walmart.

Also, while the Zune has a double-digit share among similarly priced models, it has a far smaller slice of the overall market, Bhavnani said. He noted that although the Zune is in a strong part of the market, the bulk of sales are for cheaper products such as Apple's $79 iPod Shuffle, which he said is "flying off the shelves."

Still, he said it is an impressive start for the company, which has acknowledged that trying to catch up with the iPod is likely to be an expensive, multi-year effort.

"This is a first step," Bhavnani said. "Traditionally, it takes Microsoft two or three go-arounds before they get something right."

One troubling note, Bhavnani said, is that the Zune is selling less well in college towns than it is overall. The firm's recent sales data show the Zune with a below 4 percent market share in places like Madison, Wis., and East Lansing, Mich., compared with better than 5 percent nationally.

"Some of the college towns were not adopting the Zune in larger numbers," Bhavnani said. "I think that's a key segment for Microsoft."

Not surprisingly, the Zune's presence is strongest in Microsoft's hometown of Seattle, where it commands nearly 17 percent of the market. Sales were also strong in Portland, Ore., (8 percent), and Anchorage, Alaska, and Salt Lake City (both around 7 percent).

Microsoft has said its main target is 18- to 28-year-olds, though the company knows that older tech enthusiasts were likely well-represented in those who bought the product in its first week. The company has said it hopes to sell 1 million Zunes by the end of June, when Microsoft wraps up its fiscal year. The company has said it is considering