Bloomberg reports that Microsoft has decided to end production of the Zune, the device it created to support its music service of the same name.
But the death of the Zune really began more than a year ago when Microsoft first announced its plans for a revamped mobile operating system, known today as Windows Phone 7. At the time, Microsoft said it would not sell Zune devices outside of the U.S. or Canada, but instead use the mobile phone as the Zune's portable option internationally.
For Microsoft, it's a smart play. It only sold around four million devices, according to industry estimates, giving it a paltry 2% share of the U.S. portable media market compared to the iPod's 70% (excluding mobile phones).
And while this is certainly a meaningful development, the passing of the Zune really means very little in the grand scheme of all things music at Microsoft. For more than a year, Microsoft has focused on expanding the Zune to new platforms than its poorly selling device. Last year, it gave Xbox 360 users access to the Zune service, including access to on-demand streaming via the Xbox Live network (registered accounts: 30 million).
On the portable front, all mobile phones based on Microsoft's new Windows Phone 7 operating system are now a de-facto Zune player. No separate device required. And with Microsoft's new deal with Nokia that made Windows Phone 7 the default OS for all new Nokia smartphones, that will soon mean a whole lot of Zune-capable phones in the market very soon -- dwarfing the market a standalone Zune player could ever achieve.
With Windows Phone 7 now the primary Zune host, a new question emerges -- can mobile phones running on the platform stand up against the iPhone, and even Android device, in the smartphone race of the future? The original Zune failed much in part because it wasn't an iPod. Will the new Zune suffer a similar fate for not being an iPhone?