Microsoft To Phase Out Zune Franchise?Microsoft To Phase Out Zune Franchise?

Microsoft is reportedly set to abandon its Zune MP3 player franchise due to poor demand as consumers opt instead for Apple's iPod and smartphones that can play music as well as perform numerous other functions.

Citing sources familiar with the situation, Bloomberg on Monday said Microsoft will continue to support existing Zunes but will not release any future models once current inventories are exhausted. Microsoft officials did not deny the report categorically, and conceded that Zune is set to undergo an "evolution," according to a spokesman.

"We're absolutely committee to providing the best movies, music, and TV show experiences through Zune on the Xbox, the PC, Windows Phone 7 and Zune devices," the spokesman said. "We'll share more information about the evolution of the Zune entertainment service and Zune hardware as future plans develop," the spokesman said.

If Microsoft does kill the Zune, the move shouldn't come as a surprise. The device has been a perpetual also-ran since the software maker introduced it in 2006. Apple's iPad held 77% of the portable music player market last year, according to the most recent numbers from market watcher NPD Group.

The Zune was not even in the top five despite the millions of dollars Microsoft spent promoting the product.

One option for Microsoft would be to absorb Zune into its Windows Phone 7 franchise, which already offers direct integration with the Zune marketplace through portable devices based on the mobile OS. Such a move would help Microsoft simplify its branding message to consumers, who, by and large, never took the Zune brand to heart.

Microsoft could also produce a music player based on its Xbox-brand, which is enjoying a resurgence thanks to robust sales of the Kinect hands-free motion control system for Xbox 360.

Microsoft shares were off 1.66%, to $25.26, in morning trading Tuesday.