Now that the entire world knows the Microsoft Zune will be priced at $249.99 per player, one starts wondering if they are going to make any money off of it. There have been several good articles and postings out over the last few days that cover this particular issue head on.

Michael Gartenberg from Jupiter Research posts in his blog:

Hard to see how they’re making money though at $249. They can’t be getting the volume discounts Apple gets and that larger screen and WiFi all add to the bill of materials. The key , I suspect, was not being undercut by Apple and if they need to lose money on Zune to build market share, they will, much as they have done with XBox. For the moment, price against Apple will not be a factor.

That’s definitely a very possible thought. As MicrosoftMonitor.com (also a Jupiter Research website) points out in this article, the Zune head-statesmen came from the Xbox division where selling at a loss was a common tactic in order to gain market share from their opponents. It’s quite possible that Microsoft would be willing to sell the player at a loss solely to make sure it stays competitive with the iPod.

The MicrosoftMonitor article also points out that the real threat the Zune poses is not against Apple, but against Microsoft allies who had lined up their MP3 players to support the PlaysForSure initiative. Back before the Zune, a slew of manufacturers came out supporting the Windows based DRM platform - mostly because they believed it gave them a fighting chance against Apple. Now they have to contend with Microsoft’s own closed system in the form of the Zune. Feeling a bit double-crossed perhaps?

Finally, an article over at the International Business Times suggests how much Microsoft might actually be losing with every Zune manufactured and sold. Shaw Wu of American Technology Research believes that Microsoft will lose approximately $50 dollars for every Zune manufactured and sold. Compare that to the estimated “18-22 % gross margin and 8-11 % operating margin” that Apple enjoys for their iPod lineup and you’ll see how Apple commands power in their supply chain.

In the meantime, the clock continues to click down to the official launch of the Zune. We’ll just have to wait and see how the Zune will actually affect the iPod-nation and the rest of the fragmented MP3 player world.

[MicrosoftMonitor article]

[Michael Gartenberg blog]

[International Business Times via ZuneGroove.com]

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