Microsoft sells two millionth Zune, but sales show little growth

Despite a complete revamp of its Zune portable media player last October and a new software update that brings TV downloads, sales of Microsoft's iPod rival have yet to increase.

In the two years since the device's launch, two million Zunes have reached customers. Although it took Apple's iPod more than two years to reach that same milestone, the industry has changed quite a bit. Apple dominates the market with a 71% share, and has sold 140 million iPods since the iconic player debuted in 2001.

It took Microsoft one year to reach one million Zunes sold, and with year two bringing the second million, it doesn't take a mathematician to see a growth rate that is largely non-existent.

Nonetheless, Microsoft has managed to secure 4 percent of retail sales in the United States (up from 3 percent), according to NPD Group. But that figure has largely been at the expense of Creative, which has seen its market share drop from 4 percent to 2 percent. SanDisk (maker of the Sansa lineup) still holds second place with 11 percent of sales.

Still, Microsoft has made no mistake about its continued support for Zune. The company is rumored to be considering a European launch for the player next year, and the addition of video downloads and content sharing with the new Zune Card that come with software revision 2.5 show ongoing, if incremental, improvements.

Microsoft's biggest problem has been creating the ecosystem that has led to the iPod's success. Although the Zune Marketplace was a step in the right direction, the company continues to be at least one step behind Apple with any innovations it makes.

When it comes time to upgrade your portable media player, will you consider a Zune?