GameStop drops the Zune; beginning of the end?

In yet another blow to Microsoft's slumping iPod competitor, game retailer GameStop says it will stop selling the Zune to clear shelf space for more popular products.

GameStop execs told TheStreet.com that it decided to pull the Zune because "it just did not have the appeal we had anticipated," adding that the player also "did not fit with our product mix."

For its part, Microsoft points out that the Zune is still on sale at Best Buy, Target, and Wal-Mart, among other big-name retailers—and it's worth noting that GameStop is, after all, primarily a gaming store.

Still, it's a telling move, and TheStreet has some other, sobering numbers to go along with the GameStop news: namely, that only about two million Zunes have sold since the player first launched in late 2006, compared to about 10.6 million iPods—in just the last quarter of this year.

It's hard to remember now, but the Zune—ugly brown duckling that it once was—marked one of the first Wi-Fi-enabled MP3 players, beating even Apple to the wireless punch.

But while the Zune can now sync with your music library over Wi-Fi and finally has a full-on video store, it's still saddled with some some serious drawbacks. For example, you still can't buy music directly over the Zune via Wi-Fi, sharing tunes between players is a clunky, too-limited process, and the Zune's boxy shell can't compete with the sexy curves of an iPod.

I'm guessing that Microsoft will stick with the Zune until at least the end of the year, but I predict that the latest Zune models (which came out last November) will, indeed, be the last.

What do you think? Is the Zune on the way out, or does it still have a future?

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GameStop to Stop Zune Sales [TheStreet.com]