Microsoft Band: New MSFT Fitness Tracker Takes on FitBit

Fitness wearables are dominated by Fitbit ... until Apple comes in

Of all the high-tech markets offering significant potential but full of tremendous risk, there’s probably no better example right now than mobile health technology.

Microsoft band, fitness tracker
Source: Microsoft

One company — privately held Fitbit — has dominated sales of fitness trackers, but consumer electronics giants are wading in with their own versions.

The latest example is the Microsoft (MSFT) Band, a new fitness tracker aimed squarely at Fitbit. It was announced along with Microsoft Health, a cloud-based mobile health platform that goes head-on against Apple’s (AAPL) HealthKit.

So, does Microsoft stand a chance?

Perhaps, but there are a lot of challenges to overcome.

Microsoft Band Challenge One: A Resurgent Fitbit

Some of the biggest names in mobile technology have tried to break into the fitness tracker market and have run into the wall known as Fitbit.

The company offers a line of fitness trackers, starting at just $60. It also makes a smart scale, integrates with third party apps such as food trackers and enjoyed prominent placement at Apple Stores. I own and use Fitbit fitness trackers, and they are excellent at what they do.

Nike (NKE) failed to beat Fitbit with its Fuel Band wearable, Jawbone couldn’t do it with the Up, Sony has had no luck with the SmartBand, and Samsung’s (SSNLF) Gear Fit was soon seeing its price slashed.

According to a recent Parks Associates report, Fitbit controls 40% of the U.S. fitness tracker market, while Samsung’s Gear Fit and pedometer-equipped smartwatches combine to snag just 14%. The Nike Fuel Band had 8% of the market, and Sony scored so low it was lumped in the “Others” category.

What makes this data even more disheartening for a new product like the Microsoft Band is that Fitbit managed this level of dominance despite the fact that its flagship fitness tracker (the Fitbit Force) was recalled early in the year due to safety concerns.

In other words, Fitbit continued to control the fitness tracker market despite going up against the biggest names in consumer electronics, despite the fact that it was selling products that were anywhere from one to two years old, and despite the PR black eye associated with the recall.

The situation gets worse for the Microsoft Band. Fitbit has announced three new fitness trackers, all of which offer smartphone call notifications and five- to seven-day battery life.

Two of the three are priced well below the $200 Microsoft Band.

Microsoft Band Challenge Two: Apple Watch and HealthKit

Come the spring, the Microsoft Band won’t just be battling with Samsung and Sony to pry market share away from Fitbit, it’s going to run smack into the Apple Watch — and in particular, the Apple Watch Sport collection.

This is the Apple wearable that will taking on the Microsoft Band, Fitbit Surge and other premium fitness trackers. It’s primarily a smartwatch, but in a lightweight, compact edition aimed at fitness buffs. Besides all the other impressive Apple Watch stuff, it has a heart rate sensor and pedometer. And word is, the Sport collection will be the $349 entry level model.

When it introduced the Microsoft Band, MSFT also took the wraps off its own cloud-based health data tracking service and app, Microsoft Health.

This service will be competing with Google (GOOG) Fit, Samsung’s S Health/SAMI and Apple HealthKit. Again, this will be tough slogging for Microsoft, particularly as Apple HealthKit begins to ramp up (it was just rolled out with iOS 8.1) and gain third-party support.

One hopeful sign for Microsoft here: Fitbit has so far refused to integrate its devices and data with HealthKit, a move that could have seriously strengthened both Fitbit and HealthKit. In fact, with Apple kicking Fitbit out of its retail stores (likely in anticipation of the Apple Watch Sport collection arriving), tighter integration between Fitbit and Apple’s mobile devices seems doubtful and could offer an opening for Microsoft to exploit.

Microsoft Band Enters a Growing Market

Given the challenges, why would Microsoft pursue the health and fitness market?

Despite the difficulty of facing off against an entrenched fitness tracker competitor in Fitbit and trying to make the case for its own health data service over similar offerings from Google, Samsung and Apple, Microsoft was bound to take a run at the market.

For one, if it didn’t the company would be conspicuously absent and risk losing some credibility in the high-tech world. More importantly, the health and fitness market is just taking off. According to that Parks Associates report, just 6% of U.S. households currently own a digital pedometer or fitness tracker, and an aging population that’s health-obsessed and embracing technology bodes well for future growth. Sales of connected fitness trackers are expected to hit 66 million in the U.S. by 2018.

There’s a lot of potential upside there, especially if you can convince consumers to invest in a premium health tracker like the Microsoft Band. Even if you lose out on that sale, the prospect of storing all of their personal data in Microsoft Health also has potential — think partnerships with insurance companies, for example.

Hardware or platform, Microsoft doesn’t want to get left out the way it has been left playing catch-up in the smartphone and tablet markets.

Fitbit may be in the driver’s seat now, but this early in the race it could find itself the next BlackBerry (BBRY) — steamrolled by a consumer electronics giant that comes out of nowhere to take over the market it essentially created and owned. This time, Microsoft wants to be that giant, if it can only hold off the Apple Watch/HealthKit combo.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

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