Want to Marginalize the iPod? Ask Steve Jobs How!
There are a million iPod killers floating around. Some feature more capapcity, some feature more gizmos, and some feature lower price points. None of the iPod killers are actually doing any iPod killing because they’re too busy trying to be more iPodish than the iPod.
Even with the consistent lack of success the iPod wannabees have had, there are still plenty of companies willing to make iPod knockoffs. Some of the manufacturers labor under the delusion that the next iteration of their player will dethrone Apple. The more rational mp3 player producers are intent on scooping up the lion’s share of the crumbs left by the market dominating iPod. For all the bluster and imitation the competition has consistently failed to dent the iTunes/iPod stranglehold, few expect that to change. Why has every attempt failed so miserably? Because if you are truly desirous to do to the iPod what Windows did to the command line there’s only one company who can pull it off. Their name is Microsoft and it is only a matter of time until they make a serious effort. At least, that is Steve Jobs’ take on the situation as evidenced by the following quote:
The problem is, the PC model doesn’t work in the consumer electronics industry, where you’ve got all these companies and some does one thing and another does another thing. It just doesn’t work. What’s going to happen is that Microsoft is going to have to get into the hardware business of making MP3 players. This year. X-player, or whatever.
Mr. Jobs’ logic is transparent. He reasons that since iTunes and the iPod use the vertical integration model that Microsoft could use the same tactic to finally relegate the iPod to the technical trash bin. In theory, the system would work as follows: Microsoft would bundle a music playing program with every PC that, of course, pointed to an iTunes like music store. The model would be completed when people buy a Microsoft produced digital audio player. Consumers, being the lazy slugs they are, would take the path of least resistance. Inevitably, iPod marginalization would ensue.
The normal objection at this point is to state, with a certain naiveté, that the iPod is much too well designed to be toppled by any music player that Microsoft could produce. That notion gives people a little too much credit for desiring slick interfaces and elegant design. Likely, any audio player designed by Microsoft wouldn’t match the iPod’s streamlined looks but would remain desirable. Microsoft, after all, already designs some of the best mice and keyboards and has shown certain hardware engineering skills with both editions of the XBox.
At this point, it is time for a little hand wringing. If the only thiing that is required for Microsoft to decimate the iPod is a Microsoft branded mp3 player then the future is bleak. That assessment is a little too dark. Steve may have made the path to iPod irrelevancy seem straight enough but, if Microsoft takes the gamble, they will surely find the trail full of blind turns, deadly snakes and crumbling footholds.
The logistics, of course, won’t be problematic for Microsoft. They have scads of cash for development and other associated manufacturing costs. Rather, the issue would be with those who already manufacture digital audio players and license Microsoft’s DRM. Suddenly, these manufacturers would find themselves competing directly with Bill Gates and his well-paid minions.
With this realization, we now see Steve’s comment not as a roadmap but as bait. Were Microsoft to jump headlong into the digital audio player market there would be strong incentive to Apple to begin licensing FairPlay. Manufacturers would be forced to choose between two mainstream options: A) go with Microsoft or B) Go with Apple. In the past, the no-brainer has been to go with Microsoft. This time the obvious choice is different.
The folks who stick with Microsoft get to fight over, roughly, twenty percent of the market. The folks that go with Apple would be aligning themselves with what has become the industry standard. The players that license FairPlay would have access to the iTunes store, backwards compatibility with the songs consumers have already purchased, and a chance to compete on a perfectly level playing field with the iPod. It doesn’t take a Stanford MBA to deduce that the potential rewards of opting to use FairPlay far outstrip the rewards of going with PlaysForSure.
When the vast majority of manufacturers stop supporting PlaysForSure and start supporting FairPlay, as would likely happen, then the battle is over. Microsoft will be relegated to side player in the digital content delivery market. Their DRM, the most coveted part of the deal for Microsoft, will have been shunted to a distant, irrelevant second tier player.
Why doesn’t Apple go ahead and slam the lid shut on Microsoft right now in an effort to retain ownership of the growing market they already dominate? Currently, and likely until Microsoft makes a push with their own player, there isn’t a reason to share the wealth with anyone. It is feasible that Google, or some unidentified third party, could begin challenging the iPod/iTunes dominance through some heretofore unthought-of bit of innovation but the end result, Apple licensing FairPlay, would remain the same.
Of course, there is a wildcard. What if Microsoft could convert FairPlay tracks so that they would run on players besides the iPod? Would that be enough to drive people away from the iPod? That functionality has been hinted at and, undoubtably, Microsoft believes that is the key to dethroning Apple. In reality, it is simply a tacit admission that competing directly with the iTunes Music Store is too much to ask of even Microsoft. If the plan goes through, the end result will be another round of supposed iPod killers showing up and being quickly forgotten.
Nothing lasts forever, certainly some day the iPod/iTunes duo will be challenged and soundly defeated. That day isn’t today and unfortunately, if you’re Microsoft, it isn’t even this year.
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You’ve been slashdotted!
You really think apple could “sacrifice a portion of their iPod sales in order to be the one everybody has to pay whenever a piece of entertainment gets downloaded”? You don’t think in the end, a DRM scheme of RIAA’s own will triumph? Actually scrap that, the RIAA getting their act together, no way, you’re probably right. But it’s possible Apple will be stymied in making any sacrifice of ipod sales by their own success.
The future of all this is very uncertain. Standard today, gone tomorrow.
Ah Ben, you raise some interesting questions. But first let me note that the article is more about how Apple might be trying to make FairPlay the standard than how they sell iPods (which I will address momentarily). Right now many more mp3 makers use Playsforsure than FairPlay but many more songs and videos are purchased using FairPlay so the standard is up in the air. Apple could set the standard. The objection to that is that a new standard could emerge. Which is true but the standard pc OS is windows and you every one knows what a struggle it has been to displace that standard.
Onto the key of iPod sales. Looking at the question and giving a monolithic answer would be too simplistic. in the early days of the iPod it sold because mp3 players were an uncertain commodity.When Apple entered the market it legitimized the concept. Apple was a brand people recognized and were comfortable with. As the market grew certainly the things the ipod could do that other player couldn’t became a larger factor. Now I would hazard a guess and say that the iPod sells so well because it is ubiquitous. Consumers don’t think “digital audio player” they think iPod. While I, or you, might be willing to sit down and search for a player that suppoerts ogg vorbis most just want easy. Or, consumers are slugs.
Steve Jobs would likely say that the key to iPod sales is the vertical integration. You can’t go wrong anywhere along the way. That includes the iTunes store, iTunes database and the iPod. I would tend to agree that that was the key at one time. Now, as I metioned earlier, its probably because everyone else has one.
If you ask me why everyone wants to control the DRM thing so badly, I’ll have to plead ignorance. Yet they surely do…
First of all Ben, the designer clothes analogy isn’t such a good one. There is no extendability in designer wear. You certainly can mod them, but generally people are not thinking about extendability when they buy designer clothes. A car analogy would have been better. Like the one Chris made earlier.
“The fact that Ben Hall’s purchasing behaviour goes contrary to his own argument that iTMS is not a [factor] is a good example of how this works!” - Let me explain this statement. What I mean is that, given the current trend for purchasing music online, had Ben not been able to purchase the music he bought in iTunes, at a fair price, he would have been forced to purchase said music through the old brick-and-mortar channels. Or, more likely, given that this desire to acquire music online already exists, his immediate response to iTunes’ limitation would very likely have been finding an alternative online store from which the songs could have ben purchased. This is where the problem over which music player to buy lies. If there were to be any uncertainty over the future availability of cheap digital music for the iPod, accessed online, it would be difficult to convince consumers to invest so much money in a possibly redundant technology. Add to that the potentail DRM compatibility issues, and you have a compelling reason not to buy an iPod.
So lets, then, not speculate on possible future desire, or consumption. Lets say, instead, that iTunes is perhaps a reasurance of sorts, which suggests that if one were to have any desire whatever to take advantage of the ability to acquire digital music online, one could do so in an easy and efficient manner through iTunes - software that is made by the device manufacturer and provided free of charge with every iPod.
I think what you are all missing (or perhaps not touching on, relative to it’s importance), is that for the vast majority of the public that don’t follow the computer press, iPod = music player. The name iPod has reached the point like hoover or sellotape, where a single manufacturer’s name has become synonmous with a product category.
How many of you have parents or grandparents that call your Macs a PC (or just use the name Windows), because that’s their understanding. They aren’t into the ‘scene’ enough to distinguish the difference. That’s why most players still play MP3s rather than other, more open and better standards; because for a large proportion of the market MP3 = iPod = music player. MP3 has entered the public lexicon to mean *all* music saved to protable players.
I bet there a load of people out there call *any* brand of music player an iPod. Go into any electronics store and listen into to parents discussing what to buy little Billy for his birthday. They’ll ask for an ‘iPod’ despite the fact he wanted a Sony, because to them the name is generic and descriptive of the type of device rather than the manufacturer.
That’s why Apple has been so ‘hard’ on people using the trademark loosely and generically (stopping 3rd party stores from using it). If they fail to defend the copyright, there will be nothing to stop it becoming legally generic, and you’ll see Sony, Microsoft, et al start using it to describe their own players.
That’s the real threat to Apple; making sure iPod continues to be the name associated with the niche, yet remain in control of it’s use.
And whether deliberate or not, the name iPod was a good move, as it doesn’t suggest music, video, or any other kind of media, unlike a lot of the competitors’ branding. So as the capabilities of the line, and number of models increases, they can still be called iPods.
How many people think Sony sold a *lot* of Walkmans because *that* term became generic for all manufacturers’ portable cassestte players, and ill-informed grandmas, uncles and parents bought the model that had that word on the box…
I don’t know what Apple’s long term intentions are, obviously this is an evolving market. Unlike Sony and the Walkman which used cassettes that were an open standard, ipod is very proprietary so I don’t think Apple has the same worry of quick loss of market share (even with the use of compatible formats, Sony was able to charge a premium for Walkman and Discman products that made those brands more profitable than their generic equivalents-- something Apple is definitely able to do with iPod, I know we all talk about technology, but the concept of Brand is still a big deal and Apple has created a premium brand of portable digital music player).
I wouldn’t count Microsoft out of the running, there are favorable reviews of the interface for XBox360, even reviews that call it “Apple-like”. The assumption that Microsoft wants Windows to be the brand for home PCs seems questionable to me-- why not let the competition, Dell, HP, etc. develop all their media options around Windows XP MediaCenter, then pull the rug out from under them with a well integrated suite of software and hardware to manage multimedia content based around XBox?
Certainly there will come a time when iPod is dethroned or market share gets divided up more along a Coke/Pepsi type of share. The important things are: 1. Apple has saved the company, when the iPod first appeared the future of Apple was still in doubt. 2. Apple has created a premium brand of music player that looks likely to hold off the competition for years. 3. Even if people are not buying from iTMS, they are busy converting their CDs for iTunes and iPod-- this may not involve more money, but it is a commitment of time and effort… I certainly cannot enivision starting afresh and converting all my music again-- It would be several months before I had all my music on a different player. 4. Thus far Apple’s video experiment is winning-- the folks at Google have made key mis-steps with their “open market” for video, they have failed to understand that the “open market” could impair the Google brand as a whole if people don’t like paying high prices for low quality video submitted by third parties (Indeed, Google’s decision to become a consumer brand may be their first big mistake-- once people are paying money for a service, they expect more).
No brand is predominant forever, but it appears likely that iPod will have a reign of dominance of at least ten years and many years after that when it can command a premium price… That is an amazing thing that anybody in business would be proud of.
[I don’t discount the importance of the iPod’s used interface… I can imagine trying to navigate a 5,000 song music collection with the interface from my cable box-- it would be ten minutes just to scroll through the artist list! The iPod scroll wheel is simple, intuitive, clean, and fast and thus far nobody has come up with anything nearly as straightforward and functional].
Just to reinforce the importance of the iPod connector, it seems the other MP3 players *and Microsoft* realize they need something similar.
Here is a link on cnet about them trying to create one: http://news.com.com/Finding+harmony+among+iPod+rivals/2100-1013_3-5975839.html
Chris and andywar: I agree with you that brand is all-important to the ipod. The ipod brand owns the mp3 player space in a really unusual way. This, its ubiquity, is clearly a huge factor in its continued success. And when I say it’s just the ‘form factor’, I’m obviously missing the point that countless other players have the same form factor and none can competee with the ipod. So the main reason for the ipod’s success must be that there are so _many_ good reasons.
Nerdbrain, I appreciate that the designer clothes analogy isn’t ideal, but it illustrates my belief that the situation is basically similar for ipods, that people buy the most expensive one they can afford, often simply _because_ it is the most expensive one they can afford and therefore the most desirable.
With a an understanding of the state of technology and a name like ‘nerdbrain’, you like all of us here are in the position of being able to use your knowledge and opinion of the iTMS and tight iTunes integration to inform your purchasing decision. But as andywar says, it is a small proportion of the population of the world who are in this privileged position. I suspect that you are not quite taking into account the extreme difference in outlook for these people when they go to buy an ipod compared to people like yourself.
Hey, I’m agreeing with you - i *like* having the iTMS, it’s a great way of buying random crap that i wouldn’t otherwise own and listen to. The whole system would be lacking without it. Ah’m just saying that ipods are in the realm of consumerism, and I reckon they sell ultimately because they’re desirable, like designer clothes, although admittedly not *entirely* like designer clothes, but as they apparently say in Thailand, “same same - but different”.
Isn’t apple matters nice that we can disagree so politely
Down with flaming!
Ben, here is the deal: I don’t know I’m right. The comments, such as yours, on Apple Matters are as interesting as the original content.
I really appreciate your take on the matter, I appreciate the time you take to write a lucid comment, disagreement is fine and your points are well taken. Personally, it isn’t about winning an argument it is about reading interesting perspectives.
Wow . . . what a nice series of interesting points of view. Let me add a couple of tidbits to consider. iTMS is not just a store. I gave my son my 1st gen iPod and bought a new one. The very next day he had ripped all his CD’s and was a happy camper listening to the same music he WAS listening to using his portable CD player. I didn’t show him how, or dig up the instruction manual . . . iTunes just worked the way it was supposed to. That sounds easy, to write software that will rip CD to play on a digital device . . . but it isn’t . . . I know this because I’ve messed with plenty of software that can’t! The fact that I can also buy music at iTMS is the extra bonus I don’t HAVE to need or WANT at first . . . but it does become irresistable eventualy, or handy, or just more conveineint. When my other son needed Hawaiian music for a skit he was doing . . . well who’s gunna drive to a store and pay 14$ when you can pay 1$ and have it in less time than it would take me to find my darned keys.
I also agree with the enormity of what is now the iPod. Stand in an Apple Store and listen to the folks who come in to buy. I listened to a middle aged woman who was looking at iPods and she wanted to know if Apple ALSO sold MP3 players. The sales guy just started right in explaining things as if he got that question a million times a day. Most consumers have heard 2 terms, MP3 and iPod, and that’s the extent of their knowledge when they come to the Apple store with cash in hand. The other factors, like the iTMS, great industrial design, or the simplicity of use only really come into play after I own the product. Those are the things that MS won’t be giving me anytime soon, and it’s also those things that make for loyal repeat iPod brand customers.
Chris Seibold wrote:
“I really appreciate your take on the matter, I appreciate the time you take to write a lucid comment, disagreement is fine and your points are well taken. Personally, it isn’t about winning an argument it is about reading interesting perspectives.”
It’s refreshing to see an author not taking the almost-mandatory defensive posture in his article’s blog. This is my first visit to Apple Matters, and I must say, I’m impressed. Excellent article, detailed and insightful commentary, and one of the best author replies I’ve ever seen.
Bookmarked.
Another view…
I started buying tracks from the iTMS as soon as it opened. At first to replaced lost favs, later to buy tracks I didn’t want to spring for the entire CD. Soon after I’d just get lost checking out, and buying, new tracks I discovered.
I got an iPod about 16 months later. Besides music, I use it for the calendar, contacts and as a portable drive.
I view them as two entities, but entertwined.
The impact is that the two successfully defined the direction for digital music distribution where there had been none.
The sustained success is due to excellent design of the pod and seamless integration with iTMS.
Thanks Chris, Apple Matters is ace :D
What do you think about the ipod’s longer-term chances?
Great article. Lots to think about…
The iPod is a great product, with or without iTunes Music Store and use of the FairPlay DRM. It is true that for many (maybe even most) iPod users, FairPlay versus PlaysForSure is mostly irrelevant because they do not buy songs online or do so infrequently.
But to use an iPod, the iPod user does need one thing. A computer that can run a recent version of Mac OS X or Windows. The old Sony Walkman players of the 1980s did not need the user to supply anything else (except the music or course). A significant percentage of the population in Apple’s target market areas are just not “computer users.” Yes, they may own an old PC, but they don’t “use it” in the same sense as “we who are into the technology” as a hobby or profession. But I’ll bet they would still buy an iPod to get a great portable music player.
That’s how Apple increases iPod adoption going forward. Sell an iPod accessory that does all the supporting activities needed for the “iPod experience” (rip CDs, burn CDs, access iTMS via modem and toll free number, and backup user’s library). Update the iPod to act as the interface, using screen and clickwheel for control of the device. Make it simple to do the things we currently need to own, boot up, and operate a computer to do.
Apple may have already thought of this… That iBoombox rumor sounds interesting. If a competitor does such a combo package, it would be a good way to reach a portion of the market that is currently being ignored by everyone, including Apple.
I’d like to weigh in on this with my opinion. I agree with the last post. Apple’s target market for the iPod are those who don’t understand computers. They want to be told “use this software and buy from here” which is precisely what they don’t get with non-Apple players.
There are over a dozen music stores offering music in Windows Media format, and none of them are run by the device manufacturer (with the exception of Sony’s proprietory music format, store and players). I think in the end, the fact that there is too much choice hurts the non-Apple devices. They just don’t have the same level of integration.
Now in regards to Job’s comment about vertical integration… This works for Apple since they have always been a very proprietory closed company. I don’t think this would work for Microsoft. We all know if they had a product just like the iPod, that also used a proprietory DRM and file format, and could only use their store, they’d be in court the day after it came out!
We will see an MTV-powered music store app in the next version of Windows, but it’s hard to say whether or not the other manufacturers will jump on this or not.