Microsoft's iPod Killer Emerges -- Should Apple be Scared? You Bet! (AAPL, MSFT)

Rumors have been coming fast and furious over the last month about Microsoft’s (MSFT) entry into the digital music player business. The NY Times broke the story last week with multiple confirmed sources, turning rumors into fact.

Engadget has dug up some interesting rumors that go beyond what was reported in the New York Times today.

Microsoft’s new portable audio and video player will have a screen that’s “bigger than that of the iPod video” (which isn’t really saying much) and built-in WiFi so you can not only download content directly to the player, but actually participate in an Xbox Live-like social network that will help you connect with other people with similar taste and interests. Whether that’s going to be the Live Anywhere service they introduced at E3 we don’t yet know.

Microsoft has already sunk a huge investment in the Live service for interconnecting Xbox’s and creating a user community. It’s a very well received service. The new Windows Media 11 is also a sharp improvement and is planned to integrate into the Live network.

To attract current iPod users Microsoft is going to let you download for free any songs you’ve already bought from the iTunes Music Store. They’ll actually scan iTunes for purchased tracks and then automatically add those to your account. Microsoft will still have to pay the rights-holders for the songs, but they believe it’ll be worth it to acquire converts to their new player.

The dirty little secret about Apple (AAPL) is that even though it is by far the #1 retailer of digital music, they simply just don’t make that much money from it. One billion songs on iTunes equals only one Billion dollars in revenue since the service was initiated. Apple makes far more money on selling the hardware. If Microsoft removes the biggest barrier to entry for consumers (sunk software costs) they could catalyze users, particularly Windows users, to switch to the Microsoft platform. One billion dollars is the kind of check only Microsoft (and maybe Google) can write.

Right now the new player is schedule to launch in November, but our source also tells us that Microsoft isn’t stopping with a WiFi-enabled PMP, they’re actually going to launch an MVNO next year using all Windows Mobile-powered HTC handsets. These handsets will let users connect to the same social network you’ll be able to access over WiFi using the portable media player.

This is huge. Microsoft is already the #1 provider of smartphone software in terms of unit volume (No, it is not Blackberry nor Palm/Treo). This was achieved by forging strong partnerships with hardware vendors like HTC (2498.TW), Motorola, and even Treo. This would allow the Live service to stretch virtually across every platform, from Cable set-top boxes running Windows Foundation, to Xbox 360’s, to small PMP’s to cell phones to desktop computers.

Too many people are attaching the term iPod killer to the new hardware Microsoft is working on. The real iPod killer will be the ability to scale the service across multiple platforms, something Apple simply cannot do, and it is an excellent example of the strength Microsoft can derive from its massive reach.

One thing that remains to be seen is what role Portalplayer (PLAY) might play in the PMP device. Microsoft has been working closely with them to create a hardware/software sync platform called Sideshow and it is possible that this will be the basis for communicating with this new set of mobile hardware devices Microsoft is working on.

The PMP initiative is really about preserving Microsoft hegemony as the uber-platform. The pain would really be felt in companies like Apple, Real, Yahoo, Google who count on entertainment hardware and services for a big part of their future growth.

Microsoft has a pattern of entering a business and sucking the profit opportunity out of it by incorporating it as part of its platform. Why should entertainment infrastructure be any different?

MSFT-AAPL 1-yr comparison chart:

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Comments

[Rajeev Mantri:]

Providing free songs to switch to Microsoft players? Hah, is that desperation or what.

Microsoft plans to launch the player by year-end - is Apple going to sit still doing nothing till then? Apple has taken the initiative to make its own products obsolete - the iPod mini is a case in point. Surely, they also have a newer iPod coming out for the holiday season.

I am a college student, and these days you see so many Mac laptops, its quite incredible (I switched to Mac myself a couple of months ago). Apple's new offer of giving free iPod nanos to MacBook buyers is also quite a hit with students. Mr. Ballmer has to think of something other than simply buying users for Microsoft's product.

2006 Jul 10 10:12 AM

[David Bertoni:]

You can tell when an article is intended to create more heat than light when it describes the lack of profitability in Apple's online music sales--something that Apple itself has openly acknowledged and has been a subject of discussion for years--as a "dirty little secret." Either that, or the author of this piece hasn't been paying attention to either the industry or the technology. Whatever the answer might be, the readers are equally disserved.

Turning to the "analysis," the author makes a series of statements of dubious import. First, he states that Microsoft will give away a billion dollars or so worth of music to get users to switch -- allowing them to move their song libraries to an as yet unseen alternative to iTunes and the iPod. I suppose it's believable, but why does it matter? People using the iPod and iTunes do so because of its ease of use, simplicity, and compatibility with the most popular music player in the world. Do some stay in the iTunes/iPod ecosystem because they cannot afford to walk away from a big music investment? Maybe, but the author provides not a shred of evidence to back that up. Couple that with the fact that most iPod users' libraries are filled mainly with their own ripped CDs suggest something that the author has pointedly overlooked -- that, perhaps, iTunes/iPod users like Apple's products and services. Microsoft's plan to execute a billion-dollar "try me" bribe, then, will only be as good as the alternative it proposes. If history is any guide, to say that Microsoft's offering will be underwhelming is, in fact, an understatement.

Frankly, this "article" rests, ultimately, on the dubious presumption that Apple cannot scale the iPod/iTunes service across platforms, and, by as a corrolary, that Microsoft's ability to connect with a wide variety of platforms--none of which, by the way, work very well ... just compare reviews of Apple's media PCs vs. Windows media PCs. As for the latter, may reviews bemoan that they can barely get them to work, let alone reliably.

It would great if Microsoft, with all of its money and personnel, would try something original for once. It has this habit of watching from the sidelines to see what works and then flooding the market with an oftentimes clumsy, but predatorily priced, alternative. None of its schemes--including the X-Box--have yet to make money. Let's see if they can break the trend.

2006 Jul 10 10:50 AM

[Tom B:]

What you fail to understand is that the iPod is the market leader in large part because 4 plus years into the MP3 player boom, it is just about the only MP3 player one would actually want to own. The other players on the market continue to be pretty weak. Now, ask yourself: what chance does MSFT have to design a piece of hardware that doesn't suck? Sure, they can whip out products with decent functionality-- some of their mice and keyboards get good reviews-- but decent is a far cry from superlative.

2006 Jul 10 10:51 AM

[Joe Ragosta:]

It amazes me how clueless these 'analysts' can be.

First, They state "The real iPod killer will be the ability to scale the service across multiple platforms, something Apple simply cannot do, and it is an excellent example of the strength Microsoft can derive from its massive reach.". Totally absurd. iTunes works on Macs and Windws PCs and if you want to use an iPod with Linux, there's third party software to do it.

If you want to buy software from iTunes and use it on a different player, you simply (and legally) burn a CD and then import it into your preferred software. If you want to use any MP3s that you own (legally or otherwise), they work with iPods and iTunes.

Of course, claiming that it was a 'dirty little secret' that Apple doesn't make money on the music shows that he's completely out of touch. No one ever claimed that they did. Apple has always claimed that they make their money on the iPods.

Why do reputable sites use uninformed rumor-mongers as journalists?

2006 Jul 10 10:58 AM

[david wb:]

Given the inability of Microsoft's media partners to compete against Apple it has to do something. Apple already dominates music and is making inroads into video. Who will buy Microsoft's DRM and media software if Apple controls the industry?

But the burning question for me is: what does Microsoft think it can do that companies like Sony and Samsung cannot? In the short term Microsoft's 'success' in the media player market will come at the expense of its former partners. Apple isn't likely to be hurt any worse by Microsoft than it has by any other company.

So now my next question is this: If I am right that Microsoft's customers will come mostly at the expense of its partners, what will the long term consequences be?

I see this as a high stakes must win move for Microsoft. And I don't see much hope for a win.

2006 Jul 10 11:31 AM

[Andrew Schmitt:]

If there is one certainty in the world it is this - say something negative about Apple and it's certain to generate plenty of responses.

2006 Jul 10 12:17 PM

[Joe Ragosta:]

Nice job deleting my post.

In case anyone else wants to know what I said before they delete another one. I simply stated that the responses are not because you said anything negative about Apple - but simply because you made unfounded and mostly erroneous statements.

And I have to note again that you haven't responded to the factual content of my post. Apparently, that's beyond you.

2006 Jul 10 05:00 PM

[Amit Chokshi_:]

The negativity is more of a result of the quality of your article. If you're looking for bashing and pumping based on how much people "like" a stock, company, or its products go to Yahoo's boards but there's generally less blind loyalty to companies mentioned in this site.

MSFT's been in talks to develop an iPod "killers" for years, now they finally got around to where they might release one, big deal. AAPL owns the space as it is, unit sales have generally moderated at this point. MSFT is going to be competing for the same shelf space that Rio and SDSK and CREAF all do.

And I think many people have all heard about the "threats" the various internet music stores from YHOO, AMZN, and even WMT were going to pose to AAPL. WMT was going to undercut AAPL and it was going to be over for them. MSFT is going to bumble into the MP3 market the same way they've done the console market, spend a lot of shareholder money and become an unprofitable second place market leader. The PS franchise counts for close to what, 40%, of SNE's operating profits, MSFT can't turn a profit on the 360. So some of the statements you make, about MSFT like "Microsoft has a pattern of entering a business and sucking the profit opportunity out of it by incorporating it as part of its platform. Why should entertainment infrastructure be any different?" is based on one example which is Internet Explorer. MSFT hasn't displaced Adobe or Intuit or other software vendors that MSFT would love to get its hands around. And have they done anything with the gaming console area? 17% of the market isn't bad but Nintendo actually makes money off their systems and the Wii reviews suggest the 360 could face competition from Nintendo (which doesn't do so bad at about 14% market share).

2006 Jul 10 01:14 PM

[jbelkin:]

In case, Andrew Schmidt didn't notice, it's taken MS 9 years to come close to the Treo/Palm and that's WITH the help of partners. They want to go it alone it alone here so their firstv task will be to defeat their "partners," (Creative, iriver, san disk, sony & samsung)

How many more successes can MS or MS shareholders afford?

They've spent about $400 to sell each XBox & 360 - that's $8 BILLION dollars to be third ... which is where they will be in the ipod race ... BTW, third means a marlet share of about 5%.

MS has failed in EVERY consumer venture. MSN, MSN search, WebTv, watch OS, BobOS, The talking barney, the watch OS, home networking, the Ms remote control, and even the palm when the cosnumer amrlet was 40% of the PDA marketplace, etc ... other than buying the 15% of the video game market for $8 BILLION dollars, they pretty much are clueless when it comes to consumers.

It's not just Apple they can't compete against. It's EVERYONE who sells to consumers. MS is great at enterpros selling - completetly clueless when selling to cosnumers (just look at Vista - missed two holiday season and now coming out with 4 similiar sounding versions and offering stickers that say it's capable or Vista-ready? yea, real clear).

MS is done. They are the GM of technology.

Good at fleet selling - not much at anything else.

2006 Jul 10 01:14 PM

[Andrew Schmitt:]

I agree that a "This time it is different" opinion is not usually correct. Nowhere do I predict overnight success.

MSFT is vastly successful in the consumer space becuase most consumers run windows and office. Would you like me to name all of the consumer software companies that have been put out of business because their products have been incorporated into the Microsoft platform?

FYI I am sure Intuit would love to be rid of Microsoft Money as a competitor, and you've probably missed the fact that Adobe is suing MSFT for giving away the ability to author .pdf documents in their next release. Lotus, Quarterdeck, Visicalc, Wordperfect, Netmanage ... the landscape is littered with companies destroyed by Microsofts ability to swallow their market.

Photoshop is the best exception I can think of that has gone against the grain.

The hardware is irrelevant. MSFT is more likely to release a strict hardware platform than a real product. Don't assume they will kill off their partners. The point is to catalzye a transition from Apple's iTunes platform to their own.

Microsoft will lose money on the hardware in order to ensure the platform supremacy of it's products. Apple can't do this because they have no widely accepted platform outside of iTunes.

2006 Jul 10 01:42 PM

[Tom B:]

"Photoshop is the best exception I can think of that has gone against the grain."

Apple will kill that app, one of these years.

"The hardware is irrelevant. MSFT is more likely to release a strict hardware platform than a real product."

Like the failed Origami or tablet PC or WinCE or home theater PC platforms? You think this venture will fare any better?

"Microsoft will lose money on the hardware in order to ensure the platform supremacy of it’s products."

Whoa-- you mean like their money-losing XBox platform?

2006 Jul 10 01:56 PM

[David Bertoni:]

Still no explanation for how you thought the well-known fact of the non-profitability of iTunes music sales was a "dirty little secret."

And no explanation for how replacing iTunes purchased music with copies of the same music "catalyzes" a shift to a new paradigm when most iPod/iTunes users purchase, on average, very few songs from the iTunes music store.

What this author -- and I believe every competitor -- mistakenly believes is that consumers care more about the media than the techological eco-system that allows them to listen to that music very easily and stylishly. The notion that people are looking to move their music to more complicated devices, none of which do anything terribly well, is kind of like the myth of the Holy Grail. These factors led people away from consolidated devices (like a cell-phone that does "everything") to the dedicated "does one thing really well" iPod. While all the pundits were talking about consolidation, iPods flew (and continue to fly, albeit a bit slower now) off the shelves.

Likewise, iTunes is exactly the opposite, in terms of execution and philosophy, of the programs that Microsoft releases: (1) it's simple, and doesn't try to build in every imaginable nuance and feature that might detract from its principle objective; (2) its simplicity is coupled with ease of use -- simple isn't enough if you can't get everything up and running, hardware and software alike; and (3) it evolves new functionality gracefully, working with the consumer to slowly increase its scope (including to video).

What might Apple do to make its next generation of iPod (and iTunes) better? Your guess may be as good as mine, and talk has centered on voice control, blue tooth, cellular phone functionality, and dedicated bigger screen video versions. One thing I do know is that none of those features will mean a damn thing unless they are incorporated into a media ecosystem with a degree of brilliance that we've seen from Apple, but never from Microsoft. I don't expect, in fact, for the next iPod to be an astonishingly different device -- but I do expect it to qualitatively and functionally better in a way that makes sense to user, and keeps things elegant and simple. Against this, I don't think Microsoft stands a chance.

2006 Jul 10 02:00 PM

[jbelkin:]

>

Legacy. Yes, MS was a succesful consumer company until 1998 and they're still living on that legacy.

Intuit is a good point. As I implied, when they actually have to compete and consumers have a real choice - they lose.

Inuit is a tiny spec of a company compared to Ms with basically a niche product but MS could not defeat them.

Ms could ONLY win during the pre-internet era because they were fierce competitors and later illegal competitors in the m,arketplace. When Ms could leverage (illegally) their monopoly in the OS market, they could defeat those companies by trading prodits from the OS to make Office 3x chaeaper tahn their competoitors and//or force manufacturers not to bundle any app they didn't want (like Netscape) but in the post internet & broadband era, it matters little (firefox or Google) - MS like an old general only knows one strategy - surround and buy up everything (outright or in exclusive licensing) but on the internet, that no longer works (ipod & itunes). The consumers choose and they seldom choose MS.

MS has never really competed against PS because they don't really see the market.

It's not 1995 anymore. The old rules do not apply anymore.

If you want a detailed reason, here ya go:

metroxing.blogspot.com...

2006 Jul 10 02:08 PM

[Tom B:]

"Ms could ONLY win during the pre-internet era because they were fierce competitors and later illegal competitors in the m,arketplace."

The Internet is MSFT's Waterloo. They don't understand it. It is a bad ecological niche for them; it exposes the underlying insecurity inherent in that mess they call an operating system. When computers were less connected, security was less of a big deal.

2006 Jul 10 04:47 PM

[Benito Camela:]

Apple and Microsoft are companies with a high level of creativity -- While they may compete on a segment that has been strong for Apple, it would be highly speculative to write the company off.

Both of them are buy if you believe that their ideas would turn into profitable products. Yes MSFT will put pressure on AAPL but it would not sit still and it has the first mover advantage.

Also IPods have not yet become popular in emerging markets and hundreds of million of young customer can be tapped with low price products (which would still be highly profitable for AAPL.

2006 Jul 10 02:16 PM

[Joe Ragosta:]

Apple clearly has high levels of creativity. Microsoft? Hardly. Considering their size and the amount of money they invest in R&D, their creativity level is pathetic. The overwhelming majority of what they produce is a weak copy of someone else's product. Heck, look at this entire article. They're trying to copy the iPod 6 or 7 years after it came out. Other than grossly illegal business practices, Microsoft has never been known for innovation.

2006 Jul 11 11:26 AM

[Amit Chokshi_:]

Lotus and Wordperfect, let's not forget Foxpro either, those could all be destroyed because the parent programmers were migrating from DOS to Windows and MSFT had the "environment" that everyone was migrating too and between their bargaining power and muscle, they could force out Lotus and other competing products.

When it comes to the mainstream consumer, however, and the current tech cycle, why hasn't MSFT's crappy money program done anything against Intuit's Quicken? And why wouldn't Adobe sue MSFT for that, in the tech world lawsuits are a dime a dozen, looking at ADBE's 5 or 2 year or 1 year chart doesn't really show any pressure due to their lawsuit with MSFT. If it was as material a concern as you point out, there'd be more focus on it by investors and ADBE management in their calls.

And then you say "Microsoft will lose money on the hardware in order to ensure the platform supremacy of it’s products. Apple can’t do this because they have no widely accepted platform outside of iTunes. " What do you mean by platform supremacy? Where's the economic gain here, you said they are giving away the content, so that's free, plus they don't own the content anyway so would just skim off the media companies that do own it.

First of all, MSFT can't force people to take their clumsy late to market PMP that comes out. So to incent people to try them, they'll likely be priced aggressively and lose significant money on that product. Ok fine, as you say they'll lose $ on the hardware to ensure "platform supremacy" which I guess is their iTunes competitor. Ok, so how the hell are they going to attract media companies to give them the rights to sell songs and get a piece of the action? If Warner Music wants consumers to have their songs, they'll go to Apple and deal with the $1/song because at least people buy it and there are enough iPods out there so there's a real market. You think WM is going to be happy that MSFT gives them more of a cut and allows flex pricing per song if only 3 million people own MSFT's device? Not all companies believe in loss leaders.

Don't underestimate iTunes, if the iPod wasn't such a strong device, the media companies could have easily disintermediated iTunes by offering their songs directly on their websites.

2006 Jul 10 02:50 PM

[Andrew Schmitt:]

This is a good discussion. Still, I am amazed at how much attention this issue commands. I would be willing to bet 50% of all comments on the Seeking Alpha site are on Apple, Google, or Microsoft. David?

Here's an opinion - without a subscription music service Apple is putting themselves at a long term competitive disadvantage. Agree or Disagree? (I agree, and believe that Jobs has done this specifically to entrench the Fairplay codec until it no longer is competitively viable)

2006 Jul 10 04:07 PM

[Tom B:]

You might be right about subscription services. But I have more faith in Jobs' intuition to pick a good time to dive into subscription than I do in my intuition.

2006 Jul 10 04:44 PM

[User 1:]

Comments tend to flood when a writer hits a "cult stock", and Apple qualifies. (For some reason, I seem to have avoided the same reaction with the Dell vs Apple post today.) But a refreshingly large number of comments are on articles about small caps. To some degree the Long Tail really does work here...

2006 Jul 10 04:09 PM

[Yaser Anwar_:]

Andrew, with regards to your opinion about Apple not having a subscription being a disadvantage, i don't think so. The reason being, once they roll out a subscription type of service one of their competitors could then lower the price even more to compete with them. Like Yahoo had a service of 69$ annually or so for music, i don't think it worked too well. Look at Napster, its stock is as dead as its service.

On a personal level, i think a subscription service would limit the consumers freedom to switch services. I'd rather pay 99c for a song then pay 10-12$ monthly or so & be forced to get songs just "cause i paid for it."

Right now Apple stock, according to me, is being mispriced. It sells as if there was no Intel deal nor a platform of allowing windows on Mac. Those two catalysts would help turn its 4% pc market share to 6% in the coming years.

As for MSFT's so called "iPod killer." The media can go on about it but i don't think it will be an iPod killer, more like MSFT killer. By the time they realize its not penetrating market share (just like SNDK or iRiver MP3 platers) & that they have burned the cash to no avail.

2006 Jul 10 05:01 PM

[Yaser Anwar_:]

"Microsoft has a pattern of entering a business and sucking the profit opportunity out of it by incorporating it as part of its platform. Why should entertainment infrastructure be any different?"

The only thing MSFT has ever entered successfully & "sucked" out profit from is Operating Systems & Office. Otherwise the company is a deadbeat. Their efforts have been fruitless in 1) Internet Search 2) Video Gaming (Sony sales still kill the xbox!) & the third one will be MP3 players.

MSFT can add all the goodies it wants, from WiFi to big screens, in the end they will either price it to high, thus killing demand or price low enough to take a loss on each sale (think Xbox!). I can gurantee you that the player will not have the smoothness of the iPod or the ease of use.

2006 Jul 10 05:10 PM

[Tom B:]

"The only thing MSFT has ever entered successfully & “sucked” out profit from is Operating Systems & Office"

Disagree. Remember the browsers wars? MSFT made no money THEMSELVES, but they made it impossible for NETSCAPE to monetize browser clients. Firefox, derived from open source code based on Netscape, is excellent and feature-rich. But I don't think it makes anyone any money.

Internet Explorer, today, is like something from a Sam Raimi movie, that died long, long ago but keeps crawling up out of its grave looking more-and-more maggot-ridden.

As for your other note about subscription services: I have a "nano". It's got, like 500 meg of Podcasts on it. It has less than 5 meg of purchased music. I have NO IDEA if my usage is typical, but I use my Pod more like an time-shifted internet radio than as a front end to a music store. I wonder if someone knows how much music from the iTunes music store gets bought by the typical individual iPod user?

2006 Jul 11 09:05 AM

[PerfectZero:]

Microsoft's pervasiveness may enable it to challenge Apple more seriously than past attempts, but I don't see any way its package could be profitable. Admittedly, media downloads themselves have tiny margins - this isn't only Apple's "secret" - leaving hardware as the only potential profit source.

But how will a Microsoft player compete with the iPod on pricing? With millions of iPods being shipped per quarter, AAPL has a huge volume advantage that MSFT lacks. If the Microsoft player sells at a loss then what's the point? Its not like the Xbox, where game sales can generate significant revenue.

My intuition tells me that MSFT will try to package their player with a few extra bells and whistles, but for a higher price than an iPod of comparable capacity. I'm not sure this would work in the long run.

2006 Jul 11 03:11 AM

[Edgar C.:]

wow. These Pro-AAPL people can be pretty vicious. In my humble opinion, consumer electronics is not a profitable place to be in the long term. Whatever marketing, technology aggregating, and design genius AAPL has benefitted from will be eroded. Two things to rely on: legal bariers (e.g. patents, government supported monopolies, etc.) and undeniably favorable markets (e.g. commodities). It doesn't matter if MSFT will make money out of this...All that matters is that they are getting into it. And it's goign to hurt everyone. For all the people that seem thing think iPods are the only players out there, you're about as dimwitted as the masses these iPods caters to.

2006 Jul 11 09:22 AM

[Tom B:]

I hope I am not "vicious". I prefer "particular" or "having high standards".

I agree with you-- I don't like the iPod business LONG TERM. But, remember-- something like 300 M Sony Walman got sold in the 80's. I don't expect AAPL to become "the iPod company", but I think it will continue to be a good sideline for another 2-5 years.

2006 Jul 11 09:58 AM

[Joe Ragosta:]

Nice straw man. Who ever claimed that iPods were the only MP3 players out there?

As for 'vicious', does the fact that we like to see analysts post REAL information rather than their delusions make us vicious in your mind? If so, I feel very sorry for you.

2006 Jul 11 11:23 AM

[David Bertoni:]

Vicious? Hardly. As far as being "pro-AAPL," that's going a bit too far. The subject has been limited to digital media products and eco-systems, and the premise of the analysis that prompted these responses -- that Apple Computer is about to face a serious challenge from Microsoft's alleged "iPod killer."

Edgar, whatever your humble opinion might be (and it didn't sound very humble to me), vast fortunes have been made in consumer electronics -- and whether or not they remain profitable in the "long run" has more to do with whether a company can (1) transition to new products as technology leaps forward; (2) have a great design sense; and (2) offer something so unique that the public doesn't jump ship when the first competitor offers something slimmer or shinier. What's funny about the iPod is that Apple seems to winning decidedly on all three counts, even though its only real advantage is in (3).

On (1), Apple's transition to new technologies isn't always the fastest, but I've learned from Apple's experience that speed isn't everything -- nor is equipping a consumer device with every bauble a good thing. Onboard radio (satellite or otherwise) is a good example. Apple realized that picking up a radio transmission for music is second-best to making your own radio station--which is what made the iPod attractive in the first place. From the outset, it could hold a huge library in a small (and increasingly smaller) package, and it had all the tools the user needed to program his or her personal station. When you have that, why would you want to introduce poorer quality, advertising laden, soundtracks designed by some media conglomerate owned radio station? Just ask yourself if, when driving, you'd rather listen to FM radio or your own MP3 CD or an iPod. I think the answer's easy -- radio comes in a distant third as a far as music is concerned. Now, talk radio is another matter altogether, but Apple creatively solved that problem with Podcasts ... which are now offered by virtually every popular radio (and sometimes television) talk show.

On (2), it is strikingly funny -- and ironic -- that none of Apple's competitors seem capable of producing an industrial design that comes even close to the iPod. Not even Sony. Walk up to the music player counter at any store and everything else looks bigger, clunkier, more complicated, or just plain uglier than the iPod. Why? I think it's because most technology companies (and Microsoft is a huge example) are run by engineers with little or no design sense, or for whom the design department lies at the bottom of the food chain. They seem to think that squeezing in an extra gigabyte of memory is more important than the package that holds it. And so, Apple wins out on design, an area where it, by all rights, ought to have no monopoly at all. I haven't seen a shred of evidence that Microsoft is even capable of understanding the terms of this battle, let alone winning it.

Of course, (3) is the area where Apple does hold a distinct and perhaps unique advantage. It is useful to compare the situation to Sony's Walkman. For a time, Sony's Walkman dominated the portable music scene. The were stylish to begin with (relatively speaking), got smaller and more elegant over time, and added features relatively slowly. Technology, of course, kept the feature set small. Sounds a lot like the iPod, in fact. But, what Sony didn't have is the music eco-system. Thought of in terms of the late-1970's and 1980's, in order to replicate Apple's system, Sony would have to have had its grip on (a) the furniture where we stored our record albums and tapes (the equivalent of the iTunes library); (b) the cables that connect turntables and tape players to the Walkman (the equivalent, it seems, of the iTunes digital pipe to the iPod); (c) tools for easily and comprehensively deciding, on the fly, what songs will reside on the Walkman; and (d) a record store in every house make it incredibly easy to add to your growing library. As for the last point, commentators often fixate on how consumers like choice and shouldn't be shoe-horned into an audio format that can't be used on other players. The problem with this analysis is that the marketplace shows that, for many consumers, there is no real choice in terms of other music players. They don't like them and aren't buying them. Yes, it gives Apple an additional bulwark against competition, but I think it's a very small one. Most iPod owners have relatively few iTunes store purchases in their libraries. Let's look at the numbers: About 1 billion songs sold as of early 2006 versus a total of about 42 million iPods sold (these numbers weren't released simultaneously, so they could be off): just 23 songs per iPod. And if you factor in a bit of common sense -- that rapid Apple partisans likely have the biggest libaries of purchased songs -- the number 23 likely drops even more for the consumers who might be converted to a competitor.

I have grave doubts about Microsoft being able to take a decisive lead on (1). It can't even get Office and Vista together on time. I have even graver doubts about Microsoft getting its act together on (2). And, as far as (3) is concerned, the odds are even worse for the Redmond giant.

Edgar, you're very quick to call people dimwitted -- as if anyone who posted here agrees with your strawman observation and "seem thing [sic] think iPods are the only players out there." That's silly. And to call the "masses" who buy iPods "dimwitted" -- well, very few successful businesses hold their customers in such low regard. And while you can't sell 42 million iPods without some of them being sold to people less intelligent than you, Edgar, my guess is that quite a few of them are at least as smart as you. And that's the beauty, in the end, of the iPod. It's easy enough for anyone to run the iPod/iTunes eco-system to cater to their every musical need. And that appeals to plenty of "smart" people, too.

2006 Jul 11 10:10 AM

[Joe Ragosta:]

For the final word on the topic, let's consult a site with vastly greater credibility than the author of the article above:
www.crazyapplerumors.c.../

2006 Jul 11 11:44 AM

[Grant Sernick:]

feelingbullish.com/sto...

2006 Jul 12 10:30 PM

[joseph1102_...:]

That seems like a good idea. But what would be better is a deck that would take any mp3 player (I know wake up cuz I'm dreaming).

Over all, with all the Alpine products I have in my truck (ipod hookup, tv receiver, gps navigation) I'm pleased with their products


www.ipodconverter.com

2007 Mar 23 06:12 AM