Thursday, May 27, 2004

Apple Is Repeating Old Mistakes (Thank God) 

One of the pieces of conventional wisdom most easily pulled out of the average high-tech buff's mind is the danger of closed platforms. While Apple held tightly to the Macintosh platform, IBM opened the PC platform so that any company could make compatible computers. The rest is history. Maybe I'm going to severely embarrass myself here, but I'm going to argue against this conventional wisdom in the digital music player market.

Lately, there's been a bit of buzz about Apple's iPod, and how to best manage that product. The iPod is easily the number one digital music player in the market, and it's basically a closed platform. You want iPod, you go to Apple, you buy their thing (iPod), and you download songs in their format (AAC + FairPlay). If you want to use either of those components (the players or the song downloads), you have to use the other.

So now there's a lot of pressure on Apple to open up the platform they've created to avoid a repeat of what happened with Macintosh. Particularly, the CEO of Real, Rob Glaser, has begged Steve Jobs to open the iPod platform.

Apple would have to be a real idiot to do this now. It would be tantamount to surrendering without a war. To a weaker enemy. They've got the majority of the mp3 player market, and make a healthy margin on iPods. They've got even more of the digital download market (at least 70%). Though hey, Real would love it if Apple was stupid enough to give them a free in to the market.

The are two supposed threats. The first is obviously Microsoft. Microsoft's competing digital media platform is more open, in that other companies can license it and provide products based on it. The second threat is the major consumer electronics giant, Sony (those guys who invented the personal music player market, and until recently owned it). These are credible threats, of course, and not to be taken lightly. But so far, they haven't posed much of a problem in the market.

Sony just recently announced their offerings in this market, such as their VAIO Pocket iPod-clone, and their online music store, Sony Connect. Without seeing either of these in person, both seem pretty lame. I think this article on iPodLounge does a pretty good job analyzing Sony's offerings.

See, the thing is, in order to be competition, someone has to actually want to buy the competing product. The VAIO Pocket left me totally unexcited from the moment I first saw it. I can't speak for everyone, of course, but I am a consumer in this market. I'd rather have my iPod, easily.

This "having to be desirable" is the same thing that makes Microsoft not much in the way of competition at this point either. Simply having tons of products doesn't attract consumers; they have to want a specific one. Especially since it's not like they're afraid of the iPod disappearing, given its huge success so far. So far, I haven't seen any competition for the iPod that would make me consider going that route. The iPod is priced at a premium compared to other music players, but it seems to be worth it to people. It's not a Macintosh-like price hike compared to the rest of the industry, especially if you believe, as I do, that Apple has come up with a much more attractive combination of dimensions, interface, weight, storage space, price, and battery life than anyone else so far.

Another thing that's different is that Apple seems to have a better strategy for staving off competition this round. They've sought patents on their user interfaces, and patents are likely to hold up better in court than their previous attempts, in which they attempted to apply copyright law to their interfaces. This will make it harder for competition to copy the attractive features of the iPod very closely.

And, if it starts to heat up, and iPod starts losing market share, because Microsoft or Sony has finally come up with something attractive, they still have opening up the platform as an option. Nothing precludes that at a later stage. Especially since they are starting from a very strong position in the market, and they control all aspects of the complete, integrated solution that consumers want.

Real Networks threatening to join with the competition was pretty funny, though. I can see Steve Jobs laughing now. "Oh no, please don't go associate your crappy brand and large, loyal user base with our competition! We'd love some of your brand poison over here!"


Wow, lots of comments.

Xirt/Matt: How right you are. I remember hearing the history of all that, but I'd forgotten the details of it all. In any case, however it happened, its effect was the same.

I'm no fan of the DMCA, but one of the few encouraging signs I've seen about it is that the right to violate the DMCA for purposes of reverse engineering has been upheld. In Sony v. Connectix, the court found that Connectix was exercising fair use of Sony's code since otherwise, the DMCA would be indirectly outlawing reverse engineering by way of making any intermediate copies made while examining the data illegal.

A $50 iPod Killer: Given the cost of micro-drives, and the very limited number of suppliers, I imagine this device would not be competing in the same category. If Microsoft could actually make a comparable device that cheaply, that would be problematic. But what would have prevented Apple from doing whatever it is that makes it so cheap? I'm skeptical, but even if it's true, it would likely serve a different market segment (See HP/Dell posts).

Wezelboy: Yeah, that's what I'm saying. The closed platform isn't necessarily the mistake, despite what Rob Glazer and others say. It sure as heck hasn't stopped game consoles. Innovation is important, but so are network effects. If Apple's format gains traction, that makes their platform more attractive. Given how far Apple has come already, that has everyone else starting at a disadvantage. They're not invincible, but they have a good chance, and are in the best position they can possibly be in right now.

However, I hardly think iPod DJing is a major market segment. If they can make changes in software to accomodate it, it would probably be smart. But another player just for that? I doubt it would sell, even if every asshole who thinks he is a DJ bought two.
there is the dell dj which if you use it, the interface is very iPod-ish in nature. it's not nearly as sexy or sleek as the iPod, though.

apple would indeed be foolish to open the iPod platform up. the dj hasn't even sold numbers close to the iPod, the rio which has been around for years now has failed to find a crowd, and the sony clie has been aimed more towards the pda market than the multi-media musi lover scene.

you can use an iPod without iTunes however. you don't hafta go completely apple with the device. there are numerous plug-ins for winamp and realplayer that allow you to connect, download, and content manage on the iPod.

but as for the device itself, nobody has apple closely beat just yet.
Originally, I had a paragraph talking about the Dell DJ explicitly, since it's probably the closest thing to the iPod I've seen. But then I thought it was repetitive, given the statement I made about the optimal combination of features. Like the VAIO Pocket, it's just not in that same sweet-spot that the iPod is in. That little roller thing looks like it would be a real pain in the ass, too. The great thing about the touchpad on the iPod is that it applies an acceleration factor. If you whip your thumb around, you can zip from the top of a list to the bottom. If you move very slowly, you can get very precise movement. Plus, that thing is basically the same thing that's on scrollwheel mice, and the mechanism on every single scrollwheel I've ever used has eventually worn out and started feeling weird. No thanks.

I think Dell's problem is that they think these things are PCs. "Well, we offer more battery and more storage for less price." That should work, but it doesn't. The additional battery makes it heavier, when I can't imagine needing more than iPod's battery life (and I listen to my iPod pretty much all day at work). As for storage, there is some upper limit to how big someone's music collection is. I have digitized almost every CD I have and still haven't filled up half of my 15GB iPod. I have no idea what I'll do with the other half of the storage. Given how often I'm pawing at this thing all day, I do want the superior interface.

I know you can use an iPod without iTunes, I was talking about the digital music downloading; nothing but iTunes Music Store offers mp3s or AACs, and that's all iPod plays. Besides, why would anyone use a music player other than iTunes?
Actually IBM didn't open up the PC compatible market, other companies spent a lot of time and money reverse engineering the original IBM PC BIOS. They then licensed MS-DOS from Microsoft and could sell PC Compatible machines running essentially the same operating system - remember IBM's version was called PC-DOS originally not MS-DOS.

These days if anyone tried to do that they would be in violation of the DMCA.

(sorry i don't have a blogger account atm)
methinks apple is sunk again...

'Microsoft Corp. Corporate Vice President of MSN Yusuf Mehdi told attendees of Goldman Sachs' fifth annual Internet Conference in Las Vegas, Nevada that the company will produce its own line of portable music players for as little as US$50'

Keeping the Macintosh platform closed was not necessarily a mistake in itself. What made it a mistake was a failure to innovate while trying to maintain huge profit margins. Apple could be making the same mistake here. Fortunately for Apple, most consumer electronics companies are pretty clueless and have yet to come up with a product that is remotely competitive with the iPod. Unless Apple continues to innovate however, it is only a matter of time before an "iPod Killer" hits the shelves.

For example- Apple and the tech press like to make a big deal about iPod DJing. It irritates me to no end, because DJing with iPods is just plain stupid unless your crowd loves to hear trainwrecks. When someone comes up with a portable mp3 player that has some of the features of the nicer CDJ players, there are a lot of people who are going to buy two and have a shiny doorstop leftover.

Apple has been pushing really hard to create creative consumer applications with the iLife suite. How can they possibly have missed this obvious application with a hardware tie-in? (Although in theory, a lot of these innovations might be doable with a software upgrade to current iPods) I submit that in this respect, just like he was with respect to games on the Mac, Steve Jobs is clueless.

So... where is my iPod Pro?

DJ'ing on an iPod doesn't have to sound like a "train-wreck"--just use tracks encoded at higher rates, and utilize the dock for pure audio-out.

I just had a chance to play with a 20 GB Creative Nomad this weekend. The menu hierarchy was basically the same as the iPod's, but on a smaller screen that was less easy to read. The thing had about ten buttons, but NONE of them performed the "back one menu" function that the iPod's Menu button does. You're left to scroll all the way to the end of the list for a "return" arrow and select that. And the scroll wheel--kind of like a mini radio tuner dial--was painful to use: accelerating the rate of scrolling made it go three entries at a time instead of one, unless you went too fast for it to process. Then it dumped you back where you started scrolling from. Pain in the ass.

I went back to my iPod with relief. If that's the level of competition with the iPod, it's a wonder that Apple doesn't have even MORE of the market.

As far as Microsoft, closed systems, and "choice": The only option to Apple's iTunes-iPod combo is one of dozens of WMA players that rate from crappy to decent, and a bunch of mediocre-to-decent music stores peddling WMA. It's all still WMA--no real "choice" on that side either. It's like being asked to choose from 100 varieties of ketchup, or a chef's specialty sauce from a specific restaurant.
The ipod is NOT a closed platform, the itunes Music Store is. This is an important distinction. Apple's not stopping anyone from loading their ipod with platform neutral content. The ipod plays mp3's as well as AAC's. ---sirdonic

That's not a meaningful distinction, even though it's technically true. Can you create a music download service that works with iPod without Apple giving you the keys (assuming that the record industry isn't going to OK anything that doesn't have some form of DRM)? No. Can you create a hardware device that works with files downloaded from iTMS? No. So who would care about this difference?
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