iPod Shows Soft Underbelly? Not Just Yet

by Chris Seibold Aug 23, 2005

If you hear the words “France” and “Military” in the same sentence no doubt jokes immediately spring to mind. One-liners like “Surrendered to a bar of soap” or “Cheese eating surrender monkeys” or, for tech minded among us, the Google prank. Gags aside the French get a bad rap when it comes to military victories and the low esteem the public holds the French Military in undoubtedly has more than a little to do with the Maginot Line. The Maginot Line, you’ll recall from that arduous summer studying military tactics, was a series of fortifications designed to prevent Germany from, yet again, invading France. The French relied too heavily on the fortifications so when Germany swept into France by going around the Maginot Line France’s reputation was cemented. Strangely the Maginot Line held with only one fortification falling before the fall of French government. Apple’s version of the Maginot Line is the integration of the iTunes music store with the iPod and while people sincerely believe they can dethrone Apple from atop the electronic music market by just biding their time or making ever more silly mp3 players they are simply wrong, the only way to beat Apple in the electronic music field is by innovating something completely new and going around Apple’s carefully placed defenses.

As it stands precious little innovation seems to be coming down the pipe but plenty of folks are sure Apple’s ride is over. Gene Munster, an analyst that usually has only the best things to say about Apple, was quoted by CNN as saying “Its inevitable that over time their market share declines” The reason Mr. Munster gives for this is that no particular product can dominate the consumer electronics market for more than two or three years. Going by past experience that is seemingly true, consumer electronics rarely hold such a large percentage of the market over such extended periods of time. Yet Mr. Munster forgets that the iPod is much more than just another consumer gadget people can get rid of on a whim. Once you couple the iPod with songs from the iTunes music store you’re stuck (short of EULA violating hacks) using the iPod as you mp3 player until something sufficiently compelling comes along to replace it.

To flesh out that notion we need an example. Take the seemingly slow uptake of CD technology. Putting a finger on the exact moment in time when CDs took the place of cassette tapes is a difficult notion but it was a long, hard slog. Which is remarkable, while audiophiles may argue the merits of records versus the sound of a compact disc there is by and large agreement that cassette tapes are, in nearly every way, inferior to compact discs. Yet people had significant investments in their cassette tapes and were loathe to throw that investment into the local landfill or, perhaps, they were a little too embarrassed to repurchase a Flock Of Seagulls album. In any event consumers felt the need to keep tape players long after they had overstayed their welcome from a technical standpoint.

The iTunes/iPod relationship is similar with one small exception: you could buy any cassette player to play any tape but you have to have an iPod to play the music purchased from the iTunes store on the go. So any struggle to supplant the iPod/iTunes duo is going to have to be more compelling than the CD/cassette player comparison. Somehow one suspects that if Apple’s competitors haven’t showed a music delivery and playback system that rivals Apple’s offerings yet the chances of said companies rolling out something completely revolutionary in the next eighteen months are slim. One more thing to note at this point: As wildly popular as iTunes seems people still prefer the tried and true method of buying CDs. Sure iTunes was a music buying revolution but the revolution isn’t happening as fast as many think it should.

Still hope springs eternal that Father time and consumer apathy will push iTunes out of the limelight. Record companies are said to be giddy with the prospect of Apple losing a substantial amount of market share and, therefore, market clout. The thinking, according to the same CNN article mentioned earlier, is that as Apple loses market share the online market will grow. Which is another way of saying that if Apple doesn’t own the market the record companies will enjoy more freedom to jack up the prices.

If all this seems familiar it is because Apple has been down this road before. BuyMusic.com was going to decimate the iTunes music store, after all iTunes was Mac only (one recalls the founder of BuyMusic.com gloatingly saying that iTunes was great but that it was on the wrong platform). In the end Buymusic.com was all hype, a music version of Pets.com with Tommy Lee playing the part of amusing corporate shill. There have been a string of other pretenders, Wal-Mart, Sony, Napster but they are all trying to do the essentially the same thing: Attack the iPod and iTunes directly which simply isn’t going to work.  Companies can throw every conceivable download model and crank out ever more clever music players but until they bring something to market that is as simply much better than the experience Apple offers, both quantitatively and qualitatively, they will fail. It is the equivalent of attacking the Maginot line directly, if you want to win you have to go around the obstacle.


  • What revolution? As you say, iTMS is a “buying revolution”. It’s easy, and it is pretty much the only service with a decent DRM. It, like all download services, still fails on quality. Before I cannot download lossless material at a price that is *significantly better* than buying a physical CD I am not touching it, not even for single songs. Most people don’t care about the quality though, they just want the best buying experience combined with the best user experience. Which is Apple’s, period.

    The MI now has this very clever idea of trying to force you into downloads:
    which just might backfire, don’t you think? I also think any attempt to raise prices is insane. Price needs to go down, or quality has to improve without raising the price.

    BTW, I would like to see a survey about whether people actually choose their DAP after the download portal of their choice. From what I see it’s pretty much the other way around. People want iPods, and the iTMS might play into the decision, but I somewhat doubt that there are net-savvy people saying “Oh, I cannot bear not buying from the iTMS, seems I have to get an iPod”. No. If at all there are some complaints that you cannot use iPod with any godforsaken DRMd WMA download. People go all Valkyrie on labels that put out copy protected “CDs” that prevent them from using their purchased music with… iPod. What would you rather have - an iPod or Cokemusic.com? See?
    The people I know who buy non-Apple HD-based DAPs (and there are some good ones, nevertheless none only halfway as polished) do so because
    - they found them to sound better, sound having absolute priority.
    - they want a certain feature that iPod cannot deliver. A digital out is much sought after, but only *very* few units have one. As far as I know there is just a single DAP featuring an optical out, and you cannot buy it new anymore. Nevertheless it’s lusted after by audiophiles who want to use it with a stationary or even portable high quality DAC. Feel free to assume these people rarely feed their $1500-2000 portable systems with lossy downloads.
    - they hate all things Apple.
    - they hate the iPod phenomenon and want to be “different” (which is a funny conversion of the “Think Different” theme and should be well worth an article - being different by *not* choosing Apple *g*)
    - they are affluent gadget freaks collecting all sorts of DAPs.
    - they are people who buy brand X flash DAP just to have one and probably use it with their own music or pirated p2p material.

    So, in conclusion, even if iTMS went belly up tomorrow, people would still buy iPods. Because the product was pretty much excellent without the iTMS. They would bitch and moan, but I assume they’d rather go back to stealing from p2p or physical CDs, since no other store can offer the product integration Apple delivers.  So I end pretty much in line with your argument, there is no way to directly attack Apple in this regard. I deeply bow to the people at Apple who thought up the concept of iTunes+iPod+iTMS, it’s a masterpiece.

    Bad Beaver had this to say on Aug 23, 2005 Posts: 371
  • As a proud French fan of all things Apple, and a friend of the USA, I’m really fed up of this recurrent anti-French racism. You may say your jokes and just plain silly, buut enough is enough.

    jmp2712 had this to say on Aug 23, 2005 Posts: 1
  • I concur jmp2712 which is why I said that the French get a “bad rap.” Readers interested in learning more about the French Military prowess and why those jokes aren’t accurate should read the following:

    Bad Beaver I agree that the iPod would continue to sell with out the iTunes store (friends I give you the continent known as Australia. Chris Howard has never experienced the iTunes purchase experience). The point was that applying past models to the current models factors out the benefit of the store.

    Chris Seibold had this to say on Aug 23, 2005 Posts: 354
  • I think Chris makes some great points. And the more songs Apple sells, the harder it will be to unseat the iPod from its throne. The fact that every other day, competitors are coming out with yet another “iPod killer” and proclaiming Apple to be doomed shows just how little they understand the mind of the consumer. No doubt part of Apple’s success is the result of the ineptness of Apple’s competitors. Hey Creative! How well is that $800 brick of a portable medai player selling without an easy way to download movies?

    So here are all these competitors, trying to do Apple in by using bows and arrows against Apple’s tank, and when the arrows bounce off, their solution is to use more arrows on the hope that one will pierce the armor by some inexplicable miracle. But that’s not that hard to understand, when it seems that most of them view the iPod’s success as a total fluke.

    It just makes you wonder what will happen when Apple launches an iTunes-like movie download service and a movie iPod to go with it.

    Paul had this to say on Aug 23, 2005 Posts: 31
  • Paul, I don’t care about the “what and when” but only about the “how”. *g* I say it could be done very soon, and quite well, but I would not expect a movie iPod to fit my pocket.

    For music iPod’s competitors “the train has departed” as we say in German. Even if someone came up with a nice sleek player that integrated seamlessly with a software superior to iTunes - who would care? Trouble is the competition did not see it coming because they underestimated Apple and did not pay attention to the fair warning that iPod carries so blatantly in its own name. And then it grew.

    Bad Beaver had this to say on Aug 23, 2005 Posts: 371
  • I do not see the iPod/ITMS combination slowing down anytime soon ... there is no better advertisement than positive word of mouth and the iPod has a huge advantage in this regard.  While there are many reasons for iPod’s success ... I think one key element is simplicity of use ... so many competitors keep forgetting that if you have to be a bit of a geek to operate the player ... forget it.

    The only company that I think could give some serious competition to Apple is Sony ... however, they certainly have not been a threat to this point.  I think Sony and other consumer electronics manufacturers are at a distinct disadvantage in that they have no experience in software (or at least, not to the degree that Apple does).  Apple releases a new version of iTunes pretty regularly ... when is the last time Sony updated Sonicstage ... or did anyone even notice?

    dmcleod had this to say on Aug 23, 2005 Posts: 10
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