I had a few comments on my Apple's strategic take and my thoughts are that they somehow miss exactly what IMO Apple needs to do in this context and what historically it had failed to do with its Macs. It is creating and exploiting the network externalities. What does it mean?
If you have a product let's say the iPod that is used by somebody - the value derived by that guy by using it increases as the number of people using iPod increases. As such, as the iPod's popularity grows the gadget will become increasingly valuable since you have a greater use of it. This value is coming from two parts: one from using the product itself as if nobody else in the world had used it and the other piece of value is additionally derived from being able to interact with other users of the product, and it is this latter value that is the essence of network effects.
Now, the case in point is exactly illustrating the above strategy (or lack thereof). Sooner or later, because of the inevitable competition Apple's network (base of users) will be shrinking or be preserved in the best case (the protection Kev was mentioning) below a minimum acceptable level that will not permit Apple exploit economies of scale from producing the gadget. It simply means that the second piece of value I was mentioning above would be too small due to the limitations such as the ones from the Real case.
Having this mind I argue that if iPod is opening up its platform it may be able to become an industry standard. (and this is what Real did - a piece of software to adapt to iPod. Did they hack? - hard to prove, also since TM was mentioning the .doc parallel read a very good argument against this supposition) How? By leveraging its existent platform capabilities and disrupting its competitive advantages. Now, my commentators were saying that in fact Apple keeps doing innovative things, which I respectfully will have to disagree since upgrades are simply incremental changes and not innovations (aka as things that change the rules of the game and disrupt an industry business model). Besides I read that the last iPod upgrade was not so fortunate.
Also, Jon mentioned that Apple supports other formats too - true but the Real case is simply showing that Apple tries to lock on their iPod customers into the iTunes music store and this won't work as it limits consumers' choice. Kev was saying that Real's music store offers very little that Apple's doesn't - that is unfortunately not so. Closing the platform is just failing to make the pie bigger as you close additional sale extensions. And that means failing to exploit the network externalities.
I have worked as an Apple Authorized Service Technician for several years, including during the clone era. I strongly believe that Apple should not open the iPod plaform due to the tech support nightmares that would happen and also, of course, how it might soil the Apple brand. The branding of Apple really its its crown jewel (as anyone who has been to the larger retail stores will tell you) and it is common for people to come to the Genius Bar with third party problems and blame it on Apple. Opening the iPod would only make it worse - not all iPod users are sophisticated computer users.
Remember that the DRM choice is not Apple's decision. It is the necessary ingredient that the labels force on their product. Sony, with its Connect site, has a DRM of its own and Microsoft will have another DRM. To first order people don't buy iPods for online music stores. Apple is the only "successful" store to date and they only sold an average of 3 CDs worth of music to each iPod owner. i performed a study on a few hundred iPod users last Spring and found an average of over 2000 tracks on each machine. Not all of them were pirated - many were clear text compressions from the owner's CD library (often in AAC). Online music stores will not take off until there is a serious reason to use them. Apple's is the first to be good enough to consider, but many people obviously find the concept of physical media preferable. Until online stores are serious contenders, Apple's first order of business is protecting themselves from Microsoft and Sony as they enhance their store. Full compatibility doesn't make sense at this early stage if you are in the driver's seat.
I commend the author for taking the time to explore Apple's past and present marketing strategy. But a common error has been made in that the Macintosh would still be the market leader if not the fateful decision to push out steve jobs in 1985. This single error lead the Mac into the single digits. It's entirely possible Windows would of never occurred under of the shrewd stewardship of SJ. With him out of the picture, Bill Gates was able to trick Apple (and others) out of their product. If you haven't noticed SJ is back at Apple and defending the iPod from anyone that gets too close. Later, you will see him do the same thing with the Mac once IBM gets up to speed. The show isn't over, we are only 25 years into this game... with 25 years left to play. OSX is almost ready for prime time, so a year for IBM to solve production issues, then add a $599 headless mac into the picture and you have an Apple that fulfills it's original promise to the World's public.
Your argument would only be valid if opening the iPod would sell more iPods. You can't make money selling tunes or software upgrades, opening it up won't help that. Apple does not sell add ons, third parties do. iPods sell because they look good and they work seamlessly with iTunes and iTMS on Windows and the Mac not because buyers want to download music legally. Opening up iPod might give owners greater choice of online music stores but it would ruin the ease of use by creating a mini windows nightmare of tunes not playing, crashing and rebooting on both the Mac and Windows iPods. This would result in fewer not more iPod sales. Liciencing fees for opening it up would be more than lost through lost iPod sales. iPod is a luxury item at a premium price. It would not sell like it does if it was just good enough like everything else in the windows world. You just don't get the concept of working right every time. If you did you wouldn't think you had a point with your argument.
-----true but the Real case is simply showing that Apple tries to lock on their iPod customers into the iTunes music store and this won't work as it limits consumers' choice.-------------- MSFT has a lock on OS software in the same sense, how is this not working for MSFT as a company? you say that it can't become an industry standard, yet it already is a standard, others must join it, not the other way around..... you imply a problem where there is no problem, the only problem Apple has is not being able to build iPods and Macs fast enough..... how exactly is what you mention a problem, when the company can't even build them fast enough? all Apple needs to do, is build them and deliver them, that is all..... the only problem Apple has is getting the new chips out for macs, if they had the 3Ghz or 4 Ghz dual G5's, they would have to beat customers off with a stick..... they need to get the drives to build ipods faster too.... that is Apple's only problem...... that will limit Apple's success.... nothing else comes close in terms of problems....
The online music market is still dwarfed by illegal downloads, and as steve pointed out, consumers preference for physical media. This will change in the future, but right now Apple is operating under a set of circumstances that are not fully under their control. The lack of consistent DRM across music stores is the main issue. Until you can purchase music from a number of stores and have some measure of consistency in usage rights, the legal online market will remain small. Consumers have been accustomed to buying and owning music and if limitations are going to be imposed with no clear advantage other then convenience or access, it must be consistent, easy to use and straightforward. This is why Apple is the market leader in this space. Real has not brought anything to the table by making the iPod play music from their store. The companies "consumer choice" justification is weak and baseless. Has there really been such an overwhelming demand for the music on Real's store that the company had to create Harmony? Or an even better question - does the addition of music from other online stores increase the value and acceptance of the iPod? The iPod is the vehicle for the iTunes store, not that other way around. Considering the number of people who have purchased the iPod in other regions outside the US and Europe where the iTunes store is not available is something to consider. People are filling up iPods with their own music, so the addition of other music stores formats and usage rights doesn't add significant value to the iPod ... it already stands on its own. If the online music market was bigger and more relevant, that would be a different story. Apple is doing the right thing by developing some kind of traction with the iTunes store while the music labels figure out how it will approach the DRM issue. Apple has made it very clear that if the user experience is going to be up to their standards, they will open up, as they have done with HP and now Motorola. Real has made a strategic move to benefit themselves in the short term ... wrapping themselves in a flag of "consumer choice" just makes them look impatient and desperate. When the online market becomes a serious alternative to buying a cd or illegal downloads, then Apple will need to revisit their strategy. But right now, the iPod can stand on its own without the music store, no music store in itself is in any position to dictate the market, and more importantly, the big music labels are still in control and hold most of the cards.
Apple will never achieve the same status as Microsoft no matter how they price their products or open them up for ohers to use.
You obviously have no idea what a Mac is, nor what makes Apple's user base.
That's very short sighted to say Apple cannot eclipse Microsoft. Apple was the company that brought IBM to it's knees in the early 80's. And Microsoft is no where near as powerful as IBM was before the Apple ][. When you talk about personal computing you need to keep in mind the entire industry renews itself every 5 years or so. Microsoft was powerful in the late 90's but there are sure signs Apple will control the 10's. Microsoft at its best only controls 50% of a platform, whereas, Apple controls 100%. No other company has that market power. Apple has more powerful chips (if ibm can make enough :) Microsoft is STUCK with Intel / AMD which has to make the same transformation that Apple already did in the early 90's. Microsoft also has to switch operating systems since XP is no match for OSX. So that is 2 MAJOR problems MS faces, while Apple has already gone over those hurdles. Steve is smart in keeping Mac prices high... since there will be a day, when the time is right to "pull an Apple ][" and render the entire PC industry obsolete. Just watch...
Has anybody stopped to realize for a moment that Real's software doesn't work on macs? Just go to their site and try to download it with your mac. Won't work. So the question is, who's really closed?
You state, 'Having this mind I argue that if iPod is opening up its platform it may be able to become an industry standard.' Does anyone else realize the absurdity of that statement? The iPod - NOT an industry standard? Hmmm, let's see. According to the latest numbers, iPod hold over 50% marketshare of all the MP3 players sold (including the cheap solid-state memory ones. And if you only include hard drive driven MP3 players, the iPod's marketshare jumps to over 60%). The iTunes Music Store holds over 70% marketshare (worldwide) for legal music downloads. How much more is it going take before the folks that want to continually minimize Apple's products will learn that the music branch of the computer industry is playing catch-up to Apple? Notwithstanding WMP, ATTRAC, Real, or whomever, the iPod/iTMS is the standard of choice by the purchasing public.
The real scoop on this is that Apple has to vigorously defend the rights of the content copyright holders: the labels and musicians who have music on iTunes. This is just a variation on Apple shutting down Freeplay. If Apple is not seen as being vigorous in defending the copyright holders of the content-providers then keeping all the music companies on-board will be very difficult. This is about copyright infringement, folks. Not boxes or OSes or other red herrings. g
Apple has gone from the 8th place computer seller last year to the 2nd place computer seller this year. The strategy of Apple is not just to sell iPods. It is to provide a combination hardware and software experience that is so compelling that people will switch from their PCs to Macs. Evidently it is working. Real now provides a PC only software solution called Harmony that derails that strategy. No wonder Apple is apoplectic. How would Real feel if Apple wrote code that mimicked theirs, put it in QuickTime and then gave it away to Real's customers?
https://order.real.com/pt/order.html?ppath=cpmacpl060204a You can't find it on Real's web site because they only show you the version for the platform you use to browse. When I arrive to real.com -- using a Mac -- I get a bit fat headline "Introducing RealPlayer 10 for Mac OS X". Real player works well on Mac OS. It's actually cleaner and more usable than the windows version.