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Summary:

Russell Beattie, one of my dear friends, has come to this conclusion that Microsoft and its DRM strategy are ultimately going to be winners and will leave Apple’s iPod and iTunes music store grappling at straws. Russell, when he writes about mobile phones and wireless technologies […]

Russell Beattie, one of my dear friends, has come to this conclusion that Microsoft and its DRM strategy are ultimately going to be winners and will leave Apple’s iPod and iTunes music store grappling at straws. Russell, when he writes about mobile phones and wireless technologies is seldom wrong, but I take umbrage to his conclusions. His reactions, and perhaps others who think along those lines – its 1984 all over again – are off a tad.

Russell thinks that by kowtowing to Microsoft, the companies like Yahoo are losing their place on the table, and helping Microsoft create another monopoly. I am not so sure – because I am not convinced that Microsoft’s scorched earth strategy is going to work – as long as we have the iTunes option.

Remember it hasn’t worked in Mobile Phones. Symbian continues to outsell Windows Mobile handsomely. Same in the digital music world – once you have seen or used an iPod, you know the better option. In the PC era, Apple’s strategic mistake was pricing, not the product. Well, this time around Apple got the pricing right.

By the virtue of my job as a senior writer for Business 2.0 I am exposed to many a few new technologies and gizmos. I often get to try them out. For instance, last week I had a chance to play with some of the upcoming Archos digital music devices, and this weekend had a chance to play with Toshiba’s GigaBeat player. I have seen many a few players come to the market, and well lets just say, I would not buy them. I am not a technology dimwit, (or at least I like to think that) and still I had trouble navigating and using these devices. They are despite appearances boring and lack the ‘take my dollars appeal’ of iPod. If you are a device maker – you basically don’t have the uniqueness that would make you stand out. (Creative Zen comes close, and is worth your time, but others….)

Lets turn to the whole experience of using Microsoft’s DRM and Windows Media Player. Whether you are using one device or the other, it doesn’t make much difference. The uniformity of the subscription music services is yet another reason why many devices and services are simply too ‘me too’ in nature. Some are arguing that even record companies should get into online music distribution business themselves. On the Windows platform, it takes some effort to get the whole music thing going. In other words, the complexity of these devices mimics challenges posed by Microsoft Windows. There is going to quite a bit of consumer confusion when it comes to digital music service – subscriptions from Napster, Real or Yahoo? Hundreds of devices to choose from? On the other hand: iPod, which you know works – – yes even on a Windows machine it simply works.

And perhaps it is time to step outside the hothouse of Silicon Valley, and look at consumer behavior at large. (Never mind the fact that as consumers, we have historically wanted to buy our music, and not rent it!) When dismissing iPod’s chances in the future, it is easy for the technorati to overlook the iconic status of iPod, which believe it or not is available in many shapes, sizes and prices. It is has the same status appeal, the very same cachet as say a Burberry plaid, Zegna sports coat, and Armani cologne. It has the same ‘sensory’ appeal of a Mini, or a BMW, at prices which can be deemed affordable. Now if you have been watching the retail trends, you can see the world has been focusing on ‘affordable luxury.’ Gucci clutches and Coach handbags – as long as they stay below the $500 price tag, are flying off the shelves. iPod is no different. But lets look beyond the world at large.

One last thing – to think that guys at Apple, including Mr. Paranoid are not going to do something about these competitors is short term thinking. Didn’t someone just mention that PlayStation3 and Apple iTunes might be getting cozy?

  1. You say that historically consumers have wanted to buy their music instead of renting it. But when in the past have consumers had the option of renting music compared to today?

    And how has Apple got the pricing right? They may have the pricing of their hardware correct, but when given the option of paying $5/mo to Yahoo for unlimited access versus paying $1/track – I’ll take Yahoo.

    In time, I’m sure that Creative will eventually get their interface fixed, or that the next phone you buy will support Microsoft’s DRM. There are far more hardware makers which will drive down the cost of players supporting Microsoft and give the consumer more options.

    To me it’s not Apple’s DRM versus Microsoft’s, or a Zen Micro versus an iPod. It’s the subscription model which will dictate who wins, and for now that means using products and services that use Microsoft. Unless Apple gets into the subscription game, I don’t see how they can compete.

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  2. Om, the real “affordable luxury” in the emerging markets is the mobile phone. Forget about the Apple and iPod mania. I know what I’m talking about. I live in Bulgaria, Eastern Europe.

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  3. Well, it is clear that mobile phone will be the preferred choice in seriously “mobile” societies. In the US, its all about affordable luxury. I can promise you that once iPod phone comes out, a lot of people around the world will take the iPod phenom more seriously

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  4. Symbian vs Windows Smartphone

    I often see statements about Symbian being better than Windows Mobile backed up by sales data. While I have no experience with either of the phones (I do have a Windows Mobile-based Audiovox SMT 5600 on order), I wonder how accurate using sales data t…

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  5. Slightly tangentially, I wonder about the use of sales data to backup claims of Symbian superiority and claims about Windows Mobile’s future success.

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  6. Dustin, you lost me on this one. can you be more clear on what you were saying so I can respond? thanks

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  7. Don’t know who that Russell Beetle guy is but clearly he’s just old and doesn’t realize 1984 or 1988 or 1995 is not 2005. MS cannot buy their way into a monopoly position on the internet. THey tried 10 years ago, trying to dismiss the internet – get onboard to MSN – the “better internet” and when that failed, they simply leveraged their monopoly position by forcing OEM’s to bundle IE or else and the went to corporations and bundled IE with a cheaper server upgrade – how does Netscape compete with that? Can’t. Back then, who was going to load a new browser via dialup? Now? With the bulk of the internet (at least the important users) on broadband, MS is just another choice and frankly, when given a REAL choice, consumers rarely choose MS – MSN, Cell Phone OS, PocketPC, WEbTV, Home Networking Gear, Tablet PC, Watch OS, et al… TEN years of failures (XBox – they’ve spent $4 billion to sell 15 million units – success or paying for success?) … MS is the new GM – still huge but run by bureacrats – MS is done.

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  8. Chris Cambron Monday, May 16, 2005

    Many people base their arguments on today’s reality – as though Apple’s universe will be stagnate from here on out.

    Apple can, at their whim, “flip a switch”, if you will, and support both MS’ DRM as well as a subscription model. I am sure Apple has several contingency plans in place. Not to mention that Apple clearly has larger plans involving Video, AirTunes, Wi-Fi, etc. etc.

    Apple has zero reason to allow other mobile players to use Fairplay at this point. Zero. Apple owns the market and is still making market share gains – it’s probably not time to make a change just yet.

    Apple came out with the best products – iTunes and iPod – and kicked ass. When Apple feels they have milked the cash cow long enough, and/or the products look like they might be leveling off, they will form strategic partnerships with some of the losers like Yahoo Music and let them carry the water while Apple moves on to the next insanely great thing.

    Get used to Apple dominance. The times, they are a changin.

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  9. Yeah Om…sorry for the vaguness. My main point is that sales data is used to point to the superiority of Symbian all of the time. I have two related points of contention with that claim:

    1.) The tech industry is full of products that are supposedly “better” (depending on who you ask) that have lower sales. Sales != “betterness”

    2.) The lack of sales success of Windows Mobile can arguably be attributable to the lack of devices powered by Windows Mobile. In the Smartphone space in the US there are really only two offerings with any exposure. The Motorola MPx220 and the Audiovox SMT 5600. While the Audiovox has only had intermittent availability, it is considered by many to be the best Windows Mobile device available. The Motorola is often panned in reviews. Also, the largest cellular provider in the states (Cingular) has had only ONE Windows Smartphone available until this month when they finally released the Audiovox. That phone was the same phone with nearly universal negative reviews. Cingular has had a multitude of Symbian devices available.

    http://blog.contriving.net/2005/05/16/symbian-vs-windows-smartphone/

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  10. The only threat to Apple and tangentially iPod domination of online music distribution is Steve Jobs health and continued interest in running the show at Apple.

    Yahoo music has the possibility of killing the WMA market as much as enhancing it. No one can do more than break even at the prices Yahoo is rolling out their service. So here is the scenario. Yahoo kills off Napster and Real (very likely.) Either by undercutting them on price or they try to match prices and eat up their cash reserves in record time. Now there is no competition for Yahoo in the subscription space. What happens? Yahoo raises their prices and kill off their own growth.

    Maybe they will be smart enough to keep offering their $60/yr price but honestly, who is making money off such a low price? Artists will be unhappy if their revenue from digital purchases falls after finally seeing an upside to online sales. The RIAA gets their cut but will immediately start pressuring Yahoo to raise their prices. Yahoo has at best a break even service at the current subscription price. That leaves no profit to grow the service by adding new regions or countries. Yahoo is big but they are not any more capable than Apple at sustaining loses on a big gamble. Apple has no debt and about $7 billion in cash to play with. Yahoo has $750 Million in Debt and only about $3.3 billion in cash. Long term, Apple wins a battle of who can sustain loses the longest.

    Almost certainly Yahoo kills off other subscription service competitors long before Apple starts feeling any effect from their new service. I’m not sure a contraction of the WMA market is really what Bill Gates has in mind but it looks inevitable right now.

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