And again, the Reality Distortion Field of Steve Jobs has many brainwashed:
"You're saying Apple should forego all profits on the iPods in some pipe dream that they will rule the downloads market?"
No, in fact I never said that at all. You need to actually read the posts. Creative can make money at $199 without any hope at all of getting more money. Therefore, Apple can make money at $199 -- and it will get more money later from other sales.
And, no, it isn't a pipedream to rule downloads. It is there for the taking. I'm quite sure Apple will blow it; but people in the music industry don't understand why they are so insistent on doing so. I've spoken to more than a few...
"Can you explain how you lock in customers? "
With a proprietary DRM and a rare file format. Today, your iTunes downloads play only on your iPod. You buy the iPod and start buying music, you are locked in to the iPod indefinitely as you can't take your music to another player (well, you can, through two conversions that destroy its quality; I've heard the results of AAC --> CD Audio --> MP3 and they ain't at all pretty.)
"Itunes supports many players."
No it doesn't. Downloads play on iPods -- only. Period.
"But anyway, Apple proved the naysayers wrong with the ipod and I think they'll prove rogo and the new naysayers wrong with the mini."
I'm not a Mini naysayer. I think the Mini is an outstanding product. I think Apple Product Marketing needs to price the whole line far more rationally, however, as it makes no sense. And I also think that Mini at $199 is a Grand Slam; Mini at $249 is a solo homer.
My point -- which I'll reiterate one more time -- is that Mini is a chance to take over the world. And at $249 that chance is squandered. Oh, and when they do reduce the price to $199 this summer or fall, what will you all say then? If they can do it then, they can do it now. Yes, they'd forgo a few million in gross margin, but they'd also sell a lot more Minis. Not only is demand for this thing highly elastic, but $199 is a magic price point for electronics, $249 isn't.
"If someone came along tomorrow and had a better player than the iPod in all facets, then it would start to take away from the iPod's potential sales."
I don't know about that. Apple has the zeitgeist right now. And Apple is controlling 70% of the downloads market right now. And iPod is selling a ridiculous amount, even while being expensive.
There is something called the "tipping point" and while I openly question Apple's decision not to license the iPod DRM et al. much more liberally, they could actually rule the world with their closed universe, so long as they offer a multiplicity of players at multiple price points.
This battle to control music distribution is going to last 5 years or so and then end. The winners will be the "record labels" of the future. They won't sign Britney or Beyonce, necessarily, but they will be the distributors. That is a huge, huge prize.
Apple's current strategy is to get the most margin $$$ today that are possible and to charge more than the competition for the same features. This kind of strategy -- call it the Sony Way -- can work, but ultimately usually fails. The hardware becomes a commodity and the number of people who will pay a premium for the same features is small. This is actually clear when you look at Apple's computers -- also proprietary and relegated to a miniscule niche of the market.
But there is no reason Apple has to be the same way in music. Already, it has shown a surprising willingness to "open up." The HP deal was an absolute masterstroke. The Mini is a winningg product that translates the iPod experience to something much much more portable.
There should also be a flash iPod at $149 for 256MB to fill out the line. But in the meantime, the road to dominance is paved by getting people hooked on iPod/iTunes. Mini at $199 would lay a lot more asphalt than Mini at $249. And it's a mistake to view the superb pre-sales as validation of the higher price.