Apple is currently in no position to dictate anything, and the iPod, iTMS, and Apple's DRM strategy, while bellwether technology, are still a business and consumer joke. Apple
might be in a position to dictate what happens if they can successfully navigate this inflection point in their history, but that remains to be seen. Based on past performance, I am pessimistic. I don't think they have the required resources or ability, although the recent division spin-off and windows toolkit are cute and, perhaps, baby steps in the right direction.
The digital multi-media content and converged device revolution and marketplace have
barely materialized and Apple's apparently 'huge lead' of this complex market still in its infancy will ultimately translate to single-digit marketshare if things continue as they are. The market is more likely destined to be led by a technology and media giant, such as Sony, who can deliver consumer products globally to a degree that Apple can only dream about and will have a user base 2+ orders of magnitude greater than Apple's, once established.
The core concepts of iPod, iTMS, and DRM already exist as other products, in others' hands, and/or can be bought overnight and married with a music publishing powerhouse. Can Apple become a publishing powerhouse on the scale of Sony or Time Warner in the same timeframe? Probably not, and if not, then how are they then going to own or drive the format for music (or players)? How will they do it when Sony has 300 million players in consumer's hands to Apple's 3 million? The answer is that they won't, and the iPod will have to continue to expand support for non-Apple formats if it is to retain any shred of viability. It will be another Apple toy.
So, Apple is likely to be left in the dust by these larger and more adept players, because, while Apple is an unparalleled innovator when it comes to new technology, design, and branding, they are crippled by their own elitism and lack of resources, and perhaps their craziness, when it comes to creating true consumer commodities. The plight of Nicola Tesla comes to mind - a genius, yet he died in debt while others leveraged or duped him out of his own inventions. There are certainly companies that lack Apple's unmatched innovation, but will easily copy the iPod concept constellation and flex their respective genius and superior muscle in mass-marketing and consumer delivery. iToldYouSo, iPod.
What does Apple need to do to stop this? Hmmm...that's a tough question - it may not be possible, but here are a few things that immediately come to mind:
- Hire someone who's only focus in life has been successful, high-volume, consumer delivery and mass production. Apple is completely incompetent in this area. It will really take someone who is willing to make reasonable compromises for the sake of the delivery, which, in this case, is the right thing to do. The product and market exist - get out of the design space, deliver the product, and improve along the way, as necessary.
- Make an iPod with a $50 consumer price-point,
even if it initially loses money. The hardware profit model is Apple's undoing. At every point in their history when they have experienced the Promethean opportunity to gain escape velocity into a software profit model, they have failed to make the right decisions, which is why the Mac is still a niche market. Cost reduction is a chicken and egg problem and Apple has the ability to make the leap to volume production to achieve the necessary cost reductions to reach profitability, even on a lost-leader iPod-for-the-masses. At $50, everyone could own one, and isn't that the point? What the heck - give them away with an annual iTMS subscription. If Columbia House can give away 12 free CD's with a music club membership, Apple could certainly explore the benefits of a subsidized subscription model or combination low-cost+subscription, since the unit is useless without music to play on it.
- Recapitalize the company for the purposes of producing the low-cost iPod and entire iPod line in an ultra-high-volume production facility (possibly offshore, since that's where the drives and displays are). Apple has, once again, carved a swathe out of the ether and defined a new standard for the technology and media markets - it's time to bet on the pony to win, even if he did used to be lame. Go, Seabiscuit!
- Merge with Apple Records and create a powerful, unified technology and media entity/brand instead of wrangling in repeated, incredibly stupid legal battles. Both companies have wasted insane amounts of money, time, and market opportunity on this process and could both earn
substantially more as a combined media entity than they ever would from winning or deflecting a lawsuit, not to mention the amazing event for the entire world of leveraging and building upon the Beatles' legacy (and others' like Taylor, Shankar, etc.) with a unified Apple technology/media brand. Unfortunately, both companies have huge ego problems and this type of unconventional resolution has repeatedly eluded them to their mutual detriment. Now, maybe it's time for both companies to swallow their egos and 'CEO altitude sickness' with BIG MONEY and the future of this space at stake. Neither can do it alone. But who knows...maybe Apple Records is just as myopic as Apple Computer and, in their own respective fit of greed and ignorance, wants to remain stuck in the '60s.
- Assuming unification, dramatically expand into the media space, ramping new artist acquisition and other multi-media content. I'm personally still waiting for AppleTV to appear. Where is ABC-Apple?
I mean, don't they conceptually go together like kids and teachers? What an amazing,
multi-million dollar, educational brand that would be with the right custodianship, not to mention being on-message for Apple.
- Form additional media partnerships, as possible, with OPEN standards. Provide industry wide OEM DRM technology and lose the proprietary crap. It would be nice to see open win, but it's still a long shot, especially with Sony's emerging standard, wma, etc. Say whatever you want to about Microsoft, but they are much better at forming significant, visionary, strategic partnerships than Apple will
ever be. They also saw the media writing on the wall a long time ago and MSNBC has been around since '96. Duh, Apple. While you were building fluffy, personal .mac portals, Microsoft was working on becoming a media entity.
- Negotiate to support ALL digital standards on the iPod and with related tools
Anyway...I just thought this would be a short post, but so much for that. Also, commentary in other posts on Apple being 'marginalized,' is, unfortunately, already late. As of today, even with an apparent lead, Apple is
already marginalized because of their inherent nature and repeatedly proven inability to execute. What Apple does in the next 6-12 months with iPod will determine its future, but it doesn't look good.
These opportunities come around once or twice a decade, and it would be nice to see Apple ride the wave (no pun intended), just this once, instead of being plowed under by it. If successful, it could only mean great things for Apple, the Mac, and technology users everywhere, who would benefit from a company with both the innovative vision and the newly understood ability to deliver that vision to the consumer from a dominant market position.
ps. Penman - I'm with you!
