Jobs Vs. Gates: The Rematch.

[Xtremehkr]

The article

THE history of Apple Computer can be told through its advertisements as well as its products. There was, of course, the commercial that introduced the Macintosh. It was broadcast exactly once, during the 1984 Super Bowl, and signaled the company's bid to reclaim leadership in personal computers from I.B.M. and its tiny, little-known software partner, Microsoft.

Late last month, Steven P. Jobs, Apple's chairman, rented an ornate theater here to promote Apple's latest advertisement for its iPod music player - a crisp psychedelic montage of the Irish pop band U2 playing "Vertigo," a song from its next album. Unlike the 1984 commercial, this one is intended to help Apple preserve a big, and growing, lead in the marketplace.

Speaking just after the event, Bono, U2's lead singer, said the band was not charging Apple a penny to be in the ad. (The band says it had turned down as much as $23 million to use its music in other commercials.) In its three-year life, the iPod has achieved such "iconic value," Bono said, that U2 gets as much value as Apple does from the commercial, by promoting its music and the new Red and Black U2 edition of the iPod, for which the band gets royalties.

The iPod, Mr. Jobs boasted at the event, has become the "Walkman of the 21st century." It dominates its market in a way that no Apple product has done in a generation, raising the possibility that the company is becoming more than just a purveyor of computers with high design and low market share. If Apple continues to ride the wave of digital consumer electronics products, it may become the Sony of the 21st century.

For that to happen, however, Mr. Jobs must do what he failed to do last time: prevail over his old nemesis, Bill Gates, who sees entertainment as Microsoft's next great frontier. Microsoft is working hard to make sure that the iPod is less like the Walkman and more like the Betamax, Sony's videocassette format that was defeated in the marketplace by VHS.

A few days after Apple's U2 extravaganza, Mr. Gates, Microsoft's chairman, paced around his office overlooking the rolling hills of suburban Seattle and recalled another advertisement that Apple made 25 years ago. "When I.B.M. came out with their PC, Apple ran an ad saying, "Welcome,' " said Mr. Gates. "They haven't yet run the ad welcoming us into the music business.

"Apple should," he added.

But he isn't holding his breath. Instead, Microsoft is turning up the volume in the portable music business. And Mr. Gates makes no secret that he expects to beat Mr. Jobs in that market as convincingly as he did in personal computers.

In many ways, the story sounds eerily familiar. As was the case in computers, Apple has sprinted ahead in the music market with an innovative product, elegant design and tight links between its hardware and software. Plodding along after it is a vast army, organized by Microsoft, of rivals that may be less skillful than Apple but offer a broader array of options and cheaper prices.

IN music, Microsoft has rallied nearly every other manufacturer - like Dell, Samsung and Rio - to support a new version of Windows Media. That audio standard allows their gadgets to play songs bought from most music service companies, including America Online, Napster and RealNetworks, as well as its own new MSN Music store. Microsoft's campaign slogan for the services and players is "plays for sure."

The iPod cannot play songs from most other stores, and Apple's iTunes store won't sell songs for other players. Mr. Gates argues that consumers ultimately will want more choices. "There's nothing unique about music in terms of, do people want variety of fashion, do people want low price, do they want many distribution channels?" he said. "This story has played out on the PC and worked very well for the choice approach there."

Mr. Jobs rejects the comparison between the music players and computers. The Macintosh had an uphill battle, Apple says, because so many corporate customers already had applications based on Microsoft's operating system that they didn't want to abandon. By contrast, Apple's iTunes Music Store sells pretty much the same songs that the others do, but they cannot be moved onto non-Apple portable devices.

Most important, he points out, Apple's market share has actually increased over the last year, despite increasing competition. "We offer customers choice," he said during a news conference after the U2 event, answering a question about Microsoft's strategy. "They don't like the choices our customers are making."

Indeed, in the third quarter, some two million iPods were sold - more than all of its competitors combined, and more than double the pace of the second quarter. Market analysts and even rivals expect that Apple will sell more of them this Christmas season and continue to dominate the market into next year.

What happens next Christmas and beyond, however, is a matter of considerable debate. Microsoft fans say that other music players will begin to match Apple's features and styling, and with lower prices. They suggest that consumers, meanwhile, will want to buy music from stores other than iTunes.

Continued

An interesting article on the different strategies Apple and Microsoft use.

 

[rickvanr]

good article, seem to be bashing apple a bit... I thought there were some huge contridictions in it as well. Also, some very opinion based quotes that were anti-apple, and next to known battling for apple.

the one noticable pro apple attribute to the article would have had to been Bono vs. Queen Latifa? come on... thats not even fair.

 

[timnosenzo]

Good read!

 

[BornAgainMac]

I was confused by their reference to AOL teaming up with Microsoft. I thought AOL had links to the iTunes music store.

HP/AOL/Apple/[Pepsi] music vs Everyone else choosing Microsoft or Sony choosing Sony's own format.

 

[wdlove]

A good article.

"The iPod cannot play songs from most other stores, and Apple's iTunes store won't sell songs for other players. Mr. Gates argues that consumers ultimately will want more choices. "There's nothing unique about music in terms of, do people want variety of fashion, do people want low price, do they want many distribution channels?" he said. "This story has played out on the PC and worked very well for the choice approach there."

I'm a little surprised at Bill Gates comment that consumers want more choice. He career has be to stifle the competition. It guess that as along as it Microsoft then he thinks the consumer has choice.

 

[5300cs]

"plays for sure."

Yeah RIGHT. Nothing in the m$ world is sure but high prices, system requirements and incesant crashes. Gates definitely has brown eyes

 

[sushi]

A good article.

Agreed. Fairly balanced compared to what us old timers have seen in the past.

I'm a little surprised at Bill Gates comment that consumers want more choice. He career has be to stifle the competition. It guess that as along as it Microsoft then he thinks the consumer has choice.

Well put.

I don't see the music market the same as the computer market. Style and functionality are important on the music front more so than on the computer front.

Bottom line is that $ talks. Whomever can get the consumer's $ wins.

That is why I hope to see Apple entering the Flash Player market in the near future. They focused on a specific portion to break into the market which was good. Now it is time to expand.

For example, here in Japan, the iPod and mini iPod are very popular. However, flash based players rule. Why? A vast majority of folks commute by train everyday. Having a small device that you can pop into a suit pocket is very convenient. The mini iPod is still to big compared to flash based players.

Sushi

 

[craigdawg]

For example, here in Japan, the iPod and mini iPod are very popular. However, flash based players rule. Why? A vast majority of folks commute by train everyday. Having a small device that you can pop into a suit pocket is very convenient. The mini iPod is still to big compared to flash based players.

How popular is the MiniDisc in Japan? Sony was never able to crack the American market with it. This, to me, is a better choice than flash (but not as good as HD-based players). How do they (MD, HD, flash) rank?

 

[mashinhead]

a penny..

well i've been thinking about this a lot. Apple has put a lot into the ipod because it is now their future. The success of the ipod ultimately has come from just having this 'must have stigma' attatched to it. and in the marketing world it's hard to get to this place. Its a covetted place, and its just the luck of the draw that gets you there. There was a time when the ipod was the only choice, because apple did it right from the start. But now, if you look at specs and pricing apple isn't the best thing out there, unless you own a mac. But it continues to sell like it is, because of the covetted status it has recieved in the press and the market. i've never really had a problem with anything apple has done, until now. they're so scared of healthy competiton in the music market that they are becoming microsoft. they want to build a monopoly around it an force you to use only their product. The fact that now, with iTunes 4.7, you can't even buy music off another mac and put it on your ipod and bring it home to your mac, is complete evidence. and this fear, will be apples down fall in the music market. I should be able to buy from who i choose, that is the right of a consumer. I own an ipod and a mac. and i probably would consistantly buy from the itunes store because its easier for me. But at the end of the day i've lost respect for apple with the decsions they've made in this matter because of the their inability to deal with what is nothing more than healthy competition.

 

[Brother Michael]

well i've been thinking about this a lot. Apple has put a lot into the ipod because it is now their future. The success of the ipod ultimately has come from just having this 'must have stigma' attatched to it. and in the marketing world it's hard to get to this place. Its a covetted place, and its just the luck of the draw that gets you there. There was a time when the ipod was the only choice, because apple did it right from the start. But now, if you look at specs and pricing apple isn't the best thing out there, unless you own a mac. But it continues to sell like it is, because of the covetted status it has recieved in the press and the market. i've never really had a problem with anything apple has done, until now. they're so scared of healthy competiton in the music market that they are becoming microsoft. they want to build a monopoly around it an force you to use only their product. The fact that now, with iTunes 4.7, you can't even buy music off another mac and put it on your ipod and bring it home to your mac, is complete evidence. and this fear, will be apples down fall in the music market. I should be able to buy from who i choose, that is the right of a consumer. I own an ipod and a mac. and i probably would consistantly buy from the itunes store because its easier for me. But at the end of the day i've lost respect for apple with the decsions they've made in this matter because of the their inability to deal with what is nothing more than healthy competition.

I saw that coming.

ANyways, what really irks me is either Apple or the RIAA which ever is behind the idea that you can only play purchased music on X amount of computers.

That bites.

Mike

 

[virividox]

well i hope apple retains their lead!!!

 

[rueyeet]

There was a time when the ipod was the only choice, because apple did it right from the start. But now, if you look at specs and pricing apple isn't the best thing out there, unless you own a mac.

There was never a time when the iPod was the only choice. Before the iPod came along, Rio owned the market. When the iPod first came out, a lot of tech pundits noted the other choices available, some of which had more features and a lower price than the iPod. Yet the iPod was a success, even before the iTMS, because it was better than the other options. The "must-have" status didn't come right away, nor without reason.

they're so scared of healthy competiton in the music market that they are becoming microsoft. they want to build a monopoly around it an force you to use only their product.

So does Microsoft. With all their blather about "choice", what they really mean is that they want you to have your choice of players and music stores that all use WMA. In the end it's just a format choice: AAC + Fairplay, or WMA + Janus, or RealAudio + Harmony. The success of the iPod allows Apple to get away with not licensing WMA from Microsoft.

And that's the way things will continue to be until a single proprietary format wins, or until some standards body comes out with a single interoperable DRM standard....or until something none of us can anticipate changes everything, like a restructuring of the entire recording industry that makes DRM unnecessary.

 

[sushi]

How popular is the MiniDisc in Japan? Sony was never able to crack the American market with it. This, to me, is a better choice than flash (but not as good as HD-based players). How do they (MD, HD, flash) rank?

The MiniDisc or MD is extremely popular in Japan. There are all kinds of players from different companies. Many stereo systems feature a built in MD recorder/player.

If you were to visit Akihabara 5 years ago, you would see displays of walkmans and MD players and not much else. The farther you go back the more it became walkman only.

Now days, in department type stores you see large selections of flash players and decent selections of HD and CD/MP3 based players. In computer related stores, you almost always just see flash based players. They seem to be flying off the shelves. Prices are decent. Less than $200 for a 1GB version. About $80-90 for a 512MB version.

In Japan, most folks in the Kanto Plain (Tokyo) area commute by train vice car. Listening to music and other prerecorded items is very popular. So many folks carry some sort of device.

Lately I have seen a lot more iPods and flash players being used. The flash players are almost a fashion statement with their vivid colors, designs and ease of use. Most flash players, since they are so light, are hung on a neck strap device so they are easy to see. Heck the one that I have is the size of a pack of gum and is less than 30% of the weight of a mini iPod. And my model is over a year old. Generally iPods, MD players and CD/MP3 players are in a handbag/backpack/briefcase so they need a remote. With a flash based player, the user can easily make selections/changes on the device itself. Simple and easy.

This is one area where the iPod is weak. Over here, most remotes have displays and many many features. The iPod remote on the other hand is somewhat limited from that perspective.

Cost and features are another issue. Flash players are getting cheap these days. Also a flash based player is very convenient to use. For example, I can go over to a friend's house and if he/she or I have a song to share, I can just plug in my flash player (no cord required) to DL or UL the song. Plus I can recharge my player at the same time. With other solutions, you need cables and other accessories. Also with a flash based player, I don't need a remote, nor other cables. Just the player and my neck strap, which has the earphones built in. The entire flash player and neck strap will easily store in a pocket. In fact, mine with neck strap takes up less space than an iPod mini without the earphones or remote. Another area of convenience is that most flash players can record voice and many include an FM radio. With mine I can record voice or radio. To transfer to the computer I just connect the flash player and drag the file. Simple.

Flash players seem to offer the user a good solution with many options. And if flash memory devices keep getting cheaper, this situation will only get better for the user.

Based on observations and not actual data, it seems that there is a definite shift to other than MD type players. I do not see MD disappearing overnight. MD is too ingrained for it to disappear quickly. How long will it last? Good question. If flash memory prices keep dropping like they have, I imagine that flash based players will overtake MD in a few years.

That is why I hope to see Apple enter this market. The iPod and mini iPod are nice devices. But Apple is missing a huge market opportunity over here in the flash arena.

Sushi