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| Saturday, December 18, 2004 |
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Analyst: Apple iPod poised to become platform if Apple realizes and seizes opportunity
The iPod Platform
Last night I chatted with a good reporter buddy who noted that he has seen a whole bunch of stories about iPod wannabes during the last month. He wondered why. I've heard lots of talk, too, from vendors certain that other music players will match iPod during 2005 and lay its lead to waste. After some deep reflection, I don't agree, because I see these other music players as competing in an apples and oranges race (pardon the pun) with iPod. The device is quickly moving beyond the role of just being a music player into that of an emerging platform. How much of a platform depends upon Apple's vision.
By definition, a platform is something someone builds something else onto. The high-tech industry has seen platforms come and go, with whole economies building up from them. Windows is the most obvious example. Microsoft established its operating system as a standard around which other vendors built products or solutions. A massive economy revolves around the Windows operating system running on microprocessors.
Apple's iPod is moving toward its own kind of platform status. Take for example the huge economy of iPod add-on peripherals cropping up (please pardon yet another pun) around Apple's music player. Other examples: Third-party applications; podcasting; heck, even Playboy's iBods that got way too much press yesterday. The soft porn silhouettes are formated for the iPod Photo screen. Playboy could have released something similar for the cell phone, another emerging platform. What other products might other vendors sell for that screen? I can think of plenty.
Every platform needs a killer application. Apple focused on the first category, music, and now is moving to photos. Initially, I skeptically regarded iPod Photo, because I saw the price as too high for what the buyer gets. I still regard iPod Photo as pricey, but see the device's merits from the platform perspective. Apparently, so does Playboy. And there will be other vendors, not just peripheral manufacturers, all looking to make money off iPod.
Circling back to music, Apple has two killer applications: Ubiquitous MP3s ripped from CDs and the iTunes Music Store. I hear lots of FUD--that's fear, uncertainty and doubt--about Apple's unwillingness to license its Fairplay DRM to other companies. And in the past, I suggested that Apple should consider licensing deals. But as iPod emerges as a platform, I see such licensing as making more and less sense. The music player is the platform, not the music store; iTunes is one killer application for the iPod platform. Licensing Fairplay to other music stores could benefit sales of the core potential iPod platform. I do believe Apple should license Fairplay for creating "second session" rights-protected tracks on copy protected CDs. JupiterResearch forecasts have CD sales eclipsing digital downloads or subscriptions for a long, long time.
As for the licensing FUD, I hear vendors talk about how Microsoft's Windows Media Audio is more open and offers consumers more choice. OH PLEASE! Don't make me laugh. The title of last week's report from colleague Michael Gartenberg says it all; "Digital Music: MP3 Remains the File Format of Choice for Consumers." The format consumers care most about is MP3, which Apple fully supports in both iTunes and iPod. By comparison, Microsoft's Windows Media Player 10 will not rip acceptable-quality MP3s without an encoder from another vendor.
Fairplay debates aside, iPod is compatible where it counts: As a platform. And the device works quite well with the dominant Windows platform, too. If Apple's approach were as closed as some of the FUD suggests, iPod would do nothing more than play music and only using Apple software. That's simply not the case. Consumers can use a variety of programs to copy data and other programs to the iPod and get utility out of them. What Apple needs to do, if the folks in Cupertino are really smart, is to extend other capabilities around the iPod interface. Music and photos would be the obvious starting place.
For the record, platforms aren't necessarily open. They may be interoperable with other platforms, but not necessarily open. Microsoft controls Windows, and it is the company's intellectual property. Windows' dominance makes it the standard other vendors must ensure interoperability, but that wasn't always the case. I remember complaints about Microsoft's closed approach back when more operating systems vied for platform dominance. Even today, Windows is not exactly fully interoperable with all other platforms. Remember that interoperability was an issue in government antitrust cases on two continents; cases Microsoft lost, I might add. Fairplay aside, today's Apple sells many products, Mac OS X in particular, with great cross-platform interoperability. The iPod is one of them.
Lots of vendors have attempted to establish platforms and failed, and I'm not 100 percent convinced Apple fully understands the iPod platform potential or how to extend it. The creation of a separate iPod division is a promising sign. Apple Macworld announcements on January 11 could give more indication.
Still, establishing a platform requires many things. One is something people can build onto. Another is a killer application. Typically other companies won't build onto a potential platform until people begin buying it in mass. Apple may have that problem licked. News reports about perceived iPod shortages suggest strong holiday sales. Those would be on top of two million units sold in the last quarter, more than a third of total sales over three years in just three months.
A strong base of iPod users would be great opportunity to make the platform play, and that includes extending to third parties new capabilities through the device's interface. Even if Apple fails to fully exploit the opportunity, I believe that third parties will. Millions of consumers will be carrying huge data stores on their belts or in their backpacks and purses--4GB, 5GB, 10GB, 15GB, 20GB, 40GB and 60GB--more capacity than most people need for music.
My buddy is right that there have been more news stories about other portable music players and their potential to snatch iPod's crown. I would argue that the iPod is posed to become much more than a music player. But, eventual platform success is predicated on many factors, including the will of Apple to seize the opportunity. Will Apple?
Posted by Joe Wilcox at December 18, 2004 08:35 AM |
| posted by Perimbean @ 10:00 PM |
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