“Leave it to Steven P. Jobs to sell the razors and give away the blades. Common Silicon Valley wisdom has hewed for decades to the business adage that to establish a successful business in consumer products, you must be willing to lose money on the razors and look for profits from selling the blades. A notable example has been Microsoft’s money-losing Xbox video game business. By hemorrhaging money on each video game console (razor) sold and hoping someday to make it up on game software (razor blades), Microsoft’s home and entertainment division reported losses of almost $1 billion last year,” John Markoff writes for The New York Times.
“Now, along comes Jobs, the chief executive of Apple Computer, who once again is standing the common wisdom on its head. For its fiscal first quarter of 2004, Apple sold nearly 750,000 of its palm-sized iPod digital music players (razors) for an average price of $400, while selling 30 million songs (blades) for about 99 cents each. While Jobs has repeatedly said that Apple makes little or no profit from each song downloaded, the company said last week its iPod sales were crucial to Apple’s financial resurgence,” Markoff writes.
“That the iPod is more than just another hand-held gizmo was evident in Apple’s recently announced surprise alliance with Hewlett-Packard, which plans to offer a version of the iPod, giving the device even broader distribution and marketing support. Hewlett, which in the fourth quarter was the world leader in unit sales of personal computers, also plans to place Apple’s iTunes software, and some other Apple technology, on every consumer PC it sells,” Markoff writes. “Now, with the new Apple-Hewlett alliance, Jobs finally has a QuickTime bundling arrangement. The program, which allows for the playing of video clips on a PC, will be a standard feature of every Hewlett-Packard computer. So will another Apple software technology, Rendezvous, which is an API designed to let the computer identify and create links to any printer, camera, music player or other digital device without complicated configuration procedures on the user’s part.”
“Simply put, Jobs has managed to inject Apple’s DNA into the PC world, meaning that it will be increasingly easy for his company to offer PC users any kind of iPod-style device – whether for music or other media – the company may create in the future,” Markoff writes. “Don’t be surprised, in other words, if Jobs and Apple have many razors in the works.”
Full article here.