“Apple Computer’s apparent cold shoulder to RealNetworks this week has once again put the company’s ‘go it alone’ strategy in the spotlight,” Ina Fried, Richard Shim and Matt Hines report for CNET. “With the Macintosh, Apple decided to keep its operating system proprietary, licensing it out only on a few rare occasions and keeping control of both hardware and software. The approach has arguably given Apple an edge when it comes to integrating new capabilities such as DVD burning, but the Macintosh also has become a niche player in a Windows-dominated PC market.”
“Now RealNetworks CEO Rob Glaser and some others see the potential for history to repeat itself in the digital music world if Apple persists in keeping its software and hardware closed. Apple has taken some major steps to avoid past mistakes, notably making the iPod compatible with Windows PCs, dramatically expanding its potential market. iPod sales last quarter helped Apple triple its earnings compared with the same period a year ago,” Fried, Shim and Hines report. “Real also uses proprietary DRM, but it’s made little headway in the marketplace compared with FairPlay and Microsoft’s Windows Media Audio (WMA) formats. Notably, only a handful of portable music players support Real’s format. And with Apple riding a crest of iPod portable music player sales, analysts said RealNetworks faces the more immediate short-term threat.”
Fried, Shim and Hines report., “There are some good reasons for Apple to stick to its guns. The company sold 800,000 iPods last quarter, setting a new record and actually selling more of the digital music players in the quarter than it did Macs. Its music store, designed to be a breakeven proposition, posted a narrow profit as well. Adding software partners might not do anything to make its current products better, analysts say. ‘Integration is a huge reason why iPod has done so well, so I don’t see the incentive to open it up for anyone, including RealNetworks,’ said Tim Deal, an analyst at Technology Business Research. ‘Ease-of-use is clearly an important factor to the people buying iPods, so why would Apple want to put more hands in the pot and potentially create glitches that aren’t there today?’
“RealNetworks, in particular, would appear to bring little to the party. ‘The only way RealNetworks has a chance to become involved to a greater extent is if users express dissatisfaction over their ability to use other services with iPod, and we certainly haven’t heard much about that yet,’ said NPD Techworld analyst Stephen Baker. ‘I don’t see a tremendous amount of advantage to licensing Fairplay,’ said David Card, an analyst at research firm Jupiter Research. ‘Apple is a hardware company, and the only reason Fairplay, or even iTunes for that matter, exists is to sell and promote iPods,'” Fried, Shim and Hines report.
Much more here.
MacDailyNews Take: The answer to the headline is, “no.” If iPod holds a significant share of the market, there is no reason to let anyone into the party, as long as Apple’s iTunes Music Store offers similar content to the other stores. And iPod does hold quite a significant share of the market. This is not a matter of developers having to choose which platforms to support. The developers in this case are the musicians (in most cases shackled to the music labels). Encoding a song into AAC/Fairplay is just as easy as encoding in WMA. Musicians don’t have to rewrite each song for AAC or WMA. iPods demand AAC/Fairplay from an online music store (they also play MP3, MP3 VBR, Audible, AIFF and WAV formats). And consumers seem to be demanding iPods. Sorry, Real.
The next step of iPod should be the inclusion of an integrated microphone and voice recording capability. With this, thousands more will be purchased by corporations, and the trojan horse will make its way further past the gates.
Mr. Jobs… how about that integral voice recording capability?
Excellent points MDN. I really don’t know what to think about this. On the one hand, having more support for AAC/Fairplay would be nice, and I don’t see people flocking to Real’s store because of that regardless because it’s nowhere near the experience of iTMS, so it’s not like Apple would be losing business to them. On the other hand, they bring nothing to the table. If they partner up with MS, so what? It just makes them another store indistinguishable from all the other failing iTMS competition by offering a format no one wants because they’re all using iPods. Apple is in a very interesting position right now.
I must say this is probably the most fair, balanced story I’ve ever seen about Apple on ZDNet. Whatever the reason, I hope it’s not a fluke.
Glick, change the record already. We hear this from you EVERY time there is an iPod story. Geeeeeeeeeeeeeeeeez! Get a new tune dude! This one’s old
Or just get the Belkin voice recorder accessory.
Glick,
you are not even on topic, did you just scan the headline and go for it?
Some people!!
How can you say no to this face… Glaser is such a brilliant tactician..
Apple has already made a deal with HP and it could make another with Real. It really depends on the terms of the agreement: What is Real willing to bring to the table? Another named outlet for iPod music is probably not enough unless it would assuredly increase iPod sales.
Is there more? Perhaps giving over the Real proprietary formats in some fashion to QT. That would probably be too much for Real to accept, since they are little more than a proprietary format and web site. What would they have left? If they are willing to give in to WMA, they might consider this.
As an early player, they have a significant web presence (BBC, NYT, NPR, to name a few, all use Real.) that, converted to QT would be useful but this would not directly generate revenue for Apple. Should be interesting.
I think an important point is made. People are NOT choosing iTMS. They are choosing the iPod and then using whatever service works with it. The song they buy will sound the same (to most people) if purchased on iTMS, Real, or Coca-cola. Real is trying to differentiate on factors that no one cares about and trying to compete in a market where everyone has the same product. The only actual market differentiator that iTMS has is the iPod. Apple would LOOSE ground by opening up iPod, as requested by Real. Apple has taken a great position with iPod/iTMS, they are the leader by actual numbers and, more importantly, in consumer’s minds. As long as they stay on top of their game, they will continue to get the lion’s share of this market.
To me Real is the Nazi player compared to other multimedia players. Much more so even than WMP. Maybe it’s not that way as much anymore but they used to assault you with ad’s and “encouragement” to make their player the default.
There is no way Apple will make a deal with them. It may make “passionate” sense for those wanting to take down Microsoft, but not business sense.
“Will Apple’s ‘go it alone’ strategy turn iPod into the next Mac?”
The answer is NO!
This time Steve won’t make the mistake hiring a “sugar water salesman” to push him out of running the company.
The shareholders have learned to stick with Jobs, its his visionary and creative skills management that makes Apple what it is.
Just like Walt Disney was, and how Michael Eisner is running Disney into the ground. I’ve never seen Disney World in such a horrible condition.
All the characters require two security guards, the cafeteria’s are worse than a prison chow line, the rides are ancient and always breaking down. Kids stealing all the handicapped motorized scooters and riding around unchallenged.
Cinderella is pimped out in small room in the castle when she isn’t on her throne.
It’s gone to hell.
the ipod will die sooner or later. Everyone else will catch up. If apple doesn’t let anyone in, ONE DAY they will be passed for the just good enough player and the just good enough music store.
HP deal was the beginning and great move. It’s time to have others pushing the ipod also.
SONY walkman? where is it now. It day came and went. So will the ipods.
This would all be a troublesome sign……unless Apple ported to Intel. Then the whole can of beans gets tossed on end.
“SONY walkman? where is it now. It day came and went. So will the ipods.”
I’d point out that, arguably, the Sony walkman got buried under an avalanche of similar players at cheaper prices.
It’ll be interesting to see what happens. Part of the success of the iPod–as good as the iPod is–is that it is hip, trendy, with-it, hot, happenin’, etc. How long that will continue is anyone’s guess.
As I’ve said before, I think the iPod & iTunes should support Real, WMA, Ogg Vorbis, and every audio format they can cram into the thing because, “at Apple, it’s about the music.” It shouldn’t be about the format. iTMS should continue to sell music with AAC/Fairplay because the music sounds better than with WMA.
I don’t necessarily think Apple’s strategy is bad, from a corporate point of view. It just reaks of Microsoft–you know that if the situation were reversed and it was WMA and a Microsoft musicPod, we’d all be screaming bloody murder. I’d rather see Apple do the “right” thing than do the most profitable thing.
I thought Glick was right the first 15 times he mentioned a voice recorder, and still do. A potfull of stuff is bought in this country because it is deductable, and ipods could be too. Perhaps it is difficult to do, beats me, but it’s a no brainer otherwise.
eaxit, it is free to type here, as it is to read, and trust me, MDN doesn’t care.
“The company sold 800,000 iPods last quarter, setting a new record and actually selling more of the digital music players in the quarter than it did Macs.”
How many Macs might Apple sell if you could buy one for $500.00? (The price of the top of the line iPod)
cpr86:
True… but that day isn’t here yet. =)
beryllium, next question is how much margin is there on each ipod. Nice to sell a lot of them, but compared to computer sales, it is comparing beans to steaks.
Expense the Belken!!!!!
I really don’t think corporate america will allow many to expense a $250 recorder. And if they did, they will let you expense the Belken. Stop nagging about this issue already. We need to keep the iPod pure and small.
A handful of items:
1) don’t expect voice recording capability any time soon. Why? Not needed for the “few thousand” who need it. Remember, they’re selling about 9,000 iPods a day. At the high end, that’s better than everone else combined.
2) Go it alone with iPod makes it the next Mac? First, is that a bad thing? The Mac’s been around 20 years and doing quite well. Look at the competition? Microsoft hasn’t tipped it’s hand yet. Real is suffering and seems desperate. BuyMusic is dying. Wal-Mart isn’t saying. MusicMatch is… well, who? Most of what you hear anywhere is iPod, iTunes Music Store.
There are plenty of “differences” now vs. the mid-80’s when the OS wars moved Microsoft’s way (due to criminal behavior). Apple’s market share was about 15-20 percent vs. 50 to 80 (depends on how you count).
Oh, I just noticed. After “shipping same business day” on iBooks, PowerBooks, and PowerMacs, the Apple Store is now shipping “in 3-5 business days.” That’s usually what happens when something new is around the corner.
The thing Apple has to keep an eye on is the timing. The iPod is great and will continue to sell great but it IS enjoying being a fad right now and the fad effect does traditionally fade over time. If Apple wants to control the entire market long term they have to consider licensing out AAC/Fairplay at some point. The timing of this is critical because they don’t want to waste their “first mover” advantage but also don’t want to wait too long and have other services/makers totally committed to WMA. Personally I think Apple should consider licensing out AAC/Fairplay to Real. It might not add up to short term profits but will help isolate the WMA platform and so in the long run allow Apple to control more and more of the playing board.
MDN, don’t be daft. Apple should try to license their platform to everybody who wants it, plain and simple. WMA will gain a foothold eventually, and because it’s Microsoft, the foothold will be huge. The more solidly Apple can hold their ground, the better. And partnering with as many viable candidates as possible (and yes, Real counts) will help them keep their ground.
ipoddering with what, what? It’s my dell dj that’s what, slappin the hits from iWalMArt, jivin’ down like I live in dell town. Oh whoot, whoot, won’t you take me to, spunky dell town. ipoddering, ya’ all macspack foos… can you give me a whoot, whoot, dellllllllllllll, whoot, whoot.
This all comes down to the business plan for the iPod, and the industry just doesn’t understand where Apple’s coming from.
Consumers buy music players based on it’s looks, market penetration and ease of use, not on what file formats it uses. Price has little to do with it – it’s a luxury purchase. Dell doesn’t understand this. At the moment the iPod is at the top of the pile because Apple understands the consumer.
It’s not the other way around – people don’t choose a music store first (i.e. a file format), this choice then reflecting their music player purchase.
When looked at this way, the arguements of what format’s best, AAC, WMA etc are irrelevant to the most important people in this situation – the consumer. Steve Jobs understands this.
Apple’s position works as long as the consumer buys the best player first (iPod), and doesn’t even understand what formats even exist.
Microsoft’s postion will only work if they get their consumers to appreciate the differences between WMA and AAC. Not likely as all the benefits for WMA are for the artists not consumers. But it’s consumers that drive the market.
The iPod will continue to dominate until a more attractive player competes with it on:
looks (yeah right this is Apple were talking about ),
market penetration, (this is why Apple has advertised so heavily and needs to continue doing so),
and ease of use (the AAC format is the cornerstone to this, and is Apple crown jewel here, they’re not going to let it go).
The reasons behind Apple’s success comes down to it’s understanding of the market. Apple sells to consumers and focuses on what drives their purchase. Apple has approached the iPod as if they were selling an applicance, not a computer. Therefore they sell the lifestyle, not the technology behind it.
Microsoft, Dell etc, are selling their players and formats like they were selling Dell’s to geeks (slappy mcshorty dellhead) and .net to IT managers. They will fail, unless we see some serious brainwashing in the media.
Of course, a happy side effect of this is that Apple’s brand awareness shoots through the roof, and when people come to purchase a new computer, the Mac will be on their radar, something that was impossible a few years ago.
Last time I checked, partnering with HP isn’t exactly “going it alone”. They only said no to Real because they don’t want to offer a damn thing of value to Apple in return, that’s all.
Im not defending Real by any means, but to answer your question, Real is another music store that caters to the iPod, the source of Apples Revenue, not the iTMS. as long as real just sells iPods and no competeing devices, i say let them have a music store. This is the first sign that other online music stores are realizing WMA is not the way to go. Let their be a million online music store and just one iPod, well and dozens of rebranded ones (^_^). thats the answer to longevity, other people pushing your product for you