Will Apple’s ‘go it alone’ strategy turn iPod into the next Mac?

“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.

27 Comments

  1. 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?

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. “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.

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