Microsoft’s Bill Gates’ prediction of Apple iPod market share decline fails to materialize

“The success story of Apple’s iPod music player has impressed the whole sector. The Californian computer manufacturer has sold 22-million iPods since 2001, including 6.2-million of the music players in the last business quarter, corresponding to about 70% of the worldwide market,” Christoph Dernbach reports for The Mail and Guardian. “Apple boss Steve Jobs recently presented the new iPod nano in San Francisco. It is just the size of five business cards laid on top of each other.”

Dernbach reports, “Microsoft co-founder Bill Gates has repeatedly predicted that Apple’s success in entertainment electronics and in the music business will not last as Apple has opted for a closed system using its own hardware and software. ‘I think you can draw parallels here with the computer: here, too, Apple was at first in an extremely strong position with its Macintosh and graphic possibilities — as with iPod today — and then let its position slip, Gates said in a newspaper interview in May. However, the trend change predicted by Gates is not in sight. In the United States and Britain, Apple’s iTunes music store dominates with a market share of about 80%. Only in Germany does T-Online with Musicload have the edge in the digital music business, a position that cannot be extended internationally.”

Full article here.

[Fixed quoted source. Thank you, SGM.]
The iPod is not the Mac, so stop trying to compare them. The Macintosh platform required and still requires substantial investments by developers to create compatible software. The iPod simply plays music that can be encoded, for very little cost, in any format the “developers” (musicians and labels) desire: AAC, MP3, WMA, etc. The music doesn’t need to be rewritten, recorded, and remastered. It’s like writing Photoshop once and then pressing a button to translate it for use on Mac, Windows, Linux, etc. For Gates to draw an analogy between Mac OS licensing and the iPod/iTunes symbiotic relationship either highlights his ignorance of the vast differences between the two business situations or shows Gates trying to dent iPod’s dominance with a dose of FUD.

Related articles:
Music lovers make Apple’s iTunes Music Store AAC format the de facto standard for online music – August 28, 2005
Financial Times writer: Apple must act soon or lose its lead in digital music market – July 07, 2004
Financial Times on Apple Computer’s results: ‘only a matter of time before this apple falls’ – July 14, 2005
iPod, iTunes, and iTunes Music Store competitors lack Apple’s ‘seamless integration and ease’ – August 28, 2005
Apple’s roadkill whine in unison: ‘incompatibility is slowing growth of digital music’ – August 13, 2005
The New Zealand Herald serves up a steaming pile of iPod FUD – August 11, 2005
Bill Gates: ‘I don’t believe the success of the Apple iPod is sustainable in the long run’ – May 12, 2005
FUD campaign against Apple’s iPod+iTunes fails to stick – April 08, 2005
Apple’s iPod and iTunes competitors continue whining about FairPlay – February 07, 2005
The de facto standard for legal digital online music files: Apple’s protected MPEG-4 Audio (.m4p) – December 15, 2004
Another day, another ‘iPod may go the way of the Mac’ article – August 16, 2004
The iPod is not the Mac, so stop trying to compare them – August 13, 2004


  1. Gates is not stupid. So it is FUD. Which is about par for the course for Gates. We all know how he plays the game. It is about winning at any cost and the only rules are “what can you get away with”.

    It is really nice to see the best product win for a change.

  2. “Gates is not stupid. So it is FUD.”

    Agreed, it’s a healthy does of FUD.

    However, if Gates is a genius and gets the music player market, why can’t MS come up with a credible answer to the iPod? One answer is you can’t steal class. The other is that Gates and MS are clueless to the market (witness his laughable comparison to computer platforms), and FUD is the best they can do. MDN’s take aptly covers that.

    “Apple’s success in entertainment electronics and in the music business will not last as Apple has opted for a closed system using its own hardware and software.”

    So far it’s been proven that music players have to be closed; the Apple-involved ROKR phone is a case in point. In this kitchen, two cooks are one too many.

  3. M$ WILL win the music war– by making sound only hearable through Microsoft Ears, the breakthrough technology that translates ordinary sonic vibrations into substandard sonic rattlings. All hail Microsoft Ears.

  4. Seeing as he didn’t give a timescale, he will probably be proved right – does anyone seriously believe that in 20 years, 80% of the world will be buying it’s music through one store and using one manufacturers devices?
    The question is whether Apple will be getting royalties from having defined the format or it will be WMA.

    Interestingly, today I visited a few of the UK’s major electrical retailers and while they had a large stock of iPod accesories, their MP3 player displays were curiously missing the most popular player, and do not make clear there is any ‘format’ issue with the ones they do sell. One of them did have iPods but literally ‘under the counter’ – I wonder if they’re getting promotional assistance, or if it’s just the usual thing (they’d rather sell anything but Apple due to smaller margins on Apple products)

    Argos, meanwhile, claim the iPod plays WMA!! Defined as ‘a format that lets you get twice as much music in half as much space’ – how scientific

  5. actually, the iPod does play wma; one merely converts it into AAC using iTunes, and away you go! i have a lot of friends with large, dark side, music libraries. once they found out that this conversion could easily be done, they all bought iPods. that argument really doesn’t wash.

    is anyone actually suprise that little billy was wrong in predicting the demise of iPod? has little billy ever been right about anything? does little billy even know his right hand from his left? he and monkey boy are about the past; His Steveness and Apple are about the future.

  6. “Apple’s success in entertainment electronics and in the music business will not last as Apple has opted for a closed system using its own hardware and software.”

    And since when exactly has M$’ music system been open? Last I checked, WMA-DRM is quite proprietary itself. And the songs will only play on Windows PCs and not Macs, so it’s actually even more of a closed system than what Apple currently has in place. The only reason he calls it “closed” is because Microsoft doesn’t own it, so his statements are nothing more than transparent FUD.

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