SanDisk CEO: Apple has ‘a closed, proprietary system’

“SanDisk CEO Eli Harari profited from his physics education by inventing the use of memory chips to store digital photos on tiny, removable cards. The company now sells more than 100 million memory cards a year. It recently topped $2 billion in sales, including royalties from rivals licensed to make cards… SanDisk is now expanding beyond photography, with USB flash drives, cards for cellphones, digital music devices and video game systems. Harari held management jobs at Hughes Aircraft, Intel and Honeywell before founding SanDisk (originally named SunDisk) in 1988. He spoke to USA TODAY’s Jefferson Graham at SanDisk headquarters in Silicon Valley’s Sunnyvale, Calif.,” USA Today reports.

Graham: A year ago, SanDisk wasn’t even in the digital music business. Now, with your SanDisk Sansa digital music player, you’re No. 2 in market share behind Apple Computer and its red-hot iPod. How did you come so far, so fast?
Harari: …We had a significant advantage over competitors, because we could get flash memory at lower costs than (Apple CEO) Steve Jobs could. We felt if we could leverage our 150,000 retail locations that sell our memory cards to sell our MP3 players, too, we could really have something. And we were proven correct. We came out of nowhere, and zoomed past Sony, iRiver, Creative and all the rest.

Graham: Apple has 78% of the digital music player market; SanDisk has 10% of the “other” category. Apple has sold more than 42 million iPods. You’ve sold 1 million Sansas. How do you catch up?
Harari: This month, we’re introducing a new player, the Sansa e200, and it’s superb. We feel it’s far better designed than Apple’s Nano, which also uses flash memory instead of a hard drive to store the music. Our new Sansa is priced attractively and has many more features than the Nano. You can view pictures and videos on our unit. We have FM radio, voice recording, a slot to add extra memory from a card, and a removable battery. The Nano doesn’t have those…

Graham: Many analysts have said that Apple has ruled in digital music because of the seamlessness of the iPod and iTunes Music Store, where Apple fans buy digital music. SanDisk doesn’t have a music store. You work with multiple partners, such as Rhapsody, Napster and Microsoft, which provide the software. Are you hurt by not having a store?
Harari: Apple deserves a lot of credit and has done a superb job. But they have a closed, proprietary system. We work with, as you say, Rhapsody, Napster, Yahoo and many alternatives. That’s a plus. Apple hasn’t had a competing alternative that’s just as good. But that’s going to change. We are not going to be a 10% player. We will improve our position.

More in the full interview here.
Obviously, Apple’s solution is no more “closed” than Microsoft’s. In fact, it’s far less “closed.” Apple’s iTunes is clearly available to both Mac and Windows users, covering the vast majority of the market. In contrast, Microsoft requires that users of its DRM (Napster, etc.) run Windows and Windows only; Mac users need not apply. Apple’s solution supports supports tens of millions more users (who are – on the whole – richer and better educated, hence more likely to have disposable income to buy media content online) than Microsoft’s proprietary DRM. If anything is “closed,” Microsoft’s DRM and, by extension Napster and the other also-ran outifts that use Microsoft’s DRM, are the most closed. SanDisk’s Harari is being disingenuous to try selling SanDisk players with the “Apple’s closed, proprietary system” argument when his players rely on a patchwork of struggling online outfits that are all stuck with Microsoft’s even more closed, proprietary system.

To paraphrase what we wrote back on Feb. 28th: The line “includes an FM radio and tuner” is so-tired-it’s-dead. Consumers do not care. Just look at the numbers. It’s a feature without a market. If you really want FM radio on your iPod, get Apple’s iPod FM Radio Remote.

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Related article:
Apple’s vs. Microsoft’s music DRM: whose solution supports more users? – August 17, 2005
Joke of the Day: Red Herring headline: ‘Creative may be iPod threat’ – February 28, 2006

48 Comments

  1. What’s with everybody and their dog trying to upsell “FM Radio” as a desired feature in portable players? The whole point of portable music is so that you can pick your own playlists and listen to what YOU want to, not a bunch of ads and commericial crap that composes the great majority of radio stations.

  2. I think FM Tuners are somewhat logical. Sometimes, I *do* get tired of my own music. I don’t have 5000 songs in my collection, so sometimes I want to hear something new. FM Radio is still a chance to hear something different that you don’t have every once in a while. And why have to carry two devices to do that?

    Full Disclosure: I *do* have an iPod and I do like it.

  3. These guys all say the same thing, “Apple’s closed system.” Is this a little blurb from M$ or what? BTW, hasn’t this guy read the reviews, it’s not about how many features you pack-in.

  4. Thanks to the iPod, music on FM radio is not the draw it once was. However, it sure would be nice to have the option to listen to live (local and national) news and live NPR on an iPod radio tuner.

  5. Dude has a LOT of memory at home!

    “Has more than 10 gigabytes of memory at home.”

    A typo for Terabytes? Or are they actually saying “He brought his camera with him today but left his 10GB of memory cards at home, he assures us he actually has 10GB of SD memory for his camera.”

    ORRRRR… does he ACTUALLY have a whopping TEN GIGABYYYYYTEEEESS of memory on his PC?

    Ten gigs of RAM? That’d be an odd #.

    He has 10GB of WHAT?? And why is it at home? Too big to carry around?

  6. An integrated radio so I can listen to the news would be useful, but that’s on AM, so is my kids “Radio Disney” station. No one is talking about that.

    I would also find an integrated microphone (not a bulky add-on) useful.

    But I’m probably in the minority here.

  7. MDN – please stop with the “richer and better educated” response. You have made your point many times and I am afraid that it comes across as arrogant and elitist. We do not need to perpetuate a Mac “blue-blood” perception.

    Instead, take a shot at the statement in this article that the iTMS is where “Apple fans buy digital music.” Clearly, its where iTMS and iPod fans buy digital media. It offers the same great content and experience to both Macintosh and Windows platforms, and it ain’t just music anymore.

  8. The idea of an MP3 player of any kind is to listen to your own collection of music and not the 10 songs with commercial breaks every other song listening to the radio. I bought my iPod to listen to what I want to listen to and not what some radio station wants to play. There is myth of having a radio is a wanted feature is just that, a myth. It’s dumb and an added expense. Apple is no more a closed system as is any other service out there. In fact iTunes serves both Macs and PC’s and the others DON’T!! Sandisk like the others is wrong and keeps trying to push the myth that Apple is a closed system. 80% of the public who buy from iTunes thinks you’re dead wrong Harari!

  9. It IS a closed system. Closed to them, that is. ” width=”19″ height=”19″ alt=”LOL” style=”border:0;” /> That’s what they really mean. “We are not allowed to have our MP3 players directly interface with iTunes, so we are not happy, therefore the iPod, iTunes system sucks.”

    Notice how Harari does not say that their choice of “music store” is superior to iTunes. He says it is a “plus” that they have Rhap, Nap & Hoo as their download partners.

    Plus?!?! that’s certainly an emphatic endorsement of your partner’s systems (NOT)!

    That’s like saying The Mac OSX is a proprietary system, but it’s a plus that there are so many Virus & Spyware eradication software products out there. LOL!

  10. The appeal of an FM tuner to me is more to listen to the televisions at my gym than to listen to outside radio, which would have spotty reception inside anyway.

    I can’t go to the gym without my iPod anymore, and carrying an extra FM radio adds to the bulk of things I may carry inside. I almost bought a Nokia phone once because of the FM tuner for that reason, but in the end couldn’t justify buying that phone for that sole comprimise. Bought a better phone w/o the tuner in the end.

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