Research firm CEO: Fanatical iPod buyers spend big bucks on overpriced & arguably inferior hardware

“According to a June 19 article in Variety, Apple is in active negotiations with a number of major Hollywood studios to add movie downloads to its iTunes media store and begin offering the new service by year’s end,” Michael Greeson, CEO and Co-Founder of The Diffusion Group (TDG), writes in an opinion piece for TDG.

“As was the case with digital music, Apple’s would not be the first company to attempt an online movie download service. The space is already populated with the likes of CinemaNow and Movielink, with new entrants to likely include TiVo, Netflix, and even Amazon. Of course, this is only the beginning of the party and given the beauty of the Internet distribution model, TDG expects other entrants to step up (some very small, some very large),” Greeson writes. “It is important to note that the first-movers in the online movie rental/download space, CinemaNow and Movielink (both of which have been discussed numerous times in previous TDG Opinions) are having difficulties attracting a critical mass of users.”

Greeson asks, “So why would an iTunes movie download service work when other such services have tried (and failed) to gain a critical mass of users?”

“First, we’re talking about Apple not Movielink or CinemaNow. Apple has tremendous brand strength, an existing base of fanatical supporters who spend big bucks on comparatively overpriced (and arguably inferior) hardware tied to a proprietary service with unnecessarily restrictive usage parameters – these are ‘believers’ not just consumers,” ,” Greeson writes.

“Second, Apple has employed an incremental approach in the evolution of the iTunes service – from digital music to short films and TV programming – and at each stage has had a chance to evaluate what the ‘next step’ might look like. Adding movies to this mix is a logical enhancement to the existing service, one that will make sense to existing iTunes’ users,” Greeson writes.

“Third, whether this move is immediately successful may be beside the point. In reality, introducing an online movie download service is but part of Apple’s long term strategy to become a dominant media brand in the consumer living room,” Greeson writes.

Full article here.

[UPDATE: 9:29pm EDT: changed source and link to The Diffusion Group.]
“Apple has tremendous brand strength, an existing base of fanatical supporters who spend big bucks on comparatively overpriced (and arguably inferior) hardware tied to a proprietary service with unnecessarily restrictive usage parameters?” “Tremendous brand strength” is correct. “Fanatical supporters,” yes, in some cases, no, in others; and more for Macs than iPods anyway. But, to describe iPod+iTunes as “overpriced and arguably inferior hardware tied to a proprietary service with unnecessarily restrictive usage parameters” is just plain wrong.

Tellingly, Greeson offers no example of “superior” hardware that’s priced correctly in his opinion. Distill all of the reviews you’ve ever read of iPod and you won’t come up with “inferior hardware” anywhere in your list of common denominators. Instead you’ll have collection of raves about the quality of Apple iPod’s fit and finish. Anyone who actually knows how iPod+iTunes Store works, knows that Apple’s DRM is simply not “unnecessarily restrictive,” in fact, it’s really quite liberal DRM. And, even if you don’t agree with that statement, blame the music labels for “unnecessarily restrictive” DRM, not Apple. Apple’s DRM works on both Macs and Windows PCs, whereas the likes of Napster, MSN Music, MTV URGE and countless other also-rans are unnecessarily restricted to Windows-only which, if you read almost any independent review ever written, is inferior software — you can drop the “arguably” — to Apple’s Mac OS X.

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34 Comments

  1. letter to the diffusion group-
    RE: iTunes’ Movie Downloads the ‘Tipping Point’ for Online Movie Distribution?–
    You described the iPod as “overpriced and arguably inferior hardware tied to a proprietary service with unnecessarily restrictive usage parameters.” I disagree. And, congratulations, you have just made enemies of millions of happy iPod users and Apple users… a wise and responsible business move. And to quote my co-worker who also read your article, “This guy is a moron.”

  2. …who spend big bucks on comparatively overpriced (and arguably inferior) hardware tied to a proprietary service ..

    Uh if you mean Mac’s they are competively priced with similar equipted PC’s, in fact with the Quad it was actually lower than Dells.

    If you mean iPods, well, similar equipted devices with inferior quality are also priced about the same.

    If I’m going to load up a music device with tens of thousands of dollars worth of music or P2P effort (take your pick) I sure as hell am not going to buy a cheepo MP3 player that I got to slam on the desk every now and then (ex Rio Karma) to get it to work.

    Only now does the world find out what we long time Mac users already knew.

    Steve Jobs is a God.

  3. MacBooks: the very definition of inferior quality – dangerously hot, batteries subject to swelling, explosion and the white ones made of plastic that turns yellow-brown from the inside out.

    Therefore, overpriced at any cost.

  4. “Fanatical supporters,” yes, in some cases. Yes in this case and you know why? It’s because I like my electronic to be beautifully designed, easy to use and that it just works when I need it to. Apple needs to design a mobile phone coz I have yet to find one that meets all of the above.

  5. all i gotta say is.. i just got my new ipod nano in the mail the other day.. if you wanna tell me it’s overpriced at about $150, you’re smoking crack. that thing is amazing.

    check out Creative’s newest iPod killer to see why Apple owns the digital music market. (hint: it doesn’t work with human hands, unfortunately)

  6. Perhaps Greeson’s inferior and overpriced comment was, at least in part, referring to the many 3rd party products that exist for the iPods?

    I can tell you from experience with my fiancee’s iPod nano that accessories are very often inferior and most certainly expensive. For example, I bought her an iTrip to allow her to listen to her nano on her home stereo and in her car. None of the frequencies that are listed for our area on the iTrip website provide a very clear signal — we live in a city of 0.5 million people. There should be at least one clear frequency in our area, yes? At some point I will either spend significantly more on a more robust radio transmitter like PodFreq, or spend a HUGE amount more for a bluetooth solution.

    Purchasing Apple-branded iPod accessories can be frustrating because of the blank descriptionless boxes they are in. But Apple-branded accessories seem to get the job done — according to my internet research.

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