Mac Greer interviews tech guru Bob Cringely, employee No. 12 at Apple, for The Motley Fool. A few choice snippets from Cringely:
Apple will stop making iPods the day that they can make more profit from an iPod license than they can make from selling an iPod. And that day will come. A switch will flip, and suddenly you will be able to buy an iPod from anyone, and Apple will just be in the iTunes business, but they will be making money from Apple IPE [intellectual property enforcement] and iPod licenses.
I think Microsoft is not stupid. Microsoft is big and lumbering and brutal, but they are not stupid, and what they know is that they have more resources than anyone, and they are fully capable of doing some little Zuney thing that is relatively meaningless except that every potential competitor has to take it into account. So Microsoft spends $500 million developing the Zune. Five hundred million is nothing to them, and they spend that much marketing it, which again, is nothing to them. And Apple and Samsung and all the other guys have to respond to it. In the meantime, what is Microsoft’s real strategy? Microsoft’s real strategy in the home has to be built around Xbox, and Xbox is actually doing some smart things, so I view Zune as a deliberate distraction; it is a decoy.
Full interview here.
Never confuse stupidity or the lack thereof with ineptitude, hubris, and mismanagement. With Zune, Microsoft is simply reinforcing their reputation for making mediocre products. Regardless of the amount, that’s not money well spent.
And a lousy one at that.
The guy is smart. At least now and then.
Nice use of the English language there! “I think Microsoft is not stupid.”
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Anyway, who thinks MS will bite the sour apple and license iPod from Apple?
That would be the ultimate proof of MS innovation!
Apple could make plenty licensing OS X – but they have been down that road with Mac OS before. I don’t see that happening with iPod.
As for the Zune being an intentional distraction, I think this is way off. MS has MUCH more to gain by having Zune be a success that integrates with Xbox in the home than for it to be a failure…why? Because the iPod is ALREADY the “distraction” that the writer claims the Zune to be! MS didn’t have to blow a billion dollars to create their own distraction.
Amazing, Cringely understands the Zune is a total moronic failure from inept marketeers in Microsoft and he is still in denial: Micro and soft are not stupid. If they did something so blatantly stupid, so clearly a total utter failure, it must be because they have a plan, YES, MS is clever, they have a plan: the Zune is a decoy!
Cringely: either you are a in a total brain morass, or you are truly more foolish and bozo bootlicker than anyone could possibly thing. Are you reading yourself after spouting this nonsense and still able not to feel ashamed of yourself?
Zune a decoy: Cringely, you are the real McCoy in dumbass world.
Uhhh………. sure.
Apple never licenses out there products to anyone for any price. There in the hardware business and as long as it is profitable they will keep building them and selling them, no one else will.
Microsoft is stupid contrary to what he thinks and they no nothing about R&D of hardware hense the Zune is a big failure.
– insert ridiculous commentary including a zany scenario that will get a rise out of some with others declaring that I’ve fallen off. –
Cringely is brilliant and you should listen to him.
Zune Tang, you’re forgetting that Microsoft has no class.
You’ve fallen off lately.
What Cringely refers to is a strategy that Microsoft has employed several times before. To hell with making money, just distract the competition from their course, and wait for them to make a mistake. MSFT has the resources to indulge in this kind of waiting game.
The thing is that Apple has been setting the stage for this battle for about 8 years. Their focus is lazer sharp, and MSFT’s strategy dujour isn’t going to distract them. That means that MSFT is going to have to do something it has never successfully done before, and that is to innovate.
This war isn’t over, but the clear leader at this pooint is Apple, and they are getting stronger with each passing day. By the end of 2007, I don’t think MSFT will be capable of derailing the Apple train.
What Microsoft should do with all that $500 Million + $500 Million + is get some Apple Stock
Quote “Five hundred million is nothing to them, and they spend that much marketing it, which again, is nothing to them”
I don’t care how big a company is. For this guy to dismissively say one billon dollars is nothing to them shows just why he should not be taken seriously.
If Microsoft is spending a billion dollars of shareholders money as he says, a decoy, I hope the shareholders sue MS for fiduciary irresponsibility. And the MS board fire the CFO and CEO.
This guy is just an idiot.
Again I say, why does MDN constantly link to such stupid articles and writers.
Well -if the Zune is a decoy it’s working well. Just got back from CompUSA, picking up supplies for my business and asked the clerk if he had sold many Zunes. He said he had not sold one. “How about iPods?”, I asked. Basically flying off the shelves, and this is not exactly a bastion of Apple fanatics. So, Bill and Monkey Boy, the plan is working perfectly.
“What Cringely refers to is a strategy that Microsoft has employed several times before. To hell with making money, just distract the competition from their course, and wait for them to make a mistake. MSFT has the resources to indulge in this kind of waiting game.”
Unfortunately for Microsoft sharholders and employees, this “strategy” to take over the world and every market in it seems to have distracted Microsoft itself from their core businesses, and they no longer scare competitors the way they used to.
1 billion dollars and they wanted to take away the employee’s fresh towels to be more considerate of the stockholders. Sheesh.
“Apple will stop making iPods the day that they can make more profit from an iPod license than they can make from selling an iPod.”
Well, DUH. Except with one significant difference: they’ll limit the license to people who have the same high standards of quality.
And I don’t think it’s likely that the day Apple will make more from licensing will occur.
See, there’s nothing inherently unprofitable in licensing. The mistake Apple made in its earlier attempts at licensing Mac OS was that they priced the cost of the license way too low. If Apple makes the same amount of profit from a licensed clone as it does from its own hardware, then licensing is a good thing. But in the earlier attempt, Apple priced the license too low. Of course, if they had priced it at the regular value, the clones would not have been price-competitive with Apple hardware. Which is exactly why we’ll never see an iPod license: it will always be more profitable for Apple to build an iPod than to license the iPod software to someone else.
To say that $500 million is nothing to Microsoft is…rather ridiculous. There is no company in the world that would consider $500 million play money…
I’ve never understood why anybody pays any credence to anything that “Bob Cringely, employee No. 12 at Apple” has to say. He has been so wrong so many times that “Bob Cringely, employee No. 12 at Apple” seems to be making it up as he goes along….for a laugh.
Apple has what Microsoft wants but will never have – they contol the software, hardware and the distribution ( their stores) and that’s huge folks. Their store presence allows them develop and distribure their total digital hub concept which still has a few surprises on the horizon. They have put together a solid business plan which will be the envy of all of their peers.
The previous post was absolutely correct – this train is just leaving the station
“Microsoft’s real strategy in the home has to be built around Xbox, and Xbox is actually doing some smart things…”
Ya, like staying on store shelves when everyone is looking for a Wii. Have you shop for a Wii or a PS3 lately? You go to any Bestbuy, Walmart… and you’ll see people desperatly looking for Wiis, if not Wii, PS3s, but XBox, come on? Stores are loaded with Xbox 360, too bad no one wants them…
I think that Cringely is wrong about Zune, but his comment on the iPod is perfectly sensible.
The market available for iPod rivals is too small to be viable and there are no signs that anybody other than Apple is making significant profits from selling MP3 players. Apple can kill off any remaining products by simply licensing iPod technology to other companies.
The main reason why alternatives to the iPod exist is because nobody but Apple may build them, if others could build them, they surely would. If Apple let it be known that they were prepared to licence iPod technology to third parties, don’t you think that manufacturers would come running ? Apple wouldn’t have to licence them for cut price deals, they could negotiate a worthwhile fee. The important point is that it has to be done while iPod sales are solid and increasing so that others will want a slice of the action and be prepared to pay well for the privilege.
As Cringely says, once that licence fee is comparable to the profit gained from manufacturing and distributing iPods, there’s no point in continuing much longer, you might as well let somebody else deal with all the hassles of building, distributing and supporting them and simply collect the revenue. The money can then be used to fund the next great thing.
It’s not restricted to iPods either. If Apple wanted to, they could licence OS X compatible PCs to be built by other manufacturers. The design of the motherboard would be very tightly controlled by Apple and they might actually insist on supplying the motherboards themselves, but others would assemble them into ready to go systems and then market and support them. If Apple could get a licence fee that was comparable to the profit from selling a Mac, it would be a great way to expand production and distribution. Indeed it might be the only way to get past a certain market share.
Apple have learnt a lot from their previous experience with clones and won’t repeat the same mistake. The previous clones were negotiated from a position of financial weakness and by somebody who wasn’t a brilliant negotiator. Apple is now holding an entirely different hand and is playing from a much stronger position.
When I defined guidelines for users I always gave them two choices, both of which I was happy with. It made the user feel they were in control (they were). We see this in democracy in Western governments where we have a choice of two very similar liberal vs conservative governments (left and right used to be far more different) and we are happy within our limited choices.
THUS I believe Apple needs to partner with one other company to offer their announced products under the partner’s name. It needs to be a hardware company with a good name who is desperate for a deal, makes quality products and will not work against Apple. If they agree, the best fit is Sony. They are so far down the toilet they must be desperate for some sales, good will and decent software. Plus they have HUGE amounts of content (music & movies), expertise in micro-devices, plus a games console (PS3) they could cross-licence to Apple. They would need to drop their music stores, but connecting an iTV to a Sony/Apple Bravia or Sony/Apple HD Pro Camera to a Mac Pro would be a good fit. Apple needs to move in before Sony recovers from their annus horibilus (bad year, not sore bum).
What will be interesting to see is what type of device the iTV will become. Will Apple evlove that device into some sort of intergrated gaming/HD streaming/music downloading/????……..that’s what we’re talking about. And will it take the home entertainment/computer market by storm and relaegate the MS’s and Sony’s, HP’s and Dell’s to playing catch-up and without any stores to contol their distribution.
i totally agree with Cringley.
Apple actually really has to watch out for Zune3 cause that is the typical KILL product date in almost EVERY version of the MS product cycle.
its absolutely scary, and saddly this game is Apple’s to loose.
Remember this has happened, with Windows, Windows Mobile, Xbox, SQL server, access, Exploder, OFFICE, everything, everything that they have made that is now dominant originally came off as a joke to the competitors and then blew them out of the water after version 3.0, this is a very clear and precise bs plan, and hopefully apple is aware.
the constant and retarded, “MS products suck and the people who buy them suck too” is synonimous to putting your head in the sand.
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The truth is that that once MS is really in the ring, all should really worry.
cause in a war of attrition, almost always the strongest survive, and even with its present good fortune, Apple is but a tick to MS’s Elephant.
critic,
I think you’ve hit on a good point.
MS doesn’t ‘scare’ anybody anymore.
Whatever huge sums of money and large market-share they still have, they’ve lost their ability to influence and convince.
MS’s present situation and the cringing Cringely’s of this world remind me of Hans Christian Anderson’s fairy tale, The Emperor’s New Clothes. The ending goes like this:-
And so the Emperor set off under the high canopy, at the head of the great procession. It was a great success. All the people standing by and at the windows cheered and cried, “Oh, how splendid are the Emperor’s new clothes. What a magnificent train! How well the clothes fit!” No one dared to admit that he couldn’t see anything, for who would want it to be known that he was either stupid or unfit for his post?
None of the Emperor’s clothes had ever met with such success.
But among the crowds a little child suddenly gasped out, “But he hasn’t got anything on.” And the people began to whisper to one another what the child had said. “He hasn’t got anything on.” “There’s a little child saying he hasn’t got anything on.” Till everyone was saying, “But he hasn’t got anything on.” The Emperor himself had the uncomfortable feeling that what they were whispering was only too true. “But I will have to go through with the procession,” he said to himself.
So he drew himself up and walked boldly on holding his head higher than before, and the courtiers held on to the train that wasn’t there at all.
For $500 million the ZUNE was the best they could do! Un-frikkin’ believable.
M$ now has a bureaucracy like the Pentagon, what did they pay for hammers – $25,000?
Just for those good folk who have ‘casting’ problems.
The Emperor is MS.
Cringely is, of course, one of the courtiers holding the non-exsistent train.
The little boy is Apple Computer Inc. who people are finally starting to believe.
Seabasstin:
The Xbox is still an unmitigated failure. It’s a big suckhole for MS. It’s still sucking. Wii and Playstation 3 are selling much better.
“Apple is but a tick to MS’s Elephant.”
If the OS market is 90% Windoze and about 4.5% OS X, then that’s about 20X larger. Hardly a “tick” to and “elephant” let’s look at some numbers:
Mature Bull Elephant = 6 tons (12,000 pounds) / 20 = 600 pounds
What do you know, the weight of a mature Male Siberian Tiger is around 600 pounds!
I don’t know about you, but I wouldn’t ignore a 600 pound tiger! Even if I was an elephant!
Did you see the NatGeo issue where a pride of lions took down an elephant?
MDN: Don’t underestimate Microsoft. They are brutal and smart enough to get to the top back when they were small.
Then again, the Tiger is in its prime, whereas the Elephant is aged, decrepit and heading for the elephant graveyard.
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Apple tried licensing hardware in the past, the mac clones. All it did was take away market share from the Mac.
Apple is first a HARDWARE company, second a software company.
. So Microsoft spends $500 million developing the Zune. Five hundred million is nothing to them, and they spend that much marketing it, which again, is nothing to them
You, Cringley, suck.
$1 billion is real money at any organization. Even Ballmer isn’t stupid enough to spend that much on a mere decoy.
Zune was an honest effort. It was the best today’s MS could do.
MS competitors should be hoping for many more billion-dollar turkeys. Even the strongest corporations face judgement day when they screw up big enough long enough, throwing huge sums into high-profile duds. Just ask Detroit how it can happen…
Zune is a marker, that’s all. It’s marked out a space for MS in the MP3 market. That’s all MS intend it to be for the present.
Never underestimate the power of large numbers of stupid people working together. M$ are going to attempt to spend all the others in the sandbox into oblivion – it’s the same MO as XBox. They learned it from Ronny Raygun and are unfettered in prosecuting this strategy by BoyBlunder George W. since they are good cooperate donors.
in other news – Hell Freezes over, and Pigs Fly out of my ass. Back to you, Bob.
To AlanAudio and *anyone* that thinks Apple would enjoy being in the licensing business… they wouldn’t. They LOVE being in the end-to-end design-through-distribution business. That’s what makes them such as stand-apart company from the hundreds of thousands of PC cloner builders out there.
How could one company possibly make such an impact if they chose to do things because it “makes sense” business-wise. It’s bigger than that, and Apple knows that. It’s about the end-user’s experience.
What a bloody load of crap! iPod has to respond to the Zune? To what exactly?????? Its beautiful brown color perhaps? Its wireless wasteland?
What a laugh! If Cringely is Apple employee No.12, he must have joined the company before possession of a working brain was required.
Apple will not license the iPod because Steve Jobs is interested in much more than selling truckloads of gadgets for zillions of dollars. Steve Jobs wants to change the world; and with 5 billion dollars in his Apple bank account, plus a sizeable personal fortune, who’s going to tell him he can’t do it?
This entire Zune concept originated from my rectal orifice. Many other great Microsoft innovations have similar origins. So ya, go ahead and laugh at me.
P.S. I am NOT the real Zune Tang. The real one will come up with stupid reasons to dispute this.
Speaking of the Zune… THIS IS A TRUE STORY
I was at Circuit City the other day doing some Christmas shopping and went over to the iPod section. Some shoppers came over looking for some iPod accessories and asked a Circuit City associate some questions about their interest. Well, the associate purposely, mistakenly walks them over to the Zune section to show them an accessory similar to what they were asking for in regards to the iPod and then he goes right into a sales pitch for the Zune.
Later I ask him about some iPod related stuff and he admits to me in the conversation that he doesn’t like Apple or the iPod and that he is getting a Zune sometime soon.
I think I have come to the conclusion that the Zune was built for the Apple slash iPod haters of the world. Microsoft will build what little Zune success they have around those folks, plain and simple!
coolfactor: No matter what you wish, remember that, first and foremost, Apple is a “for profit” company. Their first priority is to make a profit for stockholders. period. Yeah, they have to satisfy the end-user/customer in order to sell products/services – to make a profit. If there is more profit in the “licensing business”, you bet Apple will move in that direction. If not, they will wither away and die.
macman: The mistake Apple made back then was the clone licensing enabled direct competition to Apple’s mainstay products. Today, with OSX and the shift to Intel, they have the opportunity to gain significant marketshare where Apple has no hope of grabbing much of that market, the huge PC market.
The Zune could also be nothing more than a spoiler to the whole MP3 market:
Strike 1: Abandon PlaysforSure partners.
Strike 2: Make ridiculous deals with music and movie companies that will make it extremely hard, if not impossible for rivals, including Apple, to make good pricing and DRM deals for the consumer.
The whole MP3 player market stagnates because of high prices or too restrictive DRM. Microsoft just needs to have a so-so product out there and they essentially win, or rather, the competition loses. Home run!
Zune Tang is a decoy.
I suppose Windows Vista is a “decoy” too. Microsoft has screwed up that project ten times as much as it will ever invest in Zune or XBox. Nice “distraction” though. Give me a break…
Xbox may to OK, but I don’t own one. I do have the need to use a Windows XP laptop, however, and MS Office. Microsoft needs to get its priorities in order. Microsoft is the one getting distracted by Xbox and Zune. Get your cash cow products completed on time and out the door. Or there will come a time when 2 times half a BILLION dollars is no longer just spare change.
You guys are taking Cringer too literally. He often speaks obliquely like that, and people think that’s all there is to the story — like the Zune is ONLY a decoy. Of course it’s not. Cringley wouldn’t say it’s only a decoy, but that’s how you guys are reacting.
The Zune probably has many functions for M$, including:
trial balloon,
possible spoiler for the whole MP3 market as TripleHead points out,
hardware market tester,
marketing/promotion testor to gauge strategy and market,
possible distraction for Apple,
decoy to distract from Xbox if fails,
later link with Xbox if succeeds,
possible realignment of Play For Sure,
experience with hardware partner, etc.
And I’m sure they knew it would be tough, they’ve said so and said they are willing to stick it out for the long term and lose money in the short term.
M$ investors like to hear that talk. All the above reasons, and I’m sure there are more, make the Zune look a lot less stupid.
And they probably have some good ideas for Zune G#2, #3, etc… and Apple would be foolish to ignore the possible threat.
Cringley is not way off base. He just doesn’t explain the whole picture.
I think Microsoft is simply hedging it’s bets. It’s not about music or music players, it’s about what the iPod has the potential to become. Bill Gates has already publicly admitted that Apple won this battle, by acknowledging the iPod’s sucess and claiming Apple has had two successes; he went on to predict that this was all they had. This is one of the strategic reasons Apple keeps things to themselves. What is coming next is what Microsoft fears.
Microsoft has for years been trying to push a mobile version of it’s OS — with minimal sucess. First it was the PDA market. They suceeded in marginalizing the Palm, but PDAs died. Now there in the phone market, and they are having some sucess, but it’s still limited. Treo and Blackberry still dominate.
Enter the iPod. The iPod is a phenom. It’s becoming a cultural icon. But music playing capabilities are only the beginning. Now there is rumor of a iPod phone and rumors of an embedded or mobile version of OS X. That is the real threat to Microsoft. It’s the tie in between mobile devices and the OS that will help drive OS sales.
If Apple “innovates” again, and morphs the iPod into something completely different, Microsoft has to be ready to answer. The Zune is the platform that Microsoft will use to mimic and copy whatever Apple does. Apple is preparing to leverage their OS X platform and add it to the iPod. To help drive sales of Macs and turn potential switchers.
If Apple and the iPod can have such an impact on the music industry with the iPod, what do you think they could do to the mobile handset market? Already the Internet is filled with the possibilities of Apple’s entrance into this market having the capability of completely changing the dynamics of it.
Microsoft must be ready to answer this. Microsoft has never really been able to predict where the market will turn; but Apple has, so Microsoft will do what it always does – follow the leader. Apple, up to this point, has not been able to really capitalize on their innovations. The iPod has changed all that. Microsoft is hedging it’s bets that it can dominate Apple like it has in the past, but it won’t be able to do it without an iPod like device. They need to be ready to answer if Apple can turn the market once again with a whole new type of device.
I have no idea what Apple will come up with, but I can be fairly confident it won’t look like anything currently on the market. Apple innovates. They create new things. They “Think Different”!
Apple is poised to accomplish what Microsoft has been trying to do for years. This really is a David and Goliath story. Apple is getting ready to throw the stone.
One might argue that the iPod is the stone; and we are just watching the giant fall.
Given time Zune will be a success. They will just take a few years to catch up with iPod. In the future most people will carry their music on the phones and M$ is already installed in many of these with Windows Mobile. Wheras Apple will likely never catch up with M$ in the desktop market.
Forget Cringely. You’ll get much more intelligent analysis of the state of affairs DRM-wise from Daniel Eran at RoughlyDrafted Magazine
http://www.roughlydrafted.com/RD/Q4.06/6565C879-3C4C-4014-95F0-EF1DF464D378.html
The article is not well thought through. Firstly, Apple does not even manusfacture the iPod themselves, so licensing does not offer much incentives. Secondly, the iPod pulls people into the Apple stores where people buy other Apple items, first and foremost Macs. And thirdly, the design of the iPod has become an important identifier for Apple. No way they are going to part with this.
@ John
“Given time Zune will be a success.”
Yeah, and given time George The Chimp’s (TM) ‘Invasion of Iraq’, a sovereign country will be a success.
I give them equal chances.
0.
Impeachment, anyone? For the most drunken-sailor spending (liberal) in the history of our great nation?
wow…this is quite possibly the dumbest thing I’ve ever read at MDN.
With an infinate number of m$ employees led by an infinate number of balmer clones and advised by an infinate number of cringley clones, they will be able to make a……..hmmmm……they will be able to build a……hmmmm
they will be able to pay….all of the E.U. fines
“‘ve never understood why anybody pays any credence to anything that “Bob Cringely, employee No. 12 at Apple” has to say. He has been so wrong so many times that “Bob Cringely, employee No. 12 at Apple” seems to be making it up as he goes along….for a laugh.”
Can anyone do some research to see if Bob was “ex-employee #1” at Apple?
Of COURSE the Zune is a decoy.
That much is painfully obvious.
But think like Steve for a second, and you realize…
The iPod is *also* a decoy.
-c
MW: ‘using’ (the market to change the world)
“Microsoft is big and lumbering and brutal, but they are not stupid”
TOTALLY AGREED.
MS understands that hardly anyone can touch them in terms of resources (not Apple, nor Sony) and they will use those resources to crush the competition. It honestly wouldn’t surprise me to see Zune take 20-30% of the PMP market, then see MS abandon it in 10 years. (Or stop marketing/upgrading it’s features when the next big thing comes along.) And despite not being #1, MS would be very content gaining 20-30% of the market with Zune. Their mindset isn’t to prove that they can create exciting products that no one has ever dreamt of, but instead to prove that they can enter any mature market and turn it on its side with their presence.
They’ve done it so many times. Internet Explorer gets a 90% market share, then MS doesn’t upgrade it in 5 years. Microsoft OneCare forced security suite developers (McAfee, Norton) to consider lowering their prices. XBox 360 persuaded independents – meaning people who hadn’t yet gotten a game console (aka potential Playstation owners) to buy the Microsoft hardware instead.
Of course, to be fair I can’t totally discredit Microsoft for everything. XBox Live is downright incredible and the Zune’s Reverse-Sync feature is something that EVERY portable media player should incorporate.
How can people be so completely wrong? I would hang myself if I wrote this article.
They spent 500 million dollars on developing a MP3 Player…and this was the best they could come up with?
500 million dollars and they come up with a Brown brick size MP3 Player?
I’m speechless.
Best review ever.
I have several problems with Cringely’s conclusions.
1) Steve is too much of a control freak to let another company have final say on the presentation of a product that everybody associates with Apple. He couldn’t stand the idea that somebody else would release a substandard product that would end up making Apple look bad. At least if it is Apple releasing a substandard product they have the means to apply some form of damage control. Not gonna happen as long as Steve is in charge.
2) The combined positive effects of each iPod sale go well beyond profit per unit. Each iPod is a tiny marketing device, ambassador and evangelist for Apple. Every time the use of an iPod is appreciated it creates a positive vibe for the company. Every time a potential customer goes to an Apple Store to look at or buy an iPod they also are presented with the opportunity to bask in the light of the combined goodness of a range of Apple and third party iPod accessories, not to mention being exposed to the iPods equally sexy but much more astoundingly capable big sisters (or brothers, whichever strikes your fancy) the range of Apple computers and OS X and iLife and iWork and everything. By beholding we are changed, and that kind of subtle traction to gain mindshare does not show up on any profit-per-unit analysis.
Giving that away would be a huge mistake. That is the kind of big-picture view of the Apple Eco-System (Economy, not Ecology) that Steve and others close to him envisioned years ago, and that single-focus folks just don’t understand. Right now they control a large share of the experience and can thus insure the quality and protect their brand. Any erosion of that is not likely to serve them well.