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Apple of Our i
How the iPod won out
If our nation's papers don't have a full-time iPod beat reporter, it's only a matter of time. In the past couple of weeks alone, the media have brought news of a New Jersey teenager's iPhone hack, NBC's decision not to renew its contract to sell shows on iTunes (plus Apple's attempt to say that it broke up with that company first), and now speculation about what Apple will announce tomorrow. The consensus? It's either a new product or a new service, for the U.S. or Europe. Definitely.
My own crystal ball is broken, so I'll reserve judgment on the announcement until it's made. But I think it's worth looking at how Apple came to dominate the online music market – especially since the company did so by defying the established wisdom.
By personality type or manufactured consensus, technology pundits preach a gospel of open systems and vigorous competition, which they believe will lower prices and expand markets to everyone's benefit. Maybe. After all, the personal computer business exploded when third-party companies followed IBM's lead by making machines that ran Microsoft software with Intel chips. In this view, Apple's original sin was to reserve the right to manufacture the Macintosh rather than licensing out its operating system –- which made it an also-ran in the personal computer market.
With the iPod, the company followed what pundits called a walled garden strategy. Although the iPod can play MP3s, it cannot easily play music purchased from an online store other than iTunes, and most songs from iTunes will not play on any other digital music device. This keeps consumers locked into Apple's system – at least if they want to play the music they've already purchased – and less likely to turn to less expensive digital music devices. From a business standpoint the iTunes store, which makes slim profits, is a giant promotion for the high-margin iPod. The real reason that media companies fear Apple is that they realize the company doesn't depend on them to make money.
My own crystal ball is broken, so I'll reserve judgment on the announcement until it's made. But I think it's worth looking at how Apple came to dominate the online music market – especially since the company did so by defying the established wisdom.
By personality type or manufactured consensus, technology pundits preach a gospel of open systems and vigorous competition, which they believe will lower prices and expand markets to everyone's benefit. Maybe. After all, the personal computer business exploded when third-party companies followed IBM's lead by making machines that ran Microsoft software with Intel chips. In this view, Apple's original sin was to reserve the right to manufacture the Macintosh rather than licensing out its operating system –- which made it an also-ran in the personal computer market.
With the iPod, the company followed what pundits called a walled garden strategy. Although the iPod can play MP3s, it cannot easily play music purchased from an online store other than iTunes, and most songs from iTunes will not play on any other digital music device. This keeps consumers locked into Apple's system – at least if they want to play the music they've already purchased – and less likely to turn to less expensive digital music devices. From a business standpoint the iTunes store, which makes slim profits, is a giant promotion for the high-margin iPod. The real reason that media companies fear Apple is that they realize the company doesn't depend on them to make money.
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