Nicest of the Damned

Why Apple isn't shaking over the Wal-Mart MP3 announcement

www.fool.com | Before You Bite Into That Apple ...

Over at The Motley Fool, Rick Aristotle Munarriz notes that Wal-Mart is looking to bolster its online music offerings by offering DRM-free MP3s, and for $.94, where Apple's higher-quality MP3 files are $1.29. Munarriz thinks this may finally be the chink in Apple's iPod/iTunes armor that pundits have predicted pretty much since the iPod arrived in 2001.

Unfortunately, according to Kirk Biglione over at MediaLoper.com, the Wal-Mart Music Store is an even more bewildering mess of dark alleys than their brick-and-mortar locations. He spent two hours trying to download a single Elvis Costello MP3, having to upgrade his Windows Media DRM and the Wal-Mart software itself in the process, and being rejected when he tried to connect via a Macintosh or even through Firefox for Windows. Using IE under Windows, he eventually was able to buy a song file.

So, the Wal-Mart store isn't much for now, but Munarriz is absolutely right about one thing -- the days of a monolithic iTunes Music Store are probably coming to a close. The future of music retail looks a lot like its past: There will be dozens of different outlets for music. Where once you could buy 45-rpm singles at the drugstore (for 99¢!), department stores, and music retailers, in the future, you'll be able to buy singles through online retailers, the artist's home page, and through listening stations in brick-and-mortar retailers.

Where Munarriz misses the boat is in suggesting a diversification in music retail is a major hit for Apple:

iPod users have gone through 3 billion downloads on iTunes because iTunes is pretty much the only show in town for iPod-ready downloads. Most of the other digital-music merchants sell tunes in the WMA format, which works on more conventional MP3 players but cannot penetrate the protected iPod fortress.

An MP3 file is universal. It will work on any and all players, the same way a ripped physical CD would. And if a record label makes its tunes available as standalone MP3 files -- the way EMI has for Wal-Mart, Apple, and eventually Amazon.com (Nasdaq: AMZN) -- it doesn't matter where you get the track. As more studios begin to back the unshackled MP3 format and more Web retailers begin to sell them, the line will also blur as to who makes your digital-music player, if audio is your bag.

I see estimates of Apple's take per song sold as low as 10¢ and as high as 35¢ (that one ignores distribution costs). If you take the highest possible estimate, the one that ignores Apple's server, bandwidth, and marketing costs, the iTunes store has made Apple a little over $1 billion since it opened in April 2003, or around $250 million/year.

iPod hardware sales continue to grow at more than 20% year over year. Apple sold more than 9.8 million iPods last quarter (more than 10 million if you include iPhones), for sales revenue of $1.57 billion (excluding the iPhone). Last quarter alone. Meanwhile, woot.com is trying to unload overstocked Zunes for $149.99 while the positively archaic 5.5-generation iPod just keeps selling, with, I'll wager, major new iPods arriving before Christmas.

So who's going to be selling the hardware that plays all those unlocked MP3s? For the forseeable future, it's still going to be Apple. The only possible market or technological derail I could see for Apple would be if a transition to video players happens quickly and Apple blows it -- even the people I know with the video iPods don't think of them as great video players. Even so, I don't know anybody who has given up their less-than-ideal iPod in favor of a more capable video player.

Motley Fool-style disclaimer: My wife and I both own Apple stock.

Frank's favorite podcasts

So the new job comes with a new, longer commute, and I'm spending an hour a day in the car. With local Atlanta radio only getting worse, the iPod has been a tremendous relief, and I find myself listening to mostly podcasts, and comparatively little music.

My favorite, linked above, is KCRW's Martini Shot, by Hollywood writer and producer Rob Long. This week's edition, “Writing for Free,” is especially entertaining, and touches on blogs, insulting writers, a new twist on the accounting game I've heard described as “Find the Hat,” and the online home of Ken Levine.

Another favorite has been the Penn Radio Show, an hourlong show by Penn Jillette (of Penn & Teller) and Michael Goudeau. Unfortunately, while loading last week's shows onto my iPod, I discovered they're pining for the fjords just when they got Eric Idle committed to an interview.

So, I've been shopping for new favorites, and can heartily recommend Leo Laporte's slate of podcasts, including This Week in Tech and MacBreak Weekly, whose latest edition had me zeroed in: Battlezone! The IIfx! HyperCard! Poopr!

Also unlikely to survive the day they get downloaded are NPR's This American Life and Wait Wait … Don't Tell Me!, and HBO's Real Time with Bill Maher.

I've been studying Cocoa a little bit, and so have also enjoyed Late Night Cocoa, by Steve Scott, a Windows developer stepping into the light, and finding his way partly by talking with experienced Mac developers about their areas of Cocoa expertise.

Does anybody have any other suggestions I ought to be checking out?

iPhone 4+ years in the making?

Nicest of the Damned | isync + ical + ichat + inkwell = iphone?

I'm not usually one to self-link, but I'm getting some Google hits on the short post linked above from August 2002. It references a John Markoff story, now lost to the New York Times TimesSelect product, but the abstract is pretty prescient.

Remember, this is from August 19, 2002:

Apple Computer reportedly weighs introduction of hand-held device that would combine elements of cellphone and Palm-like personal digital assistant; forthcoming Macintosh OS X, Version 10.2, is being marketed as improvement for desktop computer users, but it has features that make more sense in hand-held device than desktop; move would play into Apple's so-called digital hub strategy, in which Macintosh desktop computer is center of web of peripheral devices of Steven P Jobs, Apple chief executive...

By the way, my very next post, later that day, was on a cool new RSS aggregator, called NetNewsWire, then in version 1.0b13.

Now we know what all those patents were about

We've got 6 months to chew on Apple's new iPhone, and there's still quite a bit that's unknown: How Cingular will bill for data, the battery's standby life, and about 100 different things about the phone software. Here's a couple quick nuggets:

•I suspect the low contrast, no-container interface (look at the Safari screen shot image here for an example: The forward and back arrows sit directly in the navbar, without a containing rectangle, like Safari today) will appear on the Mac, maybe as soon as Leopard.

• Nobody seems to have any details about the phone running “OS X.” You can bet every Mac developer is working any available angle to find out more. I've seen one report that says it's a closed ecosystem and Apple's not even naming the processor (Update: make that two reports). Even if it is “OS X,” it's not OS X as we think of it -- you wouldn't be able to go buy FileMaker and run it on the phone. It's possible there's a super-secret version of Interface Builder and a compiler for the iPhone architecture running around in Cupertino, and Mac developers will have to redesign in the new IB and recompile for the new architecture. It will be really interesting to see how the “desktop class iPhoto, iTunes, and Safari” differ from the real thing. It may just be that, because Apple defines OS X, this phone runs OS X by definition, and the applications on the box are all it has or ever will have. If Microsoft can label every OS they sell as Windows, Apple can have three different OS X's (OS X, Server, and iPhone).

• When Jobs said the company was releasing 3 new devices, in one package, he really said a mouthful. The iPhone represents the most profitable, but by no means the only, combination of the widescreen, the touch pad, the phone, the iPod, and OS X Micro. Drop the phone, and you've got the widescreen video iPod most folks were expecting today. Drop the phone, add a keyboard, and you've got the Mac equivalent of a Pocket PC, only much cooler: it could include the multitouch interface and other touch screen goodness.

• I suspect the reason this was released as a single product, instead of a product line, is the continued success and profitability of the iPod. There are only two price points ($399, $449) between the current video iPod and the low-end iPhone, so to introduce an iPod Widescreen at $449, by dropping the radios from the iPhone, would cannibalize iPhone wireless revenue (and I'm sure Apple gets a taste of that), when Apple is confident they'll continue to sell as many video iPods and as many iPhones as they can turn out. If sales don't stack up, we'll see new combinations of the iPhone package sooner than otherwise.

Personally, I find the price high for a phone, and have never liked Cingular's data pricing. On the other hand, my previous phone lust object was the Nokia E61, which is available unlocked for between $375 and $450. Given the way the iPhone makes previous phones look like they have a crank, that may be a fair premium.

There are almost 2,000 (exactly 1984 at the moment, appropriately enough) photos tagged iPhone at Flickr tonight.

This just in: The iPod's doomed

Commentary: Requiem for the iPod - MarketWatch

I thought the Apple bashers on the stock page had moved on to other companies, but it looks like they're still around. In this essay from Friday, Robert Cyran suggests Apple needs to let “songs stored on its iTunes software” (whatever that means) be played on “other gadgets. A similar strategy nearly killed off the company a decade ago.”

He admits that the company's soup-to-nuts iPod division, which sells the players, downloadable music, and accessories, has been a success. So far.

But watch out, Apple: “Microsoft's newly released 'Zune' player may become a credible rival.” And if not the Zune, then some future phone with better music capabilities “may one day crush the iPod.” And in 10 years, we may be listening to our music through a stud piercing our tongue. (Okay, I made that one up.)

Aaaaarrrrggghhh. First off, holding the Zune up as a better business model because you want Apple's songs to play on more players is hilarious. The Zune is going to require not only people with iPods, but people with previous-gen Microsoft players (the PlaysForSure initiative), to buy their music again, or re-rip their CDs. Microsoft is considering a scheme to provide purchasers with all the music they had when they bought their Zune, but that means double libraries, and catalog issues.

Secondly, and more importantly, what makes Apple such a juggernaut in this space is that they develop the software that bridges the store and the players. If iPod market penetration were ever to dip to alarming levels, Apple could easily release an updated iTunes that supported players from other companies.

Let's say the Zune outsells the iPod 8-to-1 this Christmas season, an extremely unlikely scenario. Apple could turn around and license their DRM to the PlaysForSure contingent. If you had one of their players, you would be one firmware update and one iTunes upgrade away from sharing purchased music between your iPod and your SanDisk or Creative player.

If you're not interested in purchased music, I bet this already works. I know that my old Creative Rio 500 showed as a source in iTunes the last time I tried (iTunes 5?). I'll be curious to see if Microsoft's new software for the Zune can mount the iPod.

Who'll buy a Zune?

Gizmodo | Exclusive Microsoft Zune Details

So details are beginning to leak about Microsoft's next iPod competitor, the Zune.

To recap for those who aren't following closely, Microsoft has decided to ditch its many hardware partners who have been part of the PlaysForSure initiative, and to recreate much of what has worked for the iPod. Instead of competing hardware providers offering a confusing mix of players, the Zune will be Microsoft-branded, allowing Redmond to keep control of the whole user experience, in the same way Apple does with the iPod.

PlaysForSure (which is, at best, on life support now) also allowed a plethora of online music stores, as Microsoft hoped to leverage brands familiar and credible to a variety of consumers, including MTV's URGE, Napster, and Wal-Mart. The Zune will apparently debut a monolithic Microsoft music store, much like the iTunes Music Store.

The single thing that I get the least is that the Zune is supposed to be Microsoft's "iPod killer for Christmas 2006", but it's apparently slated for release in mid-November.

Contrast that with the original iPod, which was released in October 2001, and was still widely considered a mistake long after the 2001 Christmas season had come and gone. Only wide-eyed Apple fanboys (like me) and people who had suffered through the hackish, inferior flash-based systems that came before (like me) were buying iPods for Christmas 2001 (and yes, I remember there were other hard drive players before the iPod).

So enter the Zune. There aren't really a ton of Microsoft fanboys out there, since Microsoft's hardware offerings are currently limited to Xbox, keyboards and mice. The Zune that's emerging from leaked stories around the net doesn't appear to offer any generational leap features when stacked up against a video iPod or nano. It's got a beefier processor than the current iPod video, but the next-gen iPod is expected Any Time Now.

There are hints of a Zune that interfaces with your Xbox, but those are out somewhere in the gray murky future. As a PSP fighter, leveraging Xbox titles, letting me transfer saved game state and highlight films to other Xboxes or the internet, you've got something new and interesting, but for now it's roughly on par with the iPod for features. WiFi may or may not ship with the first-gen box; there's a menu item for it in the prototypes.

For now, it appears the killer app at launch will be FM transmission and reception, so that you could listen to my Zune's music from your Zune, encouraging social sharing (but not sharing like file sharing, since you couldn't then take my music with you). They'll also include content at purchase, including EMI music videos.

From a marketing perspective, Microsoft faces a difficult task: They've got to simultaneously launch a brand, a device, and an online service, and they've got to do it between mid-November and Christmas, or concede another holiday season in which the iPod will get even more entrenched with consumers. From a decade-long perspective, it could happen, but it's not a threat to iPod hegemony for Christmas 2006.

My prediction: This thing won't sell well until it can move beyond the iPod.

Some Zune blogs:

Zuneluv | Microsoft Zune and Podcasting

Notes that there's been no discussion of support for podcasting in the Zune details released so far, and that Microsoft is likely to include content at purchase.

Zune Insider Blog

iPod photo 40-gig: A deal at Amazon

I haven't been able to find a replacement drive for my 5-gig iPod, so I haven't been able to update songs for a couple of months.

I was considering an iPod shuffle, which would mean I would manage my music on one computer or another instead of on the iPod. Then Apple introduced the new-generation iPod photos, and the 30-gig for $349 looked like an interesting possibility: only $50 more than the no-color, shorter battery life, 20-gig iPod. The new 60-gig has a drive as big as my laptop, but $450....

Then I noticed that the discontinued 40-gig iPod photo is still available, currently priced about $10 more than the 30-gig "new" model. And it gets better: The 40-gig model still comes with the special AV dock, USB and FireWire cables, and a case.

The new 30-gig model does not include accessories; only a USB 2 cable is included. Neither does the $100 more expensive 60-gig, although the old old 60-gig model is available for essentially the same price as the new, accessory-poor, model.

Don't know how long they'll be available, but if you're considering an iPod photo, and you'll need some of the accessories, this is definitely the way to go.

Dawn of a new Apple

So Steve Jobs has finished the big keynote at Macworld '05, and the Apple website has been updated with the new products he announced. If you haven't been following along, feel free to go take a look.

Wow. This is the beginning of a whole new era for Apple. No longer do I have to grit my teeth and say, "Well, you could buy a white-box PC," when somebody says they only want to spend $500 on their new computer.

This is beginning to smell like a no-excuses Apple. We only have five percent of the market? What the hell are we going to do about it? Asked and answered. We're dominating the hard drive music player market, but people are still buying smaller and cheaper flash players? What the hell are we going to do about it? Asked and answered.

It's great to see Apple leveraging their superior product design skills to bring out some low-end products. As of today, you can actually take home a useful piece of Apple hardware for $99. The iPod shuffle looks like exactly what I was talking about in December, the iPod cheapy tiny sport. My only problem is that it doesn't have FireWire support, so it would/will be very slow with Sophie's TiBook (which is still USB 1.1, of course).

As for the Mac mini, that's every bit as nice as the G4 iMac I'm writing this on, for $599. The $499 model will probably do very nicely as the replacement for my home web server, and somebody on my tech team pointed out almost immediately that the new mini is essentially the same size as the mini PC we're planning to deploy to field locations where space is tight.

I expect both of these new products to sell like crazy.

Panning the flash (iPod)

I'm a big fan of John Gruber's Daring Fireball. He's a knowledgeable Mac user, a terrific writer, and really gets what makes the Mac insanely great. I proudly wear my Daring Fireball t-shirt.

John was also among the first pundits to appreciate the attraction of the iPod mini, which has, of course, been a huge success.

Last week, John ran a post debunking rumors of a flash-based iPod, whose intended appeal he says he just can't understand.

Gruber complains that people advocating a flash iPod are proceeding from the mistaken impression that there are two kinds of music players, flash and hard-drive. Both, he argues, are “implementation details,” unimportant next to essentials like the user interface.

That much I agree with, but Gruber's argument against two kinds of music players essentially boils down to an argument for only one kind of music player: He argues that only the hard drive player has what it takes. There I disagree: different component choices lead to a range of different products, just as my 12-inch PowerBook and G5 are both Macs, but radically different.

Part of the brilliance of the iPod is the way it overcomes compromises that crippled previous hard drive players. The scrollwheel/clickwheel took what had been 5 or 6 different controls and combined them into one intuitive package. Another innovation: the iPod doesn't actually play your music off the hard drive; it would exhaust your battery in no time and skip like crazy, so Apple periodically spins up the drive, grabs a bunch of music, and loads it onto ... some flash memory, from which your music is played.

John looks at three different angles he think Apple could take with a flash iPod: “iPod cheapy,” “iPod tiny,” and “iPod sport.” None of them warrant a second look, he says.

Cheapy: John says Apple can work their way down in price point by dropping prices on the mini and offering larger capacity drives at the current price point. But Apple's in an enviable position with both lines of iPod, selling all they can make. There's really no reason to lower prices on either line until demand at the current prices abates, so Apple has maintained (even raised) their price points over three years and kept the value up by raising capacity on iPod drives. Why sell a $199 iPod mini with a 2-gig drive when there's someone in line waiting for a 4-gig mini at $249?

On the other hand, Apple has to know there are millions of sales out there for the right player at the right capacity at a lower price. And most people would pay more for an iPod-brand player than your generic Coby. The Mac Observer posted some music player market share data last month showing that sales of hard drive and flash-based players are both growing, but that flash players are growing faster, with no single manufacturer taking more than 20 percent of that market. Smells like an opportunity. By introducing a flash player as a third product line, Apple can hold the line on pricing and margins on the existing models while opening up a new market, and introduce Apple products to a wider variety of people than ever before.

Also note that retail prices for flash (so presumably wholesale prices) appear to be dropping faster than prices for small hard drives, probably because there are many other consumer uses for flash memory (cameras, phones, PDAs) and very few for tiny hard drives.

Tiny: John says there's no utility to a player smaller than an iPod mini: the screen wouldn't show enough text, and the clickwheel is the perfect control mechanism. The rumored flash iPod over at MacMind takes an interesting approach here: no display at all and a minimal clickwheel.

I can actually remember the bad old days of a 64-meg Rio 500 (second from left, above), and what I remember most is how often I had the damn thing hooked up to my computer, since I had to swap music onto it pretty frequently, and it was USB 1.1, so it took a long time to load (small AND slow -- such a deal!). This design makes that an advantage: FireWire takes care of the download speeds, and iTunes can dynamically handle the rest, with smart playlists. Why not manage your music on your computer's big screen, and only use the player to listen? Bang -- there's the cost of a display saved, and the price point lowered.

Another advantage is that you don't have to power the screen, so you can have a smaller, lighter battery or longer battery life, and a smaller package. Add in the power and form-factor savings of ditching the hard drive, and you can build a seriously tiny package. Sony used to sell an MP3 player in a pen.

And perhaps there's an optional display, letting Apple tout the low entry price, but selling most of them with the optional display at a higher price.

But nobody has built an MP3 player without a screen, I've seen people argue. That's sort of true, but Apple partner Audible.com worked with IDEO to build an award-winning audiobook player, based on flash memory, that worked great without a screen (at right and above, far left), and had an FM transmitter (a la iTrip) on board, to boot. The Audible MobilePlayer used audio cues for user feedback, and held hours of spoken-word content in its 4 megabytes (!) of storage, circa 1998. Flash memory was pretty expensive then.

Sport: I honestly don't get John's argument here:

One other difference between flash-memory and hard-drive based players is that because it’s a solid state technology (i.e. no moving parts), flash-memory players are skip resistant and less prone to break if dropped. Thus, a flash-memory iPod might conceivably be targeted as a workout companion. Lower weight would also be a plus in this market. But if this is the case, I see even less reason to expect that such models would cost less than existing models.

He seems to admit the flash player has advantages here, but can't see a reason to charge less for it just because you can manufacture it for less, since this isn't the “iPod cheapy.”

The shortsighted thing about Gruber's post is that he's thinking one-dimensionally times three: either cheaper, or smaller, or more rugged. Any flash iPod will improve in all three dimensions: it will be the “iPod cheapy tiny sport,” not just one of the above.

A flash iPod that was $99, smaller, and tougher than the existing models would be a great gift for 'tweens and teens, a great workout companion (where the iPod classic is a little bulky), and priced for impulse buyers.

Every time Apple has launched a new model of iPod, they've been able to hit a price point at or below retail for the storage itself. The 5-gig drive in the original iPod was about $400 when the iPod was introduced at $400; the Microdrive in the iPod mini was $300 and up when the mini was introduced at $249. Volume wholesale prices mean Apple can build in a profit margin and the other components for less than the difference between wholesale and retail.

On a less expensive player, there's less money in the markup on the storage, so an iPod flash might have more invested in other components than in the memory, but I doubt it. Flash cards at 1 gigabyte are around $90, with 256 meg cards in the $30 range -- at retail. If the MacMind rumor plays out, and Apple sells a 256-meg player at $99, they should be able to maintain very healthy profit margins on the new players.

Will they cannibalize sales of other iPods? Maybe a little, but that's all the more reason for Apple to reinforce how useful the current iPods are for a million things other than playing music, like photos. It might also explain why the flash iPods haven't been released, despite earlier rumors that they would be available for Christmas: Apple may have a specific level of demand for current models, or a specific wholesale price for “iPod classic” components, that would trigger the flash player's introduction.

Self-healing iPod?

I guess the Christmas miracle came early this year. I plugged my iPod in to my PowerBook last night to get it charged up, fully expecting to have to cycle through the disk check and disk check failure I wrote about a couple of weeks ago, and everything is back to normal. That is, I can see the iPod in iTunes and on my desktop, and update songs or other contents.

I haven't hit any of the songs that were giving me problems, but I did have to reset it earlier today, so I don't think everything's quite right with it.

Update: It's paused mid-song a couple of times, and I've had to reset it 2 or 3 of those today.