Apple's iPod Salvo: "Bringing a Cannon to a Knife Fight"

In a battle that it's been winning from the start, Apple just put a real hurt on the other combatants.
Posted September 5, 2007
By

John Welch

John Welch


"God, every time Apple intros a new iPod, they happily bring a cannon to a knife fight!" was the quote from Andy Ihnatko on Twitter during the Apple announcement, and that may just be the best description of it you'll find.

The Apple announcement today covered everything:

• From minor: New colors for the shuffle, ringtones for the iPhone via the iTunes store.

• To medium: The iPod is now the iPod "Classic" and available in 80GB and 160GB sizes.

• To major: The iPod Nano was redesigned to be better for video.

• To beyond major: The iPod "Touch," basically an iPhone sans the cell phone, with Wi-Fi, in 8GB and 16GB sizes, with a Wi-Fi iTunes Music store to go along with it -- and the Wi-Fi store will be coming to the iPhone later this month.

• To rather unexpected: A $200 price cut for the iPhone 8GB model, the elimination of the 4GB iPhone, and a Starbuck's Wi-Fi iTunes store.

If you hear a faint screaming, it's the Zune team, who had cut the price of the 30GB Zune to $199 earlier in the week, realizing that once again, they're relegated to the bush league team's parking lot. But, when you base your strategy on what everyone else is doing, and part of your plan is "they never improve their product ever again," that's the price you pay.

Oh, and the CFO of Microsoft's Entertainment and Devices division, most notable for the Zune and the Xbox 360, smashing successes both, played coy about possible integration of cell phones, video and music in a device "at some point." Of course, Microsoft CEO Steve Ballmer said that would not "ever" happen. I'm not sure conflicting statements are a great business or communications strategy.

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Other "smart" devices that aren't doing so well would be the Palm Foleo, a solution in search of some hint of a problem. The Palm Foleo was a device that at best, brought forth a "Why are they doing that?" reaction, and at worst, a collective shrug.

The iPhone however, keeps doing what everyone says it shouldn't be: Selling like mad. According to everyone (well, everyone who loves Windows Mobile, Palm, and Blackberry), the iPhone is overpriced, and doesn't do the things that "everyone" knows a smartphone has to do to be a success. Evidently no one bothered to tell the general public, as they not only keep buying the iPhone, but they bought it in greater numbers than any other smartphone.

However you chose to look at iPhone sales, dropping $200 from the price is going to be nothing but good for its sales. Looking at other smartphone offerings from Sprint, Verizon, and AT&T, and discounting mail-in rebates, at $399, the iPhone is in the same price range as the HTC Mogul, the IP-830W, the Treo 7XX series, the VX-6700, the AT&T 8525, etc. In other words, it's no longer over the top, price-wise. Is it a good fit for the enterprise? No, it's still missing some things. But if you don't need integration with proprietary groupware, or remote wipe capability, the price drop brings it in line with other high-end smartphones.

The iPod touch, and a Wireless iTMS both fall into that category of "major, but not shocking." I think in the long run, the Wireless iTMS is going to be the bigger play for Apple. It solves one problem that a lot of people wanted, namely wireless music downloads, without dealing with the speed issues that even EVDO rev A has when you talk about large files. Rev A's max burst download speed is around 3.1Mbps. My last ten iTMS downloads averaged 4MB. For music, that's not bad.

For video or movies, it's annoying, and you don't get that 3.1Mbps rate all the time. Average speed tends to be more in the 1Mbps range. 1Mbps is not the speed you want to be using for a lot of downloads. So WiFi is a decent compromise. It lets you get content onto the iPhone without needing a computer, and even though it's not as ubiquitous as cell networks, it does so at a much better speed than current 3G provides. Besides, once you're doing this via Wi-Fi, adding in 3G abilities is not exactly hard.

On the custom ringtones thing, I'll only say that even if you pay twice to get the same song as a song and as a ringtone, you're still cheaper than quite a few other ringtone providers, and since you'll be able to build them from your existing library, you'll have more choice over what part of the song you want to use. As for myself, I'll keep using iToner, from Ambrosia Software, and only pay once.

At the end of the day, Apple made things a lot better for their customers, and a lot worse for their competitors. In the world of business and economics, that's generally how things should be done.






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