Enough Love for Latest iPods?

Analysis: Tuesday's latest iPod launch is being met with a few yawns. What can Apple do to keep an eight-year-old music player fresh?
Posted September 13, 2008
By

Andy Patrizio


Apple's latest batch of iPod announcements was fairly well received, save for a few corners grumbling that the event was lacking in any big news, other than an energetic albeit thin Steve Jobs on stage.

"Apple, Jobs Satisfy But Do Not Surprise," wrote PC Mag.com. Apple's underwhelming announcement: A new iPod and a few upgrades was the Chicago Tribune headline. No big surprises as Apple unveils new iPods said EETimes.com.

The challenge for Apple (NASDAQ: AAPL) is starting to become what else to do with a music player now approaching its ninth birthday. There are only so many ways to skin a cat and despite a few nifty new features like shake to shuffle, in the end, it's just a music player. Even the Mac faithful on MacRumors.com are beginning to notice.

"The iPhone clearly is overshadowing the entire iPod line," said analyst Rob Enderle, of The Enderle Group (Enderle is a consultant for Dell, which is reported to be working on an iPod competitor).

"Apple has clearly signaled that their focus is on the iPhone and the iPod looks like obsolete technology at this point. It's hard for people to get excited about the iPod because the best iPod is a stripped down iPhone," said Enderle.

But there's no way Apple will get 160 million unit sales from the iPhone, like it has enjoyed with the iPod, since Apple can't control the mobile phone ecosystem like they can with the iPod, Enderle argues. So Apple will have to continue to invest in the iPod and continue to make them relevant.

Out of service

One investment Apple was expected to make was in its iTunes music service. The company was rumored to be planning a subscription service for iTunes, rather than its current piecemeal approach, but that didn't happen. Enderle suspects it's due to Digital Rights Management (DRM) (define) issues.

"I guess that problem's a lot tougher than they thought it would be," he said. "They really didn't design the DRM with subscriptions in mind, and going back and retrofitting it has been a lot tougher than they thought."

Getting subscriptions working would be invaluable to iTunes and its new Genius service. Genius works a lot like Pandora, Last.fm and other Internet radio stations, in that one enters an artist they like, and the service plays other artists with similar qualities.

Pandora is in danger of shutting down due to the exorbitant fees it is being charged to play music, but as a service, it's a success. It averages one million listeners daily but has to pay 70 percent of its revenue to royalties. So the idea is a valid one, even if it's killing a company with it as a business model.

For iTunes 8, Genius means that while songs are suggested and you might be able to listen to a short clip, it requires customers to purchase songs individually, rather than the whole thing via subscription. Adding subscriptions will really make Genius technology take off, said Enderle.

"A subscription service would push more music," said Enderle. "This will help Apple's revenue no doubt, but I think it's a competitive response to the fact that subscription services are getting better in terms of discovery and this might be a step on Apple's part to make sure their customers don't drift away."

We care a lot

The event may have been about iPods, but there's no denying that there was significant interest in how Apple CEO Steve Jobs would look on stage. He pretty much made his answer clear by strolling on stage with the words "The reports of my death have been greatly exaggerated" on the screen behind him.

Later, while demonstrating the iPods, he would pick songs like "Guess I'm All Right" by Beck and "Don't Think Twice, it's all Right" by Bob Dylan. Point driven home, Steve.

Jobs assured a CNBC reporter after the event that he's doing fine. When asked where he thought all the gossip in the blogosphere came from, he responded "hedge funds with a big short position in Apple."

This article was first published on InternetNews.com.




Tags: services, DRM, iPhone, Dell, Mac


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