Cringely thinks Apple's going to stop making iPods
posted May 8th 2005 12:37PM
Tech pundit Robert X. Cringely is floating the idea that sooner or later Apple is going to license the iPod to other
manufacturers and get out of the business of selling
iPods (you have to scroll down to the
bottom of his most recent column). The fact that Stevie J. pulled the plug on Mac clones notwithstanding, here's his
line of reasoning: Right now they're using the iTunes Music Store to drive sales of iPods, but Apple continues to face
downward price pressure on the iPod and eventually they'll be forced to cut margins on the iPod (all of 'em) to the
point where they'll no longer be all that profitable (at least not at the kinds of margins that Apple is used to
enjoying). Cringely thinks that the long term profit margins on iTunes downloads are better and more scalable than for
hardware, so he thinks that they'll start letting other companies make iPod clones that are compatible with the iTunes
Music Store and then stop making their own iPods to focus entirely on selling downloads. Crazy? Yeah, but you know how
Steve Jobs likes to pull unpredictable crap like this, so don't put it past him. If the iPod stops being a moneymaker
don't expect him to hold on to it out of some sentimental attachment.
[Via Digital Media Thoughts]
no way. Apple is making way to much money on the ipod
Some people have too much time on their hands.
Good iPods suck anyway. I hate all you apple fanboys who are always like 'there's nothing better out there... blah blah blah'
SIKE! Ha I love my iPod, I hope apple never stops making them because as soon as my battery dies I'm all like 'new battery? or new iPod? New iPod Woooo!'. But I'm rich you see, so everyone else deal
(I'm not really rich, or that arrigant - just playing around)
-Jody-
P.S - I really hate it when someone uses the word fanboy. It's really gay.
iPod is Apple's cashcow. The day the ipod stops bringin apple big will be the end of Apple.
And he thinks they do make money on itms? The RIAA wants to bring the prices up even further and apple already has it at about the bare minimum. itms is to help sell more ipods not the other way around.
Jody (message #3) you really ought to invest in a dictionary. Or ask your mom to help you, if she knows you are on the computer.
i don't beleve that. Apple is making too much off of teh iPod. The iPod is keeping them alive. They'll never do something like that. I refuse to believe they would. If they did i'd never buy another iPod again.
I love my ipod photo and will probably buy another one when the 5th generation comes out.
After people realize that paying for the rights to listen to music that is 1/10th the full quality isn't worth it, all of the online music stores will be a thing of the past. If apple kills the iPod, they'll have shot themselves in the foot.
Besides this is just some theory, I'd be surprised if it happened.
I would agree if the iPod hasn't become a fashion chic item -- people don't buy iPods because it's the best mp3 player. Many buy it because of the "Appleness", some buy it because they like iTunes.
Even if the chic wore off and Apple has to cut prices, they're making profit of iTunes purchases. Jobs is a control freak when it comes to doing things (remember Wang computers?) and won't trust the Apple brand to a third party who may not make a product consistent with his high expectations.
I don't think it'll happen. Apple sells the iPod for more than competing players. They can afford not to compete on price, because they're #1, and still make a tidy profit.
Heck, even in areas where they're far from #1 (er... computers?) they don't compete on price (Mac mini = exception, not rule). I see no reason for this to change.
If all else fails, and iPods somehow become less trendy than some competitor, the Mac users will still buy iPods to the exclusion of all others, and Apple will still get along just like it always has. They'd just cut back the line a bit and focus on something else.
That's completely backwards. It's the ipod that drives business to the itunes store. Most ipod users don't even use the store and the average number of itunes downloads per ipod user is 16 song downloads. People try it out, realize the audio quality sucks, and don't use it again. If anything, apple will hand the itunes store over Sony and be done with it -- not the ipod.
Guys, Apple is making a killing of the iPod right now, but look at all the threats to their business - great products from sony, samsung, nokia, and creative... Eventually, NOT NOW, they will be forced to continue to lower their prices and profit margins will suffer. Why not license to HP, Motorola or others? iTunes is slightly profitable now, but with HD video sales, potential ad sales, commissions from iPod clone sales and maybe even a subscription radio service - they could be highly profitable. iTunes could be a music portal.
Apple has previously admitted that music sales are not profitable at current prices and the operation exists to drive iPod sales. Cringely was among the first dozen or so Apple employees way back when but apparently hasn't been paying attention lately.
So when did Apple actually "make" their iPod? They design iPod's shell and firmware, but internally they use the same basic design and components just like all other MP3 players. Apple can certainly get the best price from the componets providers and the manufacturers - who wouldn't want this kind of high volume and renewable contracts?
Beside Apple's FairPlay is available for license - other MP3 player can play DRM AAC if they got the money, although I am sure Apple asks too much for that right now.
I don't think Apple is licensing FairPlay right now at any price.
Cashcow? I thought the iPod was apple's lowest margin hardware.
John Cruz: I dunno where you got that 1/10th figure from but it's far from accurate. You know those DVDs you own, yeah the Doly Surround ones, they use compression along the lines of AAC. I can't hear a single difference in the music I make when I use AAC at 192kbps or LAME mp3 alt-preset extreme. I can find differences in lower bitrates but 1/10th? You sir are an idiot.
But also, consider that within 2 or 3 years cell phones will have enough hard disk capacity to enable them to rival the music functionality of the ipod.
Since people would rather carry one device around than two (no matter how cool one of them might be) this means that single-function music players will be gradually phased out. So it makes sense that Apple might eventually license the ipod. And this has already kind of started to happen with the motorola itunes phone.
The alternative would be for Apple to enter the cell phone market. This would be very cool, but also very risky and I'm just not convinced that Apple wants to go there.
There's no way that Apple will stop making iPods. Our children's grandchildren are probably still gonna be using them. However, if for some reason they stop selling iPods, they'll move on to iPod (iTunes) phones.
There is no way that Apple would stop making iPods or licensing them to a different manufacter. iPods generate TREMENDOUS ammount of their income. With out them Apple would be where it was 5 years ago. Cringely needs to learn more about Apple and their income situation before making irrational statements.
Tom Scrace: Cellphone cameras have existed for more than 2 years but digital cameras are still being sold.
The day cellphones will push mp3players off the shelves will be the day when cellphones have enough battery capacity for 20 hours of music listening and 5 hours of talking hours.
Cringely's right on this one. I also heard Microsoft will be discontinuing the Windows operating system and, of course, we all know Cisco is phasing out their line of routers.
Don't you think Apple would just evolve the iPod into the all-in-one device? We know they are exploring phone technology.
Cellphone cameras, however, are nowhere near the quality of digital cameras. Phone-based MP3 players will be.
As for battery life the current iPod has 12 hrs of battery life, not 20. But still, I see no reason why the kind of battery used in the iPod can't be used in a phone. Phones are smaller, but not that much and within 2 or 3 years we may well have the kind of battery to meet these requirements.
#17 Tom Scrace
As the cost of adding more storage to phones comes down, so will the cost of adding storage to iPods.
Therefore an iPod will always be able hold more music than any phone.
True, we all like to carry fewer devices, but I've always found that combo devices tend to suck more than dedicated ones. I have more than one vehicle, because they serve different purposes, there isn't one vehicle that will serve all my purposes 100%.
I think there's a lot of merit to this idea IF you think long-term, say five years out. At some point, the market for players will become saturated, margins will become razor-thin, and new features and mega-capacities will only provide incremental improvements...but there will always be money in selling music.
So, I think it's quite reasonable to think that at some point the music store will become a bigger moneymaker than the player. At that point, Apple will want every player to be able to play that music. Maybe there will always be an Apple iPod-branded player, but it'll be small potatoes compared to the iTunes store. Like I said, give it five years.
In regard to a comment regarding compression:
For me, there is an immense amount of difference between 192kb and uncompressed music. While this not noticable when listening to my ipod, it is when played on my hifi. The difference is so noticable leading me to formulate my opinion that I will never buy compressed music.
Unfortunatly very few people give a monkeys about sound quality and listen to most of their collection on the ipod or computer. For that reason I think compressed music sales will be large.
Regarding the original article, the ipod enhances the Apple brand, and sales have increased arguably as a result of the ipod, so perhaps its an non profitable intangible asset.
some of you people who say the iPod is keeping the company alive need to do your research. the company was one of the FEW profitable companies in the computer/tech sector even before the iPod. Did you guys forget the original iMac???
Ipods are going away. Low end and midrange cameras are going away. USB flash drives are going away. Car keys and house keys are going away. Credit cards are going away. They'll be in your phone. Cheaper flash memory, smaller hard drives, liquid lenses, better sensors -- it's a no-brainer. It's already happening. You will only have your phone in your pocket, and you won't have to take it out for practically anything you use it for.
Of course Apple will license this technology. This is not speculation, it is a fact embodied in the relationship with Motorola. They may license it further, but probably only to device makers that are in a different and innaccessible market from Apple (such as Cell Phone vendors).
I would also expect Motorola to cross-license and allow Apple to sell the iTunes phone as an iPhone or something. It would likely be Motorola software and hardware with Apple's exterior design, custom applications and an Apple theme. For Motorola, this is just another sales channel and makes perfect sense. For Apple, it is a way to continue it's brand continuity with iPod.
Apple probably wouldn't sell these things through cell-phone carriers but only in the Apple stores and other established sales channels (mostly because Motorolo wouldn't want the channel conflict). I would buy one.
I dont think that apple will pull the plug on the ipod but it is definitely food for thought that he might license the os and such. As long as they keep the ipod innovative I think people will continue to pay a little more for the product itself. For now the ipod "killers" are not priced so low that the can really beat apple. If a 10 gg super cheap ipod clone came out, that might be another story....Rob
Yeah, right. Apple will stop making iPods and license its technology to other companies the same day it stops making computers and releases a version of the OS that runs on a generic PC.
It'd take a really hard time for Apple to even consider it. They have it too good now.
Xbox360-forums.com: you better go return all the DVDs you own, unless it's using Linear PCM it's compressed audio be it DTS or Dolby Digital, audio compression has been used for a long time, but I think what you would want to be calling bad is lossy compression.
Lossless compression means all the data is there, but it is still compressed.
Cringely is wrong because:
A: iPods exist to get people to switch to Macs (just look at iMac G5 and mini)
B: To date, Apple has made a total profit of about $12,000,000 of ITMS, which is peanuts (a lot of peanuts, but still). They can't live on ITMS.
C: the Apple (iPod) experience (soft- and hardware together) is key, so there will be no cloning. period.
D: Apple might stop making iPods when phones and PDAs have more than 20G of storage. Not before. Just like Epson will stop making printers when they stop making non-ePaper.
Apple is NOT a stationary target; iPods will be manufactured and sold by other people when Apple comes up with something that blows them all away. "Think Different"
People you have to get your facts straight. The Ipod isn't apple's sole cashcow, they actually made more money on "Finding Nemo" than they have with the Ipod since inception.
Xbox360-forums.com said "Unfortunatly very few people give a monkeys about sound quality and listen to most of their collection on the ipod or computer."
Unfortunate for who? The people listening to their music and enjoying it? Or for you because you up on your audiophile horse can't bear the thought that the plebeians you are looking down on really don't give a crap and have better things to do than bemoan the state of the digital content distribution?
-p-
If Jobs pulls unpredictable things, how can they be predicted? Huh! Punk!?
"Yeah, but you know how Steve Jobs likes to pull unpredictable crap like this, so dont put it past him."
Its already predicted... .so forget the whole thing :)
There has to be some thread about apple or microsoft or google to evoke some responses? Don't peoeple have any other interests ?
I think Cringely's completely off on this one. The man has had some good predictions but he's making a mistake here
It's pretty simple really. People by iPods because they're ...well iPods. They're trendy and hip and cool. And that's the point. Saying that Apple will stop selling iPods is like saying Mercedes or BMW will license out the technology in their cars and stop manufacturing them themselves. Who wants a car with a BMW licensed engine in it??
If you want a car because of looks and prestige you look to names like BMW, Mercedes, Ferrari, Porche, and Lamborgini for example. The iPod isn't just a technical marvel, it's part culture and part fashion.
While those last two things I mentioned aren't tangible qualities, they're important. So is brand recognition. If I say iPod to some random person they're going to know what I mean. If I say Nomad to someone they're going to look at me funny and wonder why i'm talking about some itenerant desert dweller and it has anything to do with music.
Apple is about style and flash and culture just as much as it is about technical excellence. I think Cringely's missing half the equation on this one. A player that interfaces to iTunes is great and all, but if it's not an iPod, well....it's not an iPod. If that last part of that sentence doesn't seem like it makes sense without further explanation, then I doubt it will with one either.
In summary: people buy iPods because they're iPods. Not because they work with iTunes. The fact that Apple has the total package is great and "it just works" is awesome. But the name recognition and intangibles are key as well.
Steve would never allow the iPod to be cloned like that. its bad enough as it is with HP.. He might open up the music store, and let other people with other mp3players than iPods dig in. The iPod will continue to inovate - applestyle - but they are just waiting for a good direction to take the concept. phone? camera? both? the iPod name/concept would VERY VERY stupid to just let go now. It'll stay, even if just as a pillar supporting the apple brand. my 0.1$
People you have to get your facts straight. The Ipod isn't apple's sole cashcow, they actually made more money on "Finding Nemo" than they have with the Ipod since inception
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*crickets...
LMFAO!!!! APPLE?!! WTF?!!? You're talking about Steve's other company Pixar!
Apple continues to face downward price pressure on the iPod and eventually theyll be forced to cut margins on the iPod (all of em) to the point where theyll no longer be all that profitable (at least not at the kinds of margins that Apple is used to enjoying).
--
Downward price pressure hrmm? Maybe those price drops are possible because the parts that go into an iPod (or a Dell DJ, or a Zen) are DROPPING?! Which means the costs go down as the price goes down, so the profit is reasonably consistent. The logic doesn't work.
This is economies of scale, man.. Apple can make money selling a $99 iPod because the parts, etc have come down in price.
Having said that, his idea of cloning the iPod is interesting, I like the idea of Apple taking royalties on iPod and getting the profit (yes the iTMS is profitable) from the iTMS.
The iTMS sales are climbing exonentially, you guys are foolish for not seeing it. Cringely's right, the iTMS will eventually be the money-maker (in terms of profit)..
I just don't think Apple's going to consider lisencing out the iPod for a while.. I don't agree that there is this pressure towards zero-margins.
Maybe for the Dell DJ, which isn't selling, but for Apple, the only pressure is.. for example, the iPod mini price drops, they were 'fair' price drops but they weren't margin killers.. the market for mp3 players is through the roof, which means parts are being produced in much higher volume so average cost plummets.
ECON 101. Cringely's off a bit.
Some of you need to READ the article before simply blabbing away. Address the logic that is presented...gosh!
Steve Jobs is a master of marketing spin. If the iPod stops spinning he dump it and find the next spin.
ipods are going the way of stand alone pdas. with mp3 functionality in phones becoming the norm say goodbye to the to the ipod. it would be smart for apple to not bank on their future being the ipod.
I HATE APPLES I ONLY EAT BANANAS
I think Cringely's way off base - Apple is making money on iPod sales NOT iTunes sales (according to Steve Jobs).
The job of Tech pundit must be a terminal illness on their career. Tech pundits all make a lot of sense early on, then they start making a few mistakes in their mid-life career. Near the end - they all sound like babbling fools. I've seen it happen to John C. Dvorak and apparently Robert Cringely has also succombed.
Well, I just read the actual article - oddly enough it starts out about personal airplanes or something, leads into Microsoft power planes(?) and then to XBOX, HD and then Apple - nicely written. http://www.pbs.org/cringely/pulpit/pulpit20050505.html
First he makes a point about Tiger having hidden Ogg Vorbis and WMA icons - someone let him know that they were also in 10.3.X (or is that X.3.X?) so this is nothing new. There could be something there, but I doubt it.
Then he acknowledges the fact that Apple has previously created clones and licensed the OS and uses that same business model for the iPod - did that work?! No! You Dolt! Steve Jobs = CONTROL FREAK. If S.J. was out of the picture, absolutely! But then Apple would no longer be Apple and no matter how much you think Apple is over priced or over hyped - the computing world would be drastically changed. Think about that one Cringely.
Apple, iTMS and the iPod are not successful because the iPod is a better product, cheaper to buy or easier to use, it's because of advertising and the fact that i can walk into any electronics store in the country and buy an accessory for any iPod. The consumer electronics industry and the entire recording industry has changed because of an MP3 player - you think Jobs isn't aware of the power he has right now? You think he would so easily hand that over to HP or Sony? It's only going to get bigger and stronger - I just hope that team Jobs/Ives has enough to keep this thing going to meet the demand. Maybe I'll become an editor one day and write silly stories about Apple Computer - those Apple fans will get all riled up about anything!
wtf
Soon, (sooner than you think!) all of you iPod junkies will grow up and realize there's more to life than having your own stylish little jukebox plugged into your head.
So it'll be the next generation buying minijukeboxes. They may decide someone else's logo is more chic ... iPods are a fad. Whether they've got the staying power to become a staple (like Levis or Nike) is really just a guess at this point.
This writer doesn't understand business or the Apple culture. Clearly Jobs has alwasy pegged Apple as being different because it is a hardware AND a software company giving the best user experience. People are willing to pay for that difference, otherwise that stupid little pack of gum Shuffle wouldn't have 58% of the flash market when there are much better hardware alternatives. Think he wants to give up the profit margin on that product?
iTMS is not a money making engine in and of itself. It is a vehicle to push the Apple brand, products and culture. With his weak anaylisis on this issue, I wouldn't put much stock in anything he writes.
As an aside, I don't really dig the ipod