Should iPod go its own way?
Published: 16 Apr 2004 11:50 BST
Apple Computer's apparent cold shoulder to RealNetworks this week has once again put the company's "go it alone" strategy in the spotlight.
With the Macintosh, Apple decided to keep its operating system proprietary, licensing it out only on a few rare occasions and keeping control of both hardware and software. The approach has arguably given Apple an edge, when it comes to integrating new capabilities such as DVD burning, but the Macintosh also has become a niche player in a Windows-dominated PC market.
Now, RealNetworks chief executive Rob Glaser and some others see the potential for history to repeat itself in the digital music world, if Apple persists in keeping its software and hardware closed. Apple has taken some major steps to avoid past mistakes, notably making the iPod compatible with Windows PCs, dramatically expanding its potential market. iPod sales last quarter helped Apple triple its earnings, compared with the same period a year ago.
But that's a half measure, according to Glaser, who recently quipped that Apple might go the way of the Soviet Union, unless it takes a more liberal stance toward licensing its software, specifically the FairPlay digital rights management (DRM) controls that prevent songs purchased through iTunes from being illegally copied.
"Apple's (market) share will go down, if they continue to do this," Glaser said at last month's PC Forum. He predicted that customers will say, "I bought an iPod and can only shop at one store. What is this? The Soviet Union?"
Real also uses proprietary DRM, but it's made little headway in the marketplace compared with FairPlay and Microsoft's Windows Media Audio (WMA) formats. Notably, only a handful of portable music players support Real's format. And with Apple riding a crest of iPod portable music player sales, analysts said RealNetworks faces the more immediate short-term threat.
Given Apple's history, few are surprised that Apple appears to be rebuffing an advance by RealNetworks to team up in a battle against Microsoft. Regardless of what the right strategy might be, analysts don't expect Apple to partner with Real or to license out its core technology any time soon. Apple declined to comment on its plans.
"Once you do that, you basically lose control," said Creative Strategies analyst Tim Bajarin. "That's one thing [Apple chief executive] Steve [Jobs] won't do. He won't lose control of being able to write Apple's destiny.
It's Jobs' belief that Apple can deliver superior music products by handling both hardware and software better than anyone else, Bajarin said. "I believe he will not deviate from that strategy," he said.
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