Should iPod go its own way?
Published: 16 Apr 2004 11:50 BST
"The only way RealNetworks has a chance to become involved to a greater extent is if users express dissatisfaction over their ability to use other services with iPod, and we certainly haven't heard much about that yet," NPD Techworld analyst Stephen Baker said.
Eye on Redmond
But there are also some powerful counterarguments to Apple's approach. It is clear that Apple will be taking on Microsoft and its billions of dollars, and it makes sense for Apple to line up all the allies it can get.
"I would never assume Microsoft is out of the game, even with a good lead" like Apple's in digital music, said Roger Kay, an IDC analyst.
Kay noted that the software industry tends to have relatively few barriers that allow a competitor to enter a market, even one dominated by another player.
"Microsoft has a huge war chest," he said. "They are highly motivated."
Having recognised Apple's lead, Microsoft is eyeing several possible places to try dethrone the iPod. The company plans later this year to offer technology, code-named Janus, that will allow subscription music to be transferred to portable players, a feature not currently possible with the iPod. The company also has software for "portable media centres", devices that combine video and music playing and photo display into devices that, though bigger than the iPod, could fit in a large shirt pocket.
Also, it is not clear that Apple could gain much from licensing its software.
"I don't see a tremendous amount of advantage to licensing Fairplay," said David Card, an analyst at Jupiter Research. "Apple is a hardware company, and the only reason Fairplay -- or even iTunes, for that matter -- exists is to sell and promote iPods."
Microsoft has been pushing its own digital audio format, WMA, as part of a larger consumer electronics and digital-content strategy. The company's efforts have resulted in a broad acceptance from hardware players, something from which analysts say Apple could benefit.
However, even if Apple loses its dominance, the company has shown that it can support a business, even without commanding market share. For all the criticism heaped on Apple for its small share of the PC market, the company has been largely profitable in recent years, while most of its rivals have not.
Card added that Apple may not want to be the Dell of the digital audio player world, referring to the computer maker's ability to ship devices in high volume while having a reputation of being low on the innovation totem pole.
"Apple wants to be the BMW of the market," Card said.
Analysts say the more important question is how well Apple prepares itself for future battles -- including video. In that arena, though, analysts say Jobs and his understanding of the record and movie industries is probably the key. Many companies, including Disney and Time Warner, have already begun to line up behind Microsoft, so Apple will not have the same advantage it had with the music store.
"If Steve is able to create an iPod video store and do just as good a job (as with music), he could easily be an alternative to Microsoft," Creative Strategies' Bajarin said.
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