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JANUARY 14, 2004
By Alex Salkever Apple + HP = iPod Forever [Page 2 of 2] DIFFERENT STORY. That's the scenario painted by many iTunes and iPod competitors. "Apple can maximize their short-term profitability by keeping the system closed and proprietary. But three years from now, if they continue to do this, their share will be at a very small level -- far smaller than if they had agreed to license more broadly," says Dennis Mudd, CEO of music-download service and software outfit MusicMatch. That may be. But I think Jobs has this one right, and Apple will continue to make headway. Times have changed, and the music market is different. For starters, Apple is building a captive audience for iTunes Music Store. Every 99-cent download represents an investment for a music lover and an additional disincentive to ditch their iPod and go with, say, a Dell Digital Jukebox. Converting an entire collection into MP3 format and burning it onto disks would be a major hassle. And no one wants to go out and replace their music collection every time they switch players. So as more and more people download tunes from iTunes, the Apple music format becomes harder and harder to dislodge as a prominent standard. In a nutshell, I think this is also the reason why Apple had so much trouble getting people to switch computing platforms: The cost and inconvenience of switching not just hardware but software is prohibitive. ME AND MY iPOD. I also think the music-player business and the PC business differ in terms of the cool factor. Apple and Sony are the only PC companies that build machines to appeal to design freaks. That's because few view a PC as anything but a machine. It's a giant paper weight that sits on your desk, not a thing of beauty and a joy forever. A music player, on the other hand, is a fashion accessory. Sure, plenty of folks don't care what their player looks like. But the majority will view their iPod as an extension of themselves and their image: Hip, sleek, and cutting-edge. And no one disputes Apple's stellar track record for building things that are just plain cool. Other cool music players may emerge, but it's not that easy to build cool products, as HP seems to have acknowledged by abandoning its own efforts to build an iPod killer and throwing in with Apple. And when has Dell ever been associated with cool? Um, next question. CHOICE CUTS. Finally, content choice is an issue. I think it's a far bigger deal in the PC business than it is for music players. For PCs, software is content, and Apple has suffered its lack since many software makers have Windows but not Mac versions of their products. After all, it costs additional money and manpower to create dual versions of essentially the same product. No such problem exists in music. A song is a song is a song, regardless of the digital format it comes wrapped in. And basically it doesn't cost extra to make songs available in multiple formats. Apple's iTunes music software will always be able to play songs just as well as MusicMatch or RealJukebox. The only real issue with choice is when one music-download site can't offer the songs that users want. As long as Apple maintains the good graces of the music industry, it probably won't face that issue. Add these factors up, and the digital music game, for the next couple of years at least, is Apple's to lose.
 Salkever is Technology editor for BusinessWeek Online. Follow his Byte of the Apple column, only on BW Online Edited by B. Kite
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