Our World. Our Minutae.

Saturday, January 07, 2006

iPod: The Anthropology

The iPod is already amazing on so many levels – not just the device and its impact on consumer electronics but how its effect is not only felt in pop & societal culture but also how it managed and manages to confound so many people.
 
The problem is that one really needs to understand pop culture, marketing, the financial markets; technology, computers, personal electronics and importantly, MUSIC to really begin to proper understand the iPod and its lasting impact.
 
Let’s get a few major points out of the way.
 
No matter what you attribute the success of the iPod to – it’s simply an amazing phenomenon. If you were to create a list of products that have sold worldwide in the 40+ million range in the last 50 years – that would be a pretty short list. If you add in the fact that the average selling price of the item probably averaged @$250 over the current 5 year life span of the iPod? Your list would be pretty tiny. So it’s not a fluke or a fad.
 
And the iPod is really the world’s first mass market customized product that touches kids and adults. That sounds like a misnomer but if you understand consumer markets, marketing and the business end of products – you’ll soon see why the iPod cannot be beaten anytime soon.
 
But we’ll get back to that in a bit.
 
First, let’s get some of the fallacies out of the way:
 
iTunes Music is closed/proprietary.

 No, in fact, iTunes is about as open as you can be. Unlike your other entertainment choices such as a DVD, book or even a CD, iTunes lets you make a FULL backup of the tracks you buy from the Apple iTunes music store as a “data” file or better yet as an AUDIO CD playable on BILLIONS of devices worldwide. How difficult? Highlight. Click and put in a blank CD-R. It does the rest.
 
You are technically breaking the law by making a copy of your DVD. You cannot make a legal reproduction of your book and its pages and making a backup of a CD requires another couple steps. Only Apple’s tracks (Fairplay m4p) offers you a chance to strip out the DRM forever.
 
In all fairness, WMA stores also offer you essentially the same option.
 
Which brings us to Fallacy #2
 
Yea, but iTunes Music is closed/proprietary.

So are WMA stores and Microsoft’s DRM. And unlike DVD’s or books – only music gives you a choice. You can buy the highest fidelity consumer option as a CD*. OR you can buy the same tracks as an Apple Fairplay m4p track OR you can buy it as a WMA track from one of the many WMA stores.
 
And since everyone pretty sells EXACTLY the same tracks (other than a few hundred exclusives), and the all cost about the same AND you can convert them all to audio CD formats at any time you choose, if you own an ipod, why not buy from the Apple store? The perfect analogy is two Starbucks on opposite corners. They sell EXACTLY the same thing but if for some reason, you prefer to wait for the light and cross the street to go to more inconvenient one – go right ahead but there’s also one right here for you on this side of the street.
 
AND MOST IMPORTANTLY, if you hate Starbucks. You have Peet’s Coffee also but it’s a block away – analogous to CD’s.
 
*Of course, Sony with their root kit failed to offer you the highest fidelity on a CD format with their WMA player as default playback on a computer and no copying – as Wendy’s used to say – One choice is no choice.
 
Which brings us to Fallacy #3
 
The iTunes Store/iPod is a Monopoly.

With iTunes market share in the high 70%, and with iPods at 85-90% of the market, it is in the most un-educated sense a monopoly. But before you go wildly off base …
 
Having a high market share does NOT make it a monopoly!
 
A TRUE ILLEGAL monopoly as defined in economic terms means you use your high market position to lock out your competitors and to generally be the bully on the block.
 
Does Apple prevent other online stores from selling the same tracks? NO.
 
Does Apple prevent you the consumer from obtaining the tracks from some other source? (CD store, mail order, etc …)? NO.
 
Does Apple have the lowest price (to drive out competitors by possibly selling at a loss?) NO.
 
Does Apple prevent you from loading tracks from other sources onto the iPod? NO.
 
Never mind that the iPod plays back 8 formats and on the PC side will convert unprotected WMA to one of iPod’s 8 formats, (protected WMA to audio CD can go right back to iPod … slight inconvenience is not considered a major hindrance)
 
Does Apple prevent retailers from selling competing Mp3 players? NO.
 
Does Apple prevent manufacturers from creating competing Mp3 players? NO.
 
In all fairness, some governments are looking at Apple’s deal to lock up the NAND Flash drive market as a “monopolistic” maneuver and it’s too early to say how it will be ruled but since Intel & Micron just announced they were building a new NAND Flash plant, it’s not as though Samsung has proprietary technology AND it’s just normal course of business if you’re smart or big enough to lock up a supplier to make only a part for you – just as auto makers have suppliers who will only work on their parts so ultimately, it should not be ruled monopolistic.
 
Which leads us to the biggest fallacy.
 
The iTunes Store/iPod Success is due to its Marketing.
 
Is Apple a smart marketer? You bet. Apple gets more free PR than the next 5 companies combined. Other than the movie studios, the TV networks and the President of the United States – Apple is talked about every other 5 minutes but that’s not the sole or even the most important reason for the success of the iPod.
 
Here are some of the KEY reasons for the success of the iPod and until someone can deliver on all of these or Apple fails to deliver on all of them going forward, the iPod is unassailable and UNTOUCHABLE.
 
DESIGN

Apple has one key advantage – Steve Jobs. No other consumer electronics company has one guy who is respected (and feared) by marketing, engineering and design – if he says it’s not good enough – you know it’s not good enough. What are you going against? The guy who fought for the Macintosh 1984 ad? The guy who launched the consumer personal computer market, the online digital music market and who knows what else? The guy who had a hand in launching some 4-5 iconic products that will stand the test of time? (Mac, iPod, iMac, Apple II, etc …) not to mention his work at Pixar … who are YOU to question if he says your scroll wheel is no good or the headphones are not solid feeling enough? Dozens of companies have world class designers but their product is either designed just to win awards or gets neutered by marketing or manufacturing (we’ll put plastic here, we can say $.04 a unit!) and very few companies have a guy respected and feared enough where everyone just gets in line.
 
The principle behind the portable mp3 player is simple enough. I want to listen to music. I want to load my music easily. I want to scroll, play, back up, go forward, and turn up the volume & down.
 
Why was Apple able to deliver on these simple principles and no one else really? Two reasons. Besides missing a gatekeeper like Steve Jobs, they are/were companies either run by marketers or by engineers but unfortunately for them – not by both. The marketers believe in brochureware – as long as we have the most features, we will win the market share battle. That’s fine for graphics card or PC speakers when everyone shops by specs – as long as you provide drivers to run the card or the speakers, all is well. These people are confused, confounded and puzzled as to why their mp3 player clearly has way more brochure check marks is not out-selling the iPod. PEOPLE are STUPID (people as in us, the consumer) – can’t they clearly see how many check marks are ticked off on the box?! We MUST be fooled by Apple marketing (is the only conclusion they can draw). That’s why when Apple had 5 Mini colors, one of their competitors had 10 – we have twice as many colors! We should sell twice as much! That same competitor now has an ipod look-alike (well, if you’re legally blind and standing 25 feet away) AND it comes in three colors! We should sell three times as many!
 
To them, they pick up an iPod and think, we can do this – it’s just a HDD (or NAND drive) with a screen and some navigation device – they just don’t get it.
 
But that’s the key to Apple’s design success. The iPod is a media player that happens to have a storage disk. Everyone else thinks it’s a portable hard drive that can play media. That’s the engineers/manufacturers talking. They think their job is done if they can get everything crammed in there that marketing asked for and they can manufacturer it for the agreed upon price. They believe it’s up to them to say when something is done and if marketing questions them – what do they know about components? We’ll just tell them we can’t do it or it’ll cost another $10 wholesale – that’ll shut them up.
 
So all the other “features” that people are always screaming about – clearly by the sales of the ALL the other Mp3 players COMBINED should prove to you that very FEW OTHER people CARE ENOUGH.
 
And of course, that’s just the INSIDE of the iPod – the outside of the iPod? Again, not just world class but is a fitting showcase for the work done on the inside AND of o=f course – leading to the next major key reason for the success of the iPod …
 
THE USER/SYNCING

Unfortunately for Apple’s competitors, they think their work is done when they can manufacturer their product for X dollars and it features X+1 features. They believe they are done when their product ships – the rest they could care less about. They worked on the principle that they were smarter than you and if they came up a solution, who were consumers to question it? There was an mp3 player that required all songs be placed in folders marked FOLDER_01, FOLDER_02, etc … or the player did NOT recognize any of the tracks inside. As an engineer might say, ‘deal with it.” Or the mp3 player where the battery would fall out but hey, marketing wanted a replaceable battery to trump the ipod, here ya go.
 
Of course, the iPod goes deeper in little steps. You pull out your headphones, the playback stops right there – paused – waiting for you to plug back in … or of course, a HOLD button so jostling wouldn’t affect your playback from volume to fast forward, etc … one competing mp3 player required you to navigate 3 menus deep to access HOLD.
 
And of course, that extended to syncing. Apple had the forethought to design a jukebox to do it all. Plug in your ipod. Itunes launches. If it’s activated, it synced EVERYTHING so you don’t have to guess. You can even burn a CD right there. And of course, along the way others choices and options were added but the principle has always been the same – how do we make it easier for you?
 
For those using the latest version of the Windows Jukebox, funny, it looks much like iTunes … go back one version and it looks completely differently – not to mention you had to go buy another piece of software to burn a CD-R.
 
There were some WMA players that required you to use Internet Explorer to load tracks. No syncing. You had to start over to move tracks around … or the Dell DJ until recently – you’re not allowed to load two tracks with the same track name in one playlist … yea, can’t imagine a scenario where anyone would want to listen to the same song even by two different artists … again, not a media player – it’s a portable HDD that can play back media.
 
After all this time, you think they’d learn? Not really, not to embarrass any particular brand but a recent PC magazine (and not a Mac magazine) tested out 10 portable mp3 & media players – here are some of the flaws of the iPod competitors … display grainy, can't listen to music & view photos at the same time, bass causes player to make clicking noise, no mp3 ID tag info on screen, gridlines across the screen, playback limited to low res video and requires proprietary software to encode video.
 
So until Apple’ competitors fix their major flaws, they’re not going to get any traction in the marketplace.
 
ITUNES MUSIC STORE

Mac users take it for granted you can plug in an external device, it launches an app and it shows up on the desktop and your files are ready to sync or are already syncing.
 
Most PC users are surprised the iPod works just as well on the PC side – you build a library of tracks in iTunes. You plug in your ipod, you un-mount. You are ready to go. That’s it.
 
The software is simplistic in appearance and I’m certainly not arguing it’s perfect but everything is straightforward and it’s Apple smart. Once you place a track in the iPod Library, you can drag it to as many playlists as you want – some PC jukeboxes require you to load the song again and again for EVERY playlist you want the song to appear in.
 
It’s no wonder that the re-designed Microsoft Mp3 jukebox now looks like iTunes and surprise so does Sony’s Connect.
 
Of course, the next major upgrade was the iTunes Music Store. Again, some people are quick to dismiss it as even possible to sell tracks online but until Apple came along, some online stores were happy to sell 100,000 tracks a YEAR calling it a great year. Apple has sold over 600 MILLION tracks from ZERO in 4 years. Again, its simplicity is deceiving – it’s all-seamless from CLICK to DOWNLOADING to placing into your PURCHASED list. No need to click 11 times to buy an album and if you try to buy the track again, iTunes will thoughtfully point out you have purchased it already.  
 
Now the success of the iTunes stores peeves off many people and they have developed an entirely new litany of complaints.
 
First, I’m not advocate of DRM. But the DRM on Apple’s Fairplay is like a 2-foot fence. If you can’t hop that, you’ve got other issues but the attitude of 90% of those who loath the iTunes Store is seemingly based on the belief that they can see through the “scam” and anyone who buys a track is a dupe.
 
First, your restrictions are listed right upfront. Unlike CD’s with restrictions included sealed inside or the Sony rootkit – there is no surprise. If you choose to buy this particular product – here are your restrictions. And unlike many other products with restrictions, we have a choice to go buy the CD or even buy a WMA track NEVERMIND that you can legally erase this restriction in a few minutes.
 
And yes, it’s 128kbps – again, not a surprise. It’s an adequate format. It is compressed but so are CD’s. Yes, CD’s are a compressed audio format also. Short of you having a seat in the center inside the recording studio, everything is a reproduction – some better than others but it’s a tradeoff LIKE EVERYTHING YOU BUY.
 
Yes, like EVERYTHING ELSE YOU BUY.
 
The iTunes Store promises you this. Here is a 128kbps audio track. You can listen to 30 seconds of it. You can click to buy it and you can have it (generally) in less than :60 seconds. Done.
 
No calls to see if it’s in stock. No driving to a store in hopes they have it. No need to buy 12 tracks to get the one you want. Etc, etc … I’m NOT saying it’s better than a CD or even better than a WMA track. It doesn’t promise you the moon. It promises convenience and near instant gratification. That’s ALL. And for MANY people, that’s enough. And unlike other competitors, you can completely ignore the iTunes Store.
 
And now, of course the Video Store.
 
And let’s get a few more fallacies out of the way.
 
The iPod only plays tracks from the iTunes Store.

No, and unlike the older Sony players that insisted on converting ONE WAY ONLY all your mp3’s to ATRAC3, the iPod could care less. Load 10,000 Mp3’s converted from your CD collection or buy 10,000 tracks from iTunes – THEY WILL PLAY BACK EXACTLY THE SAME.
 
If your computer crashes (hard drive dies), you lose your songs.
 
Yes, but why are digital files different than anything else in your life? Lose a CD – will the store give you another one? Lose your car keys? You’ve never lost anything else in your life? Or more likely, grow weary and put it away? How many CD’s in your collection disappear with every move you’ve made?
 
ATTACK ATTACK ATTACK

By design and by luck, Apple has moved the fight every time someone gets within 100 miles of the iPod.
 
No Windows Access. DONE.
No Online Music Store. DONE.
No Smaller Drives. DONE.
No Photos. DONE.
No Flash Versions. DONE.
No Color Screen. DONE.
No Video. DONE.
No Online Video Store. DONE.
And that’s just the past 4 years – What’s Next? Clearly NOT DONE.
 
In today’s buyer’s market, you keep pressing your advantage until your competitors are DONE.
 
THE ACCESSORIES “COTTAGE” INDUSTRY

Clearly, now not just a cottage industry anymore but fuel for the world first Mass Market Customizable Item.
 
Add in MARKETING & PR,
 
You have the world’s first MASS MARKET CUSTOMIZABLE ITEM.
 
Manufacturers, sellers, companies – have two goals in creating a new product.
 
Make People Want to Buy it.
Sell a HUGE Amount of it.
 
Pretty Simple.
 
But very hard to pull off for an extended period of time. Yes, you can get people to buy almost anything for a short period of time before people become dis-satisfied or another new “better” (newer) and shinier object appears.
 
Ultimately there are really only two markets: The trendsetters and the mass market followers.
 
In many senses, it’s easy to create a product that trendsetters will gravitate towards – make it new, make it exclusive and usually make it expensive.
 
Now, if successful, it’s a lucrative business as your margins are great. These are the $5,000 handbags, the $500 sneakers and the $2,000 cell phone. But it’s ultimately limiting as the trendsetters move on and of course, if you lower prices or even sell a lower priced line in an attempt to broaden your market greatly, you lose some of your cachet as exclusive.
 
And generally copy-catters will copy some of the elements of your design and the mass market will buy those choices – diluting the look & feel – causing the trendsetters to move on as more people on the streets are “closing in” as it were.
 
Some companies choose one target or the other. They know that there will some overlap but if they choose to pursue the mass market, the trend setters (and their margins) will whither away fairly rapidly.
 
But the iPod breaks that set pattern due to:
 
Apple design (inside & out)
 
Apple’s constant changing designs and the initial exclusivity and limitedness of each new iPod.
 
Apple’s stagnated pace of add-on of features (online music store, photos, video, video online store, etc …) that not only appeals to the trend setters but also increases the perceived utility for the mass market to follow.
 
AND a little luck with the 1,000+ 3rd party accessories, which seals the deal. Even the mass market is loath to appear to be too mass market but …
 
EVERY iPod is MASS MARKET but yet UNIQUE because every iPod is a ONE of a KIND ITEM in the WHOLE WORLD.
 
There are no two iPods completely the SAME!
 
It’s Mass Market.
It’s Custom.

The closest equivalent are cars but at $15,000 (at least) for the cheapest car that others might envy … the price of entry into the fabulous world of the iPod is only $99.
 
Cell phones are close but since most people are restricted to their choices when they signed up and with a few exceptions of literally 1,000 phones – 99.5% are just a hunk of plastic with a user interface only someone who works at a telecommunications utility could love.
 
The iPod on the other hand is literally everything to EVERYONE DIFFERENT.
 
It’s pink with Swarovski Crystals and a playlist of teenage Rocker “Grrls.”
 
It’s black with a blood wrap and 1,200 Nu-Metal songs.
 
It’s a bootable Linux machine.
 
It’s a showcase in size (applicable to almost any iPod at any time of release).
 
It’s a commuter’s video player of last night’s LOST.
 
It’s the portable photo backup on vacation and at the end of the night – plug it into a TV and watch it right then.
 
It’s the perfect soundtrack for going through the yearbook or deep in snow country.
 
Because nearly EVERY aspect of the iPod is customizable to reflect your personality – starting with the content. It is the very personal soundtrack to your life. Then you work your way out from the skin or box to add-ons to the $300 noise canceling headphones to the wireless streaming box to the connector that lets you use your BMW M3 steering wheel to control the content – that’s the design and accidental luck of the power of the iPod.
 
(Luck - You cannot get 300 vendors to make 1,000 accessories for your product if you begged – it has to happen organically).
 
It’s the Early Adopter/Trend Setter Toy because there’s always another one coming and it’s always new – it’s exclusive but it’s also customizable so they’re not “embarrassed” to carry it around after 3 weeks because the music inside makes it their very own exclusive object.
 
And for the Mass Market, it’s has two fold sway – it’s both a useful tool and it offers them cachet as trendy & being able to afford something “trendy” and exclusive.
 
Again, the price of entry is only $99 and Apple has smartly priced it so it’s enticing to just jump a little. If you’re considering the SHUFFLE, for only $70 more, you can have a color screen and the amazingly sized NANO. If you’re considering the NANO, for $50 more, get one with the twice the capacity and/or why not for another jump to the iPod Video?
 
And that’s how you build the world’s first Mass Market Customizable product.
 
That’s why the iPod is not a fad but it is literally all things to all people.
 
And that’s how you lock out your competitors because Apple holds sway over the Early Adopters/Trend Setters & the Mass Market – leaving non iPod buyers to either feel they missed the boat on something new & exclusive or to the “average” mass market buyer – you couldn’t afford $99?  
 
The only people left for all the other mp3 companies are basically people who simply like going the grain. They are psychologically suspicious of anything popular – as if they are the only ones smart enough not to fall or be duped. That’s why it’s even harder for Apple’s competitors to gain traction because the only market really left to them are the bargain hunters and consumers who resent having to buy their product by default – as they cannot be seen buying anything remotely popular. And most of Apple’s competitors’ players don’t help matters by all having some major flaw or missing feature – the consumers “forced” to buy their products are certainly not going to be starting a groundswell viral marketing campaign of good word-of-mouth to overtake the iPod.
 
Which of course makes the new competitors players that look just like iPods puzzling (there are at least 4) (and again, if you stand 20 feet away in low light) because they clearly don’t understand their only appeal right now is to market to those who loath the popularity of the iPod so why would they buy a prototype looking chunky ipod look-alike – causing them to spend their time answering one question, “if you like that look, why didn’t you just buy an ipod?” If anything, building a shabby iPod look-alike is probably going to make the remaining 10% of the market, throw up their arms and just buy an iPod … oh, yes – those competitors? They’re priced the same or HIGHER than the iPod.
 
Of course, an iPod is not a necessity of life. And if you’re not a computer user, it’s hard to figure out how to get content on it or if you simply don’t need to listen to thousands of songs but as the world economy grows – Apple’s potential selling audience is probably close to 600-800 million so anything could happen here on out but it’ll take some serious competition and for Apple to seriously slip for anything to change in the near future.
 
Neither looks to be happening on the horizon soon. Of course, there’s competition but name one industry where people aren’t fighting like feral dogs for 1% share and there?
 
So, while there are pessimists who worry about how much upside there is – there is plenty. The transition is just beginning but with the competitors still believing it’s just the outer casing and Apple marketing as the key success to the iPod, iPod’s reign is pretty secure.
 
And yes, there are plenty of WMA stores including the new MS MTV one but asking teen-agers to dump their iPod to use an iPod look-alike … as if.
    

10 Comments:

Anonymous Anonymous said...

Good article. Long article; )

4:52 PM

 
Anonymous Les Posen said...

You slaved over this, and I see no comments! Shame on the Mac community! You summarised so much of the iPod's iconography in one post. Well done.

(Mind you if it was me, I'd be linking all over the place! But that's me!)

Well done!

5:10 PM

 
Anonymous Anonymous said...

Wow. Excellent article. I could not agree more with your points, especially in regards to the people who say that iTMS is proprietary while ignoring the other music stores on the market who use Microsoft DRM. Guess what? Those are even more proprietary in that they force you to use Windows!

10:41 PM

 
Anonymous Anonymous said...

All that talk about a freaking MP3 player?! Get a life!

11:38 PM

 
Anonymous Anonymous said...

One of the best explanations I have read.

I think the fundamental flaw with Apple's competitors is simply their roots ... as in CE/hardware. The companies that are trying to compete with Apple have very little experience with software/interface design. They are used to building navigation for TV's, CD players, DVD players, etc... which is a very different world from the interaction between the computer and mp3 player.

All one has to do is look at home theatre ... it can be incredibly complex ... the reason is that none of the boxes communicate with each other and the interfaces are typically horrible ... even for relatively simple devices ... why do you think so many purchase touchscreens (ie. Crestron) to make the systems useable?

While Microsoft does make software ... they do not make hardware and leave it to the various player manufacturers to come up with the devices (and the appropriate interface).

The competitors to Apple forget that if you have to be even remotely 'geeky' to load and operate the player ... forget it.

11:06 PM

 
Blogger fixyourthinking said...

Great article ... I think it does boil down to Apple's understanding of pop culture. They don't necessarily see it as a lot of advertisers do ... a flashy multifaceted kid oriented experience. Apple's version of Pop Culture is simplified Fung Shei (sp) - to Apple everything is occam's razor -= the simplest solution is usually the best solution.

12:12 PM

 
Blogger fixyourthinking said...

Note though that I do not equate an understanding of pop culture to great marketing ... I just think Apple hits on all cylinders when it comes to the socialness of the company.

12:14 PM

 
Blogger Andreya said...

Hi Nice Blog .I've made up my mind: I'm gonna buy an MP3 player. I just don't know which one. I like the Ipod batteries, but do I really need something that small?

10:46 PM

 
Blogger Ian said...

Great article. Agree with you 100%. You make a lot of valuable insights about why Apple has such a strong hold over the market. Worthwhile read.

9:07 AM

 
Anonymous oona said...

You mentioned that "There are no two iPods completely the SAME!

It’s Mass Market.
It’s Custom."

How is that?
Im a grade 12 student working on my extended essay for the IB, so any additional info would be greatly appreciated.
Great article!

5:58 AM

 

Post a Comment

Links to this post:

Create a Link

<< Home