i, cringely: "Divide and Conquer: Why Apple Has an iPod Division"

[Jason Dunn]

<div class='os_post_top_link'><a href='http://www.pbs.org/cringely/pulpit/pulpit20040520.html' target='_blank'>http://www.pbs.org/cringely/pulpit/pulpit20040520.html</a><br /><br /></div>"The news, broken Wednesday by the New York Times, was that Apple was creating a separate iPod division because the little music players are such a huge success. Conventional business school wisdom also says that starting a separate division is a way of isolating startup costs, making them more obvious to Wall Street and thus minimizing negative impacts because of course, even Apple has to spend money to make money. Or, like 3Com did with Palm Computing (and even Apple once did with Claris before changing its mind), you can structure a division to spin-off or have a separate IPO. This all makes sense on the surface, but then I recalled something I was told more than 20 years ago by a much younger Steve Jobs. Back then Apple had three divisions – Apple II, Lisa, and Macintosh. Why have separate divisions? “Because it’s easier to shut one down,” said Steve..."<br /><br />A great article by Robert X. Cringely - I changed around the email address I was receiving his editorials to, and I stopped receiving them. I didn't realize how much I missed reading them until now. Great read! Do you think he's on to something? Can you see Apple moving away from their core computing role?

[James Fee]

Just as Microsoft has moved away from just an OS/Software vendor, so has Apple from a CPU Hardware vendor. The landscape is littered with companies that were unable to break away from their niche markets (Sun, WordPerfect, etc) and Apple knows this. While selling Macs isn't a bad business to be in, there really isn't much growth in it. iPod is just an easy way to build upon their brand without much effort. The question in the future is where next? Jobs has smartly not rushed off and created another Pippen (http://ryangenno.tripod.com/sub_pages/Pippen.htm). The growth of the iPod has been great, but what next? That is the million dollar (1,373,098.51 CAD) question.

[Janak Parekh]

I don't see this happening, personally. The G5, despite upgrade woes, still carves out a useful niche. And I still want one. ;)

A great article by Robert X. Cringely - I changed around the email address I was receiving his editorials to, and I stopped receiving them.
You might want to use their RSS feed instead, which is what I just set up thanks to your reminder. :) http://www.pbs.org/cgi-registry/cringely/cringelyrdf.pl

--janak

[dean_shan]

I don't see this happening, personally. The G5, despite upgrade woes, still carves out a useful niche. And I still want one. ;)

Yes they are nice. My school has some. Perfect for video editing. I love Final Cut.

[Kent Pribbernow]

Cringley's views pretty much echo what I've been saying here. Apple is slowly transitioning into a consumer electronics vendor. I could be right about iShoot...just you wait and see. It has to happen. The Mac platform is shrinking, and Apple can no longer bet the company a product whos market is dwindling.

[Suhit Gupta]

Cringley's views pretty much echo what I've been saying here. Apple is slowly transitioning into a consumer electronics vendor. I could be right about iShoot...just you wait and see. It has to happen. The Mac platform is shrinking, and Apple can no longer bet the company a product whos market is dwindling.
Hasn't Apple always been into consumer electronics? Or are you just trying to make a distinction better their current strategy vs. their failing one in the 90's with their Macs?

Suhit

[Felix Torres]

"Why have separate divisions? “Because it’s easier to shut one down,” said Steve..."
Can you see Apple moving away from their core computing role?

Separate divisions are easy to spin-off, ala Claris, to comply with the likely outcome of the Beatles' lawsuit.
Start iPod as a separate division, then spin it off as a separate brand so Apple itself is no longer in violation of its contract to stay out of the music business.

As for getting out of computers?
Nah!
They may only add up to 1% of the market but 20 million customers are nothing to sneer at, especially rabid vocal customers, who don't even blink at paying $129 every year for "OS-enhancements". After all, if he can get them to rollover the OS every other year, that's a billion dollars a year of pure profit. Nobody turns their back on that kind of customer base.

The part about going (mostly) direct sales only, I can buy, though.
What I expect Mr Jobs to do is keep one of either CompUSA, BEST BUY, and Circuit City, keep the vars that sell to the publishing and graphics pros, and pull the plug on everything else, funneling the sales through the Apple stores, education sales force, and web site.
I also expect a bigger push into applications, culminating in a full frontal assault on MS Office.
That way every last penny that there is to be made off Mac hardware and software goes to Apple not some middleman somewhere else.

[Felix Torres]

Hasn't Apple always been into consumer electronics? Or are you just trying to make a distinction better their current strategy vs. their failing one in the 90's with their Macs?

Suhit

The media and industry distinguishes between Consumer Electronics (TVs, stereos, Cd and tape players, and the like) which sell by the hundreds of millions worldwide to customers using them for essentially one function with a minimal learning curve, and more elaborate tools that sell to different customers for different functions and have long, and often steep, learning curves, like computers.

For example, everybody buys a digicam to take pictures and a DVD player to watch movies.
Computers, however, are purchased to put out magazines, or surf the web or serve files on a network or any of a thousand mix-n-match functions. A camera is just that, a camera; a computer, however, is whatever you want it to be.

Think of it as the distinction between console and PC gaming; the console is a fixed-function platform that will always perform in a known deterministic fashion, while the PC can have any of hundreds of different configurations and missions, most of which have nothing to do with gaming.

So, yes, while Apple has repeatedly tried to turn the Mac into a CE product (the original sealed Mac128 and the more recent fruity iMacs being but two of those atempts) the nature of personal computing has generally prevented it.

The Pippin and the eMac were closer attempts at appliance products but the iPod is their first success at creating a true CE product.
Which has a lot of people wondering: what next?

Beyond that, like most Apple discussions, it gets bloody.

[Kent Pribbernow]

The Pippin and the eMac were closer attempts at appliance products...

No...the eMac was designed purely to bail out Apple because the flat panel iMac was a complete disaster. The G4 iMac now sells at less than one third volume levels of the original iMac line. The truth is, even though the G4 iMac gained lots of media atttention and high praise, it was a marketing flop, underselling all previous iMac products by a HUGE margin. That coupled with the fact that education customers (among others) complained about the high price tag prompted to Apple to go back to the drawing board and design the TRUE iMac successor...eMac.

The eMac is NOT an appliance...it's an exit strategy. Realistically, Apple prices all its desktop systems for the zealot market anyway.

[Felix Torres]

The Pippin and the eMac were closer attempts at appliance products...

No...the eMac was designed purely to bail out Apple because the flat panel iMac was a complete disaster.

The eMac is NOT an appliance...it's an exit strategy. Realistically, Apple prices all its desktop systems for the zealot market anyway.

Whoops! Sorry; I meant eMate, the old Newton based school-only quasi-laptop for K-6...

Well-received but killed when Jobs took over and wiped out everything Scully-based...

[James Fee]

Whoops! Sorry; I meant eMate, the old Newton based school-only quasi-laptop for K-6...
I fail to understand how you could call the eMate (http://applemuseum.bott.org/sections/computers/e300.html) an appliance. You sure you are not thinking of the crappy Mac TV (http://www.lowendmac.com/500/mactv.shtml)?

[Kent Pribbernow]

Whoops! Sorry; I meant eMate, the old Newton based school-only quasi-laptop for K-6...

Ah....now that makes more sense. I wondered why on Earth you thought the eMac is an appliance. :)

[Felix Torres]

Whoops! Sorry; I meant eMate, the old Newton based school-only quasi-laptop for K-6...
I fail to understand how you could call the eMate (http://applemuseum.bott.org/sections/computers/e300.html) an appliance. You sure you are not thinking of the crappy Mac TV (http://www.lowendmac.com/500/mactv.shtml)?

Fixed configuration, fixed-function, minimal learning curve, meant to be used amost exclusively with the built-in software; it was really more of a grown-up V-tech training toy than a regular computer.

One of Scully's better ideas, not that he had many worth hailing...

[Mojo Jojo]

... at appliance products but the iPod is their first success at creating a true CE product...

Haha! My evil jedi mind tricks are working. You said the iPod was successful!

Okay, nothing to see in this post... move along. This is not the thread response your looking for. :D

[Felix Torres]

... at appliance products but the iPod is their first success at creating a true CE product...

Haha! My evil jedi mind tricks are working. You said the iPod was successful!

Okay, nothing to see in this post... move along. This is not the thread response your looking for. :D

Read again, Darth...
I said Apple succeeded in creating a true CE product, not that the product was a success. :twisted:

(Mind you, its done extraordinarily well in mindshare; but long-term market share? That remains to be seen.)

Emerson notwithstanding, I tend to be consist in my put-downs... 8)

[Mojo Jojo]

I know, was going to edit my own post to be more specific after I put it up but got distracted.

Still not going to admit it is successful as the number one digital music player though? In the here and now to be specific :P

[Felix Torres]

Still not going to admit it is successful as the number one digital music player though? In the here and now to be specific :P

&lt;sigh>
I used to think english was a semi-precise language...

The pod isn't the number one digital music player.
Not even close.

Not unless you gerrymander the market definition and slice-n-dice it thinner than a 2 cent piece of ham.

"Digital music players" includes the tens of millions of cd-players sold worldwide over the last 5 years.

"Digital music players" includes the tens of millions of DVD players sold over the last four years.

"Digital music players" includes the tens of millions of pocket PCs sold over the past six years.

"Digital music players" includes the tens of millions of flash based players since the first Rio hit the streets.

"Digital music players" includes millions of in-dash car systems sold in the past three years.

"Digital music players" includes every satellite radio ever sold.

"Digital music players" includes every satellite tv and most digital cable set-top boxes in use world-wide.

Heck, "Digital music players" includes every Minidisc player, DAT player, PC, MAC, and for that matter, every CDDA CD player sold in the last twenty years.

Now, if you ignore 99.999% of the market and limit yourself to only battery-powered, hard-drive based, lossy-compression, playback-only, personal digital music players costing over $300 and sold mostly in the US by companies that also sell computer hardware, then you finally reach a market definition where the POD product line adds up to 52% of the market as of last month, if you only talk about current sales rate in the US.

Cause if you want to talk installed base, I'm betting the Nomad and Rio lines as a whole have greater installed bases.

The numbers are, of course, subject to revision due to ongoing market competition, but one can safely assume the POD unit sales market share will continue to decline as new players come in from the larger ocean.

Digital Music players, like Consumer electronics, is a vast planet-wide ocean with literally hundreds of players. Its crowded out there and its only *now* starting to get competitive.

Back to the Sith Academy, young Padowan... :twisted:

[Mojo Jojo]

Sorry. I thought 70% of all current sales was a majority. My mistake.

[Felix Torres]

Sorry. I thought 70% of all current sales was a majority. My mistake.

70% of what market?
(Its 52% as of last week, BTW; 70% was months ago...)
US?
Haiti?
China?
Does it include flash-based players?
CD-Based players?
Memory-stick or Mini-disk players?

I know!
70% of the media hype and press releases in the last six months.

That one, I'll stipulate up front, as I already did.
But mindshare only goes so far.
Lets wait a year, shall we?
(I feel like I'm playing whack-a-mole when I'd rather be playing Morrowind...) :?

[Mojo Jojo]

I was quoting articles as of todays date, and articles in the last couple of weeks. Not some two months ago.

These are numbers that are being published by PC Magazine, CNET, Silicon Valley Business Journal, New York Times... so far I have been posting links and articles to back up my position while you have not show anything on the supposed decline of sales of the iPod or the sudden rise in competition.

To be blunt your argument is picking apart grammatical mistakes and throwing in opinion. If you have information that supports your position please post it. Otherwise I am left in the position of you telling me the sky is green while everyone else is telling me blue.

[Jonathon Watkins]

Well I have to agree with Felix here. I keep hearing these huge numbers quoted for the Pod, with no supporting evidence. I know one person with a Pod, a many more with cheaper and larger devices (physical size and capacity). I very much doubt they even have 50% of even the portable hard disk based digital music market.

[Felix Torres]

...so far I have been posting links and articles to back up my position while you have not show anything on the supposed decline of sales of the iPod or the sudden rise in competition.

To be blunt your argument is picking apart grammatical mistakes and throwing in opinion. If you have information that supports your position please post it. Otherwise I am left in the position of you telling me the sky is green while everyone else is telling me blue.

1- There is adifference between declining sales, as you claim I'm saying, which I'm not, and a decline in market share, which can come amid growing sales, simply when the product doesn't keep up with the growth of the market. For example, in 1981, IBM had 100% of the PC market and sold a few hundred thousand PCs. In 1985 Ibm was selling millions per year yet their share fell under 50%.

2- My arguments actually consist of pointing out muddy thinking, over-generalizations, and plain lack of critical analysis. In proper debate, it generally pays to choose ones words and concepts properly cause definitions are key. If you do not clearly define and state your concepts you will think I'm saying the sky is green instead of blue, when what I am saying is that *most* of the time, the sky is black or gray.

As for Apple's increased competition, just look around this very web site; in the past six months they have pointed us at literally dozens of new digital music players of all shapes, sizes, and technologies. They are not all going to fail; each has its strengths and weaknesses and will appeal to different folks because one size does NOT fit all.

And as the overall market continues to grow faster than Apple can keep up, (they can't even deliver the products they've introduced, much less bring out new stuff) their sales will go up but their share of the market will go down; it happens to every single entrant to nascent markets, whether it be PCs, minivans, or digital music players. It doesn't mean they're failing; all it means is the waters are reaching their true levels.

Digital music playback is a massive industry (tens of millions of units per year) with hundreds of existing participants world-wide, and nobody can address the needs of any significant share of the market with just two products that sell by the hundreds of thousands.

Try a simple test:
go to Amazon or tiger direct or newegg or j&r and search for Mp3.
You'll find dozens of products from dozens of vendors.
(amazon alone coughs up over 500...)
And most are doing nicely for their builders.
Its a big game...

Happy hunting!
Me, I'm late for debate class...

[Felix Torres]

Upon further reflection, never mind...
And I'm sorry for the obscure Doc Smith and Kotor quotes.

Peace.