The iPod End Game

I have to admit, the iPod has been one of those devices that has fooled me from the start. I never thought anyone would buy a $400 portable music player, and before you laugh at me, remember how you felt the day it came out. If you bought an iPod within the first few weeks of it being released (or at least would have if it was PC-compatible), you’re off the hook. If not, you were skeptical like the rest of the world.

Oh how times have changed since then. iPod sales have far surpassed everyone’s expectations — including probably some people at Apple — and by the end of 2005, the device could see a market share of over 80%. Possibly well over 80%. An entire book could be written on the rise of the iPod, and in some senses, an entire book already has.

But I don’t want to get into any of that. It’s a huge hit. Bravo Apple. You are shaking up the world again… in a great, great way.

What I want to talk about is how this game will play out. How the rules will change when Microsoft puts both feet in the water. How sales will be affected when consumer tastes change. How new devices and new technologies will help, hurt, or kill the iPod. And most importantly, how Apple may attempt to defend its newfound position of power with a diversification strategy.

Let’s start with a few things learned from Apple’s last SEC filing.

Just the facts

The most shocking thing about Apple’s latest quarterly financial report is the raw amount of revenue brought in by the iPod as a percentage of the company’s total revenue. iPod revenue came at $1.2 billion while total revenue was $3.49 billion… if you subtract the iPod’s share, revenue comes out to $2.29 billion, meaning the addition of the iPod to Apple’s lineup essential grew the company’s top-line by 52%! That is huge. What’s even huger is what happened to the bottom-line. Due to off-the-charts iPod sales, Apple’s profit went from $63 million in the same quarter last year to $295 million in this quarter. This was particularly shocking to analysts (and myself) because it is generally thought that the iPod is one of Apple’s lower margin products. After running the numbers in my previous post, however, it appears that that has dramatically changed. A reliable inside source has also confirmed that suspicion and informed me that iPod margins are quite healthy and have risen by at least 30% since the introduction of the original iPod. This, of course, is huge for Apple as they appear to have ramped up production enough to get much better deals on parts, labor, and everything else associated with the production of iPods. Additionally, since a lot of the R&D for the iPod occurred during the initial introduction of it, those costs are no longer part of part of the equation. Yes, there’s still R&D going on, but Apple has clearly hit the “margin sweet-spot” in this last quarter of sales.

Another interesting thing about this dramatic change in product mix is that given how poorly PowerMacs will be selling in the future (as compared to iMacs and Mac Minis), we should see the average margin of Apple’s CPUs diminishing below that of the iPod. I am a professional designer and I’d never buy a PowerMac again. It’s not a bad computer at all, but Apple has created such a powerful machine in the 20″ iMac that I really have no reason for more than that. If you edit video for a living, fine, buy a PowerMac, but for the majority of even Apple’s professional user base, I reckon the consumer machines are just fine. So what Apple now has is a situation where their high-margin product (the iPod) is supposed to convert you over to their low-margin product (the Mac). Who would have thunk it.

It’s a strange situation for sure, but it will not last. The fact is that the margins (and sales) Apple is enjoying on iPods right now are due to lack of competition in the space. Yes we know all there are a handful of other MP3 player manufacturers out there, but none have created the total experience that Apple has created. Apple also has not yet even begun to feel the Microsoft effect in this segment. That should change as well.

So let’s examine some threats facing the iPod over the next couple of years.

The Microsoft factor

Love them or hate them, you have to respect Microsoft’s power to radically affect any sector of the tech industry. They are the most powerful company in the world today and more powerful, on a world scale, than most governments. They are also fiendishly good at spotting innovation and bending it in their own favor.

So what has Microsoft done to head off the iPod power surge? To no one’s surprise, it’s a software-based attack. Although Microsoft profits from hardware such as mice and keyboards, they’ve chosen (so far) to let hundreds of other companies build the players while they build the platform. Microsoft could easily build their own player, so let it be understood that if they don’t, they are betting that it is not a good idea for the long-term. They could even afford to build a player knowing it wasn’t a good idea for the long-term, merely to head off Apple’s momentum right now. But they’re not… which means they don’t think they need to.

Instead, Microsoft’s plan revolves around the Windows Media Player, Janus DRM, and what’s known as the “Plays for Sure” initiative.

Many Mac users (and even Windows users) remember the Windows Media Player as a clunky, crash-prone, bloated piece of software which rarely acts as it is supposed to. Times, however, have changed, and the Windows Media Player has undergone more improvements than Quicktime and Real combined over the last few years. It’s nice looking now. It doesn’t crash as much. Its API is much more robust than either Real’s or Quicktime’s. And most importantly, the WMV 9 video codec, at web bitrates, now looks better than Quicktime’s or Real’s. So after years of playing catch-up, Microsoft’s media player is now on par or better than the competition’s in many significant ways.

One of the ways the Windows Media Player is ahead is in comprehensive DRM. Apple uses the AAC format wrapped in its own FairPlay DRM and that’s great for music… but what about video? I can distribute a DRM’d audio or video file with all sorts of customized rights management on it if I encode with WMA/WMV. Before you shake your head and start screaming about how DRM is evil, realize that it is a fact of life and it likely always will be. It’s the only reason you can even buy music or rent video online, and Microsoft is thinking big-picture with it. Any major movie studio can distribute a full-screen, full-length, high-quality DRM’d movie right now in WMV format and it’s small enough to fit on an SD card. Apple is nowhere to be found in this market right now, and unless they’ve got another iTunes-like coup in their pocket with the major movie studios, Microsoft will likely own this space within a year or two.

But Janus goes beyond just the Windows Media Player. It is a set of requirements that device manufacturers must adhere to in order to maintain in their role in the Microsoft ecosystem. For instance, every Janus-compatible device must have a secure clock. A secure clock ensures that the date on the device can’t be tampered with in order to circumvent DRM time schedules. Furthermore, Janus-compatible devices must follow the Windows Media API exactly how Microsoft prescribes it. This means, essentially, that the device is heavily biased towards using the Windows Media Player as the sole conduit to the computer. The end result? All commerce goes through Microsoft.

The third prong in the Microsoft attack is the “Plays for Sure” initiative. “Plays for Sure” is not really any different than the concept of Windows. If you buy software which is Windows-compatible, it will work on any computer which runs Windows. If you buy music labeled “Plays for Sure”, it will work on any “Plays for Sure” endorsed device. So you can already see the value in device manufacturers getting that endorsement.

With regard to the current state of the music market, the “Plays for Sure” initiative really doesn’t mean anything yet. Most consumers will say “If it doesn’t play on my iPod, it doesn’t play for sure”. What happens when Dell starts giving away improved music players with their computers though? What happens when non-Apple music players start doing more things like playing video and making phone calls? Once enough of these Microsoft-endorsed devices make their way into the market, “Plays for Sure” will start to matter a lot.

So, enough about Microsoft.

The changing role of the device

I was delighted at the release of the iPod Shuffle because it is the first iPod that I feel should not be integrated with a phone. I listen to all my music on a Treo 600 phone and the regular iPods give me little advantage over this besides a slightly nicer interface and better syncing. I tend to listen to music without touching the interface much so that part doesn’t bother me, and the syncing just takes a little longer with the lack of iTunes but I’m okay with that too. Besides that, the Treo kills the iPod in almost every other category. I can make calls. I can check e-mail. I can use Bloglines. I have unlimited capacity via SD cards. I can take pictures and movies. I have much better battery life. The list goes on and on.

While the cellphone is the going to be the primary music player of most people within a few years, the iPod Shuffle fills a slot the cellphone never will: the ultra-tiny, wearable device. I need my cellphone to have a certain amount of bulk in order to carry out all of the complex interactions I have with it, but I just need a wearable iPod to be as small as possible, whatever the sacrifice in interface.

The key here is that no one wants to carry two cellphone-sized devices around. Given that people will always have a cellphone, there are only two things that Apple can do: build their own cellphone and keep making the iPod Shuffle smaller. The cellphone will be the primary music-playing device with either a hard drive or a high capacity SD card, and the Shuffle will be the device you take with you only on the rare occasions when you don’t have your phone (usually during exercise or when traveling out of the country).

Some people question whether or not Apple wants to be in the cellphone business, but I think the question is not if they want to make a cellphone but rather how they can negotiate the complicated landscape of cell carriers whilst turning a profit. Russell Beattie put the subject best when he said:

“Steve Jobs has a mobile phone. I’m not sure which mobile phone it is, but he’s definltely got one. And he hates it. He curses at it every day. He hates it like he hated the original IBM PC. He hates how hard it is to add contacts and make calls and he cringes at the web experience and the Java games, if he’s even bothered to try them. He holds it in his hand during long trips and admires some things about it, but knows he could do it better.”

Palm has already proven that you can make a high-end device like the Treo 600/650, sign deals with all carriers to support it, and turn a healthy profit in the process, so there is no reason to think Apple can’t do the same. In fact, the Apple brand has so much cachet right now that I would bet at least one carrier would bend over backwards to do a comprehensive deal with Apple.

And then there’s the ultimate end-around: Wi-Max. Robert Cringley wrote in an article several weeks ago that Walmart or McDonald’s could cover almost as much of the country with Wi-Max as any cellphone carrier covers with GSM/CDMA in a pretty short amount of time. An antenna on the roof of every store, a management system to gate access, and you’ve just created a next generation data and voice network. Is Apple watching this space for an entry point? Maybe.

Accounting for taste

The last major threat facing the iPod’s dominance is the simple fickleness of the modern consumer. Who’s to say the trademark white headphones and colorful commercials will still be hip in a year or two? Granted, Apple is the king of hip, but what if the iPod is less fashionable moving forward. It almost has to be less fashionable considering how fashionable it is right now. What if the iPod becomes the “big brother” brand and young people turn to alternative brands? Apple has more power to maintain their brand’s status than any other company, but the task is no slam dunk. And besides, as Apple proved in the 80s and 90s, the best technology and brand doesn’t even win out all the time.

A good example of a great brand falling out of favor in this way is Levi’s jeans. Levi’s had been the #1 brand of jeans for decades and they made a great product which was heavily associated with the entire “jeans” genre of clothing. Then, in the 1990s, young people started buying alternative brands. It wasn’t that Levi’s was any different than they had ever been… it was that they were no different than they had ever been. Young people knew they still needed jeans, but they sought to extend their own personalities with alternative brands like Seven. Once these alternative brands as a whole start to tip, it’s big trouble for the market leader… Levi’s in this case. Apple in our case.

Preparing for the End Game

Now that legitimate threats to iPod world domination are on the horizon, what can Apple do to fend them off?

Keep on keepin’ on

When you sell 4.5 million units of anything in one quarter, you’re doing something very very right. Apple has created a huge demand for the iPod through brilliant advertising and great product design, and they are now turning a healthy profit thanks to incredible economies of scale on the production side. When consumers are throwing money at you like this, keep taking it. With market share comes power, and even if Apple didn’t make a penny off each sale, they’d be strengthening their outlook in the emerging digital music market.

Build a cell or Wi-Max phone

I have no doubt about Apple’s desire to make a phone. If there was nothing standing in the way, it would already be done. It won’t be long before the cell phone is your camera, your music player, your organizer, your portable web client, your remote control, and your digital wallet. It will not only be your digital hub, but your single most pervasive conduit to the world. Before you say something like “The iPod is only successful because it does one thing extremely well”, think about what people have been doing with their iPods. People are installing hacks to store their contacts, read their RSS feeds, and all sorts of other things. And that’s to say nothing of podcasting! The point is that this device is begging to be so much more than what it was originally designed for. People love it for what it is but clearly want to make it so much more. The device doesn’t need to stay simple… it just needs to still feel simple, and that’s what Apple is great at.

The concept of the uber personal communicator is so powerful and its manifestation so certain, that it makes sense for Apple to provide it as soon as possible and by any means necessary. This is the sort of sentiment that Microsoft is famous for. When Redmond sees an opportunity, they throw their best resources at it even if they aren’t sure when it will turn a profit. Apple made $295 million this quarter. As an investor, would you have rather seen $295 million in the bank or $100 million in the bank and a $195 million investment into the personal communicator sector? The point is, when you are highly profitable and you have over $6 billion in cash it is your responsibility to invest in dramatically growing the business. If you’re not going to do that, issue a dividend. That’s what Microsoft did when they decided they had too much cash.

Now, that being said, Apple did invest in growing their business when they created the iPod and it’s now led directly to an over 50% increase in top-line revenue and an over 100% increase in bottom-line take-home. All I’m saying is let’s see more of the same here. Show no mercy on emerging markets and get them under your control as soon as possible.

Obviously, the Wi-Max route is further out and more speculative, but if that’s your end-around plan, then start throwing brainpower at it. Set your alliances early to ensure grabbing the best partner. Apple and Walmart may seem like strange bedfellows, but each has something the other wants. Walmart has wide distribution of inexpensive goods and services, and Apple has newly inexpensive goods and services to distribute. And you can bet they’d both love to get a piece of the monthly voice/data bill.

Partner with XM

Just a year ago, people were saying that satellite radio circuitry was too big to fit in a handheld device. Now, you can get a satellite radio player which is even smaller than an iPod. What’s the moral of this story? MP3 player. Music. Satellite radio. Music. Someone’s going to put it together, so it might as well be Apple. Apple has more juice in the industry right now than its ever had. Now is the time to use that juice on a deal with a favorable revenue split. Microsoft has already partnered with Sirius, so that road might be closed right now, but XM might be another avenue to look at.

There are so many possibilities, from a feature standpoint, that an Apple/satellite radio deal would create that it’s really the subject for another blog post. Boiled down to one sentence: Satellite radio pushes new music your way which you eventually purchase through the iTunes Music Store if you enjoy it. How about being able to click “Save This Song” while you’re listening to satellite radio? Now that’s “m-commerce”.

Develop the iTunes Music Store into an IP radio network

If Apple’s not hip with the satellite radio industry, they should immediately label them a serious threat and fight them with IP-based distribution. The iTMS is probably the most pristinely kept, thoroughly stocked, and comprehensively indexed body of digital music in the world today. Why not offer it as a subscriber-only personalized radio station as well? That’s something you can’t do over satellite… only over IP. The idea would be a DJ-less system which automatically assembled shows based on your tastes in music.

Microsoft already has technology which finds similar songs all the way down at the soundwave level. By analyzing sound patterns in multiple music files, they claim they can introduce you to more music that you’d probably like. I’m a bit skeptical of this approach, but I do think you could accomplish the same goal using smart folksonomies instead. It’s possible Apple is already developing these concepts. If they are not, they should be.

License and expand FairPlay

This is a tough one right now because Apple’s control over FairPlay helps lock people into iPods while at the same time ensuring a mostly hassle-free DRM experience. The minute DRM starts to get in consumers’ way is the minute they begin to reject it, and Apple has done a fabulous job at keeping it behind the curtain for the most part. FairPlay, however, could be a tremendous source of revenue once iPod profits shrink down as they inevitably will. There will always be other device manufacturers, so you might as well be getting a few bucks in licensing fees (as Microsoft is doing) for every music player sold, even if it’s not your own.

As for the “expansion” part of the equation, that would involve getting into the video DRM space. Could the iTunes Music Store become an iTunes Video Store? I think so. Not many companies would have the bandwidth capability to pull off such a feat, but don’t forget what company Apple has a very significant financial stake in: Akamai. They’ve been Akamai investors almost since day one, in fact. Akamai has more edge servers around the world than any other company, and you can bet they’d be willing to store and distribute a ton of movies if asked. Without a strategy to get into the living room (like Microsoft’s Media Center), the video distribution angle is of limited utility in my opinion, but that’s all the more reason to parlay this whole digital media renaissance into a compelling living room strategy. If Apple wants to be the digital hub, it can’t afford to ignore any battleground.

Other strategies?

Who knows.

Surviving is about reacting

It’s often all too easy to criticize Apple. Not because they’ve messed up in the past or because Microsoft is viewed as a more successful company, but rather because we know so little about their plans. They are intensely secretive, and just because there is no evidence they aren’t already doing some of the things mentioned above, doesn’t mean that they really aren’t. It is for this reason that this article should not be viewed as a criticism of Apple but rather just a look at how the landscape might be changing in the next few years. The true test of how smart the new Apple really is will be how they react to these changes. If we see three years of cockiness and isolationism, we’ll see this game play out just as the Mac OS/Windows duel played out in the 80s and 90s. If, however, we see Apple convert their hardware dominance in this market to software dominance (iTunes), licensing dominance (FairPlay), and commerce dominance (iTMS) — perhaps even at the expense of hardware dominance — then that’s when we can say for sure that the tables have turned and Apple is the new leader of the digital era.

I’m curious to hear if anyone has any other ideas as to how this battle might turn out or what else Apple could be doing right now. The only part of this article that I’m absolutely positive about is the emerging dominance of the SD-based music player/phone. The rest is educated speculation. So if you have some of your own educated speculation, please by all means share it.

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66 Responses:

  1. Mike D. says:

    Shaun: Great information on the European market. Many thanks. Just a couple of things —

    1. The Treo and the P910i are actually almost identical in size. The Treo is a tad shorter and thinner and the P910i is a tad narrower. They share basically the same form factor except the Treo doesn’t have that flip down keyboard thing.

    2. I agree that satellite radio may not be a great addition to the iPod. I personally don’t use satellite radio and I’ll never pay for such a thing either. I do, however, see the need to get “non user-programmed” music onto iPods. I don’t think we’ll ever get to a point where friends are the only way we find out about new music. We need radio stations, albeit in a slightly different form, to introduce us to music we wouldn’t know about otherwise. My main point is that if Apple shuns the satellite route, they should make plans for an IP-based endaround. Turn the iTMS into an IP-based radio station which can either stream music to your iPod over WiMax or cell networks, or download it when you’re within Wifi range and cache it for later listening. Once we get to the point where we can be introduced to music directly from our devices and then push one button on said device to purchase and own it, that’s the golden moment.

    3. With regards to UIs on phones: I think the main reason people are so skeptical about ditching iPods for music-playing phones is that, as you say, most phones have really shitty interfaces! To that, I say “Don’t hate the game! Hate the player!” Just because most phones have shitty UIs doesn’t mean they have to or that they always will. The Treo, for instance, has an excellent UI. In fact, I didn’t even believe in convergence until I started using one. It’s bliss… it really is. Not perfect, but damn good. Throw Apple’s fingerprints onto that product and you’ve got yourself a phone, PDA, camera, and MP3 player that are as easy to use as a, well, Apple.

  2. Patrick says:

    Mike, I’d completely agree with your point on the movement that Microsoft is making into digital video: if they get their foot in the door of independent producers and providers as well as networks such as MTV before any H264-based Apple solution comes around then Steve Jobs et al will have major hurdles in getting them replaced by Apple solutions. I love the fact that Jobs shows such faith in this new codec and as Shaun writes, the movement into mobile phones will be telling – it’ll be availability on cellphones and other wireless devices which will be the telling of all the new video technologies. The Apple/Motorola alliance still has legs because, as the Treo has shown, there is mileage in good design even if it’s not coming from the leading provider. Microsoft’s phone software is so heavy and slow compared to that on the Treo that I believe a lot of new phone providers will be thinking again about providing a Windows OS based phone; they have not been a roaring success!

    I think the idea of Apple getting into the phone design and the actual process, whether producing a phone themselves or not, is a great one. It captures the market of people, like you and me with Treos, who want to listen to music on the go but don’t want to carry around another device. You saw it in radios bundled with walkmans and then with portable CD players. Nokia’s most popular consumer phones are those with radios in them – because people like them! You don’t have to get home and plug in five different devices but can just do the one which quickly becomes a reflex – you get home, you plug in your phone! Personally the iPod Shuffle was a killer because it’s exactly what I want for the gym, for running, for losing in coat pockets, but others won’t agree and that’s why an Apple phone is so compelling. By using their skills in interface design, and in convergence an ‘iPhone’ could succeed where the likes of the N-Gage failed.

    Satellite on the iPod would be a major risk because it provides an element of the unknown in the realm of quality. What’s so great about the iPod is that the quality of the experience maintains so consistently high – taking an XM player onboard would then involve service dropouts, unreliablitity, battery drainage and so forth. People wouldn’t be able to tell whether it’s the iPod that’s playing up or the radio, and they wouldn’t distinguish between providers, they’d just say ‘My new iPod sucks!’ and drop it; the cool factor plummets. I think this is key in your idea about the fickel consumer – people abandon companies because they stop making good products. Levi didn’t go out of fashion because there were new alternatives but because Levi became boring, traditional and weren’t innovating in the field like Diesel and G-Star. If Apple maintains its reputation for quality in everything it does then it’ll succeed. If consumers demand access to their iTunes music on their Nokia, if they make Quicktime’s DRM and system-wide workflow so easy it’s second nature then they’ll gain these markets just as easily as Diesel stole Levis.

    … I think.

  3. kath says:

    i want to find the marketing and financial objectives for the ipod for research i am doing, do you have any suggestions as to where the best and most accurate place to find these would be?

  4. Rob says:

    When kids think of buying anything they think of what is the most popular investment to buy what is cool and trendy and shown on “MTV” . They don’t realy care about what it can do because they will understand those perks after they have made their purchase. This is basically what powers a nice part of the iPod’s wonderfull sales. So many of my peers at my high school barely knew what it was they were buying when they bought thier new “origonal” iPod they didnt know how to get the music on their iPod, they didn’t even have enough music to be concidered a music geek but they did know that those white head phones had to be more trendy than those yellow “Live Strong” bracelets. They knew that the pretty little chunk of mettle was the status symbol to carry around. Allot of my friends that have iPods dont even have a phone, they still go around asking to borrow. As long as iPod stays fashionable thier business will keep on booming, they don’t even have to produce a whonder device.

  5. Dave says:

    Your article gets me all carried away in the idea of a single piece of kit doing so many day to day things. No need to be laiden with lots of kit in various pockets, forgetting your cards, your keys, your phone, your music player, yadda … Less clutter please.

    Mobile music and radio (including ‘buy this song/album?’), phone, camera, internet, handheld games console, remote control for TV, but also potentially secured for your car locks, and home door lock, chip and pin Credit/Debit card idea could be integrated too, as well as sideline things like Shopping Loyalty cards and locally the London Transport Travel ‘Oyster’ card … simple technology which could be handily incorporated.

    Trying to think what else I use day to day that could be incorporated … a book I’d prefer to keep as a book, but thats my own personal preference.

    I realise the security implications, but these things could be made manageable and suitably secure I’m sure. With the way fingerprint scanners and retina or dna technology is moving, it’s not too far away from such a mass/personal scale.

    Ramblings … Just looking toward the future a little wide eye’d.

  6. Gordon Ashe says:

    Why don’t they make a device that includes cell phone, voice recorder, MP3 player, FM radio AND 1GB of USB flash memory. For a bonus, they could give it a fingerprint scanner that prevents others from using it. Does anything like this exist on the market. I know they can make it, it will be almost as light and compact as a regular cell phone. It seems the manufacturers are trying to milk as much money out of consumers by offering a little at a time, so that we end up buying 3 or 4 new upgraded models before they finally make something we want now and they can certainly make now. I for one and not going to spend another penny till I see something like that. (And no, to anticipate some responses, I’m not going to wait until a “wallet PC” comes out, that will require infrastructure changes to provide the necessary service support.)

  7. Francis Paredes says:

    very interesting. long but interesting :-)

  8. b ill says:

    Excellent article, and beautiful page design. The numbered comments are a particularly nice touch.

    This realtime comment preview is also most amazing.

    Oh, and my iPod rocks me faithfully since 2002.

  9. modcon says:

    I don’t believe that Apple Computer is in any present danger of becoming the “Big Brother” company in the eyes of consumers. Sure, consumers can be fickle when it comes to fads. But the loyalty of iPod consumers is not steeped so much in the superficiality of the iPod fashion trend as much as it is in the positive user experience that Apple has designed for them. Also, today’s consumer is also extremely savvy and has access to more product information than ever before in order to make a well-informed purchase decision. It used to be said that a good salesman could sell an icebox to an Eskimo, but that’s less true than ever in today’s market. Consumers aren’t likely to spend hundreds of dollars on something smaller than a deck of cards (or a stick of gum, or. . . what’s next, a grain of rice???) without first being absolutely sure that they NEED it. Apple has reached that golden niche of ubiquity, and shows no sign of loosening its stranglehold. Remember the cola wars in the 80s? Nowadays, “Coke” is synonymous with “cola,” as “iPod” is shorthand for “portable mp3 player.” Not to mention Apple has streamlined itself into a finely-tuned “system-experince-creating-machine,” capable of steering the hardware, software, and media industries on a whim (once those industries realize that Apple’s going where the money is). And the cellular/Wi-MAX industry is next. Don’t think for a minute that Apple hasn’t been brainstomring around the wireless iPod concept for years already. Sure, negotiating the wireless/telecom/cable TV/broadband legal landscape can be on par with finding one’s way through a mine field, but if anyone can wrangle the communication giants into submission, it’s Apple Computer. They single-handedly rescued the record industry from online file-sharing piracy concerns with the overwhelming success of the iTunes store, then qualmed the “who’s-gonna-want-to-buy-TV-shows-online” concerns of the TV networks, and are about to answer similar trepidation from the movie studios (with millions in profits, doubtless). In the age where content is king, content delivery is God. A wireless iPod/cellphone is right around the corner, courtesy of the Creator. As Apple has tried to market it’s desktop line as the digital hub for your home, the iPod will be the digital hub for the rest of the world. And I’ve got my money in hand!

  10. Ben says:

    What a great blog. I think you predicted the future. Will the capability exist to install rival os’es or indeed multiple os’s on the hearing aid size gadjets of tommorrow?

  11. naysayer says:

    None of this really holds up anymore. Plays For Sure has been submarined by Microsoft itself, they’re building their own player which does not work so well, and Apple is still running away with music/movies/TV shows.

    Then there’s the new phone Apple’s coming out with…

  12. How will it end for Apple?

    the ipod end game

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    Can Apple loose its lead again? Along time ago Apple was years ahead of it’s time in terms of technology, features and potential, but for reasons that I don’t want to rehash here they managed to loose it all.

    The iPod has proved to be a…

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    I never thought anyone would buy a $400 portable music player, and before you laugh at me, remember how you felt the day it came out….  iPod sales have far surpassed everyone’s expectations — including probably some people at App…

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  16. Alexandre says:

    While listening to the Critical Path podcast on with Asymco’s Horace Dediu on 5by5, I got stuck on Dediu’s comment that there weren’t iPhone rumours when Google acquired Android. After a quick search, I ended up on this piece (written eight months before the Google purchase), so I tweeted to @Asymco with a link to this post. Several people, including Dediu himself, tell me that this wouldn’t qualify as a rumour (though my own definition of rumour probably differs from theirs). Still, I’ve received some comments about how insightful this piece was.
    I later found a NYT piece from 2002 which contained an actual rumour about the “iPhone”, including the name:
    > industry analysts see evidence that Apple is contemplating what inside the company is being called an ”iPhone.”

    But back to this piece, here, which might have been more insightful than the NYT’s one or Beattie’s…
    In hindsight, this piece was both prescient of what would actually happen and telling in what didn’t happen. The radio, Plays for Sure, and WiMAX parts didn’t pan out as planned, and that’s interesting. Apple’s content play has been both more ambitious and less impactful. The move against DRM might have been surprising. And it’s funny to think about 1GB SD cards as expensive… ;-)
    But, in the abstract at least (and in Steve Jobs’s way to describing it), the iPhone has been this integrated communicating device about which people had been talking for years. So, good jobs in predicting it years in advance.

The Ocean in 185 Lines of Javascript:

Mesmerizing. Try tweaking some of the variables in the “sea” section of the code.

“"Design had been a vertical stripe in the chain of events in a product’s delivery; at Apple, it became a long horizontal stripe, where design is part of every conversation.””
Why I Just Asked My Students To Put Their Laptops Away:

A great essay about how toxic everyday distractions can be.

Humanity's deep future:

A group of researchers at the Future of Humanity Institute talk about where our race may be going and how artificial intelligence could save or kill us all.

Steve Jobs speaks about the future at the International Design Conference in 1983:

31 years later, it’s safe to say this is one of the most prescient speeches about technology ever delivered. Jobs covers wireless networking, tablets, Google StreetView, Siri, and the App Store (among other things) many years before their proliferation. A fantastic listen.

How to travel around the world for a year:

Great advice for when you finally find the time.


A fantastic app for prototyping your design work onto real world objects like billboards, book covers, and coffee cups. This seems like just as great of a tool for people learning design as it does for experts.

50 problems in 50 days:

One man’s attempt to solve 50 problems in 50 days using only great design. Some good startup ideas in here…

How to Do Philosophy:

If you’ve ever suspected that most classical philosophy is a colossal waste of time, Paul Graham tells you why you’re probably right.

TIME: Why Medical Bills Are Killing Us:

Stephen Brill follows the money to uncover the pinnacle of corruption that is the U.S. Health Care system. A must-read article if there ever was one.

DIY Dot Org:

A beautifully designed site full of fun and challenging DIY projects. I could spend months on here.

The Steve Jobs Video Archive:

A collection of over 250 Steve Jobs videos in biographical order

Self-portraits from an artist under the influence of 48 different psychoactive drug combos.

Water Wigs are pretty amazing.

David Pogue proposes to his girlfriend by creating a fake movie trailer about them and then getting a theater to play it before a real movie. Beautiful and totally awesome.