Apple Marches On With Video iPod Plus Its First Media Hub

The video solution on the new iPod sucks and, strangely enough, this showcases how much better Apple understands the current market and why others are either failing in it or have had to exit, like, respectively, Creative Labs and D&M Holdings (RIO).

The 2005 Portable Entertainment Market

Two things are selling well in single vendor solutions: portable music players (specifically the iPod) and portable game systems (specifically the PSP). It is interesting to note that both products remain on the short lists for the under 20 crowd going into the holiday buying season.

Previously the Palm handheld device and the Sony Walkman enjoyed similar positions. One did contact management well and the other played music well. In both cases there was one thing each did better than anyone else and that one thing carried them to greatness.

There are three legs to this kind of success: First, you need to excel at the one thing people want you to do. Second, you need to be priced at a point people are willing to pay. And third, you need a marketing program that showcases your advantages.

Apple and Sony have all three legs with their respective products. Sony’s PSP doesn’t do video or music particularly well but then it is bought for the games and people don’t really care. The iPod doesn’t do video particularly well (largely because of a lack of content and small screen size) but people probably won’t care about that either and, assuming the content does show up, the iPod’s screen is arguably better than the one most cell phones currently have.

What makes the iPod great is that it’s thinner, lighter, and less expensive than the product that preceded it and they would probably sell all they can build if it wasn’t for some nasty competition.

Video iPod Competition

Fortunately for Apple the nastiest competition comes from their iPod Nano, which I personally prefer. However, in several conversations with women I know, I’ve concluded that my view is very male-centric and that the pockets I take for granted often aren’t an option on women’s clothing. Evidently small items like the Nano are incredibly difficult to find in purses, which is a problem I have yet to experience. If this incredibly informal sample is correct, guys may prefer the Nano and girls the Video iPod which will better balance interest in the iPod product line.

Other things that will be competing for the iPod dollar include the Sony PSP which remains on constraint — basically demand still appears to exceed supply, the Xbox 360 which will be hitting the market with a rather substantial marketing program of its own, and “the digital camera” — the only thing on the last consumer survey I saw that didn’t actually call out a product brand name.

While not currently in the iPod class the new Palm TX just launched and it has both a better screen and wireless capability. In addition it works with wireless broadcast TV services like MobiTV. Palm was the hot product before the iPod and if you are more into pictures and video, particularly given how cheap flash memory is, it may have more appeal particularly if you already have an iPod.

This brings us to the other big competitor to the new iPods: the old iPods. The iPod is actually rather well penetrated in the existing customer base and for many they may prefer not to get a new one and instead get something else because what they have is still working just fine. That will increasingly become a problem for Apple because they now have 90 percent of the portable music player market and the only way they can now grow at any rate is to grow the overall market. Eventually it will saturate, however, or move to something else.

For now, the fourth quarter, at least for the iPod, is looking incredibly good and the video iPod may eventually be the device that heralds in an era when we download our TV shows. I still highly doubt this, but as long as it does music very well and its competitors really aren’t competitive (this has to be driving the Microsoft folks nuts), it will do just fine.

Apple’s Media Hub

As expected, Apple announced a product positioned as a living room media hub. I had expected them to use the much more flexible Mac Mini for this but the iMac, as a TV-like implementation, works as well (and that’s good because that’s what they picked).

Comparing this new G5 iMac to the Windows Media Center PC, it is generally easier to install and has less features but what it does it does simply and well. This is not to say the Media Center doesn’t, but many of the features the Media Center has that the Apple doesn’t aren’t currently working particularly well. The Media Center does HD, but getting HD content can be very difficult. It will broadcast to other rooms but it will not multi-cast like the Sonos does, nor will it broadcast DVDs. In short the Media Center PC may do more stuff well but it is often remembered for what it doesn’t do particularly well and its complexity which, if we apply the iPod model, works in favor of Apple’s product.

There are the issues of price and flexibility. Media Centers start at around US$500 these days, and Media Center PCs work better with external displays, like plasma TVs, and rear-projection TVs, which is why I still think the Mac Mini would have been a better platform. The all-in-one Media Center PCs have sold very poorly and it is only HP’s stereo-like box that has captured any lasting interest in this space. Still, even it needs an amplifier and cable card support (granting HD content) before it gets really interesting — and we probably won’t see that until next year.

In short, I can see why Mac lovers might pick up this product but I have doubts as to whether it, at $1,200, will move widely in the living room as a media hub. Now if they ever come out with a Mac Mini version that does HD well at closer to $500 then some interesting things could happen. For now, the Media Center should outsell this new Apple box for living room use, but until one of these products really creates an iPod-like experience, and neither really does at this time, I think we are still looking to the future for a product that really does well in the living room. As with all iMacs, and all-in-ones in general, I don’t expect this one to make a huge splash.

Looking Forward

Next year, when the Intel-based Apple products show up (I’ll talk about those here in a few weeks) expect to have your socks knocked off. I’m seeing test data that suggests a performance bump that is all but unbelievable and some designs that will make everything that Apple, or anyone else, has look suddenly very old. I can hardly wait.

In the meantime, it is interesting to note that I expect the battle for digital media hardware to be between HP and Apple at some point in the future. HP is ahead in the living room but clearly doesn’t yet have anywhere near the success that Apple has with the iPod. Apple set HP back two years with their brilliant idea to have HP resell the iPod, but that period is over. Expect HP to come back with a vengeance now that they know they were played.

There is nothing like a good battle to keep the blood flowing and consumers will clearly benefit from the advancements and prices that are likely to result. For now, in the iPod space, Apple is almost unstoppable. We’ll learn how big the word “almost” is next year when HP steps up to the plate and takes their opportunity to swing for the fences. It honestly wouldn’t take much to do better than the other also-rans in the space, but beating Apple will continue to be very difficult.

Rob Enderle, a TechNewsWorld columnist, is the Principal Analyst for the Enderle Group, a consultancy that focuses on personal technology products and trends.

1 Comment

  • In think you’re dead wrong about the video iPod. Content will come, plus peoples ability to put their home movies in the product lend itself to a mass consumer appeal. I don’t think these guys make mistakes as big as this one. They were tight on with the original iPod and I for one bought it on the first day it was avaialble, but I always do that and sell the old one on ebay. I think your in for a big surprise on this one!

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