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Table of contents
1. The race to catch the iPod;........................................................................................................................... 1
Bibliography...................................................................................................................................................... 4

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Document 1 of 1

The race to catch the iPod;

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Abstract: When it was first launched three years ago, Apple's iPod digital music player was met with derision.
The attraction of the iPod was that it used a hard disk, allowing it to hold thousands of songs. Since then, it has
changed the face of the music industry. In the three months to June, Apple shipped 860,000 units, up from
304,000 the year before. The launch outside America of the iPod mini, on Saturday, July 24, marks a big step in
Apple's bid to dominate the delivery of digital music. But Apple's success with the iPod has spurred competition.
The most formidable challenge comes from Sony. Some industry-watchers think this could turn into a struggle
like that between the Betamax and VHS formats for video recorders.
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Full text: Apple's portable iPod music player has revolutionised the way in which music is delivered to
consumers. However, as Apple launches its iPod mini worldwide, the brand is under attack on two fronts: from
copycat products from the likes of Sony, and from subscription services, which will soon be helped by software
from Microsoft
WHEN it was first launched three years ago, Apple's iPod digital music player was met with derision. Priced at a
hefty $400, consumers jibed that its initials stood for "Idiots price our devices". After all, consumers could
already carry their music around in portable compact-disc players like Sony's Walkman. And for those who did
not want to lug CDs around, there were already dozens of small digital music players. But these used memory
cards that could store only a couple of dozen songs at a time. The attraction of the iPod was that it used a hard
disk, allowing it to hold thousands of songs. Oh, and it looked good too, with its sleek design and cool white
casing. Since then, it has changed the face of the music industry. In the three months to June, Apple shifted
860,000 units, up from 304,000 the year before.<block class="relateditems
The launch outside America of the iPod mini, on Saturday July 24th, marks a big step in Apple's bid to dominate
the delivery of digital music. With a smaller capacity of 1,000 songs, a price to match (around $250) and an eyecatching candy-coloured shell, the new player is already much in demand--indeed, demand is currently far
outstripping supply. The iPod mini is likely to inflict further damage on sales of CDs, which have been falling
steadily over the past few years (see chart). This is largely thanks to the advent of file-swapping software that
has allowed music-lovers to share their songs for free.
The industry's response to the "problem" of digital file-sharing has been more stick than carrot. In 2002, the
music giants managed to have Napster, the best-known file-sharing service, shut down, after its central
directory was found to violate copyright law. However, a new generation of so-called peer-to-peer services,
such as Morpheus, Grokster and KaZaA, have sprung up in Napster's place. Because they do not have a
central directory, judges have ruled that they are no more violating copyright than firms that make video
recorders, which can likewise be used for illegal purposes. The industry's latest ploy has been to go after
individual file-sharers rather than the online services they use, with a blizzard of lawsuits last autumn.
The advent of the internet and more powerful computing that made online piracy possible also made possible
legal digital distribution. However, the industry has been slow to take advantage of this opportunity. Initially,
rather than offer consumers what they wanted--the ability to choose exactly which songs to buy, and to
download them to either computers or portable music players--the industry clung to the old format of song
compilations (with just one or two hits) on physical disks. Worse, in a bid to offset the decline in music sales,
companies raised the price of their CDs, which only increased the incentive to download them illegally. The
industry was reluctant to offer digital distribution itself, partly because it feared that it would no longer be able to
sell second-rate songs bundled with more popular ones. It was also worried about illegal copying from legal
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downloads.
Apple managed to assuage the latter fear by making it virtually impossible to transfer songs from an iPod to a
computer. It also lured customers by giving them the ability to customise their playlists, and by pricing songs
bought from its iTunes online store at a not-too-steep 99 cents apiece. The iPod's cult status has spawned no
fewer than 200 accessories--BMW has even adapted some of its cars so that drivers can play their iPod through
the vehicle's sound system.
But Apple's success with the iPod has spurred competition. The most formidable challenge comes from Sony.
The Japanese company launched the Network Walkman last month, on the 25th anniversary of the first
(cassette-based) Walkman. Priced at the same level as the mid-sized, 20-gigabyte iPod, it is smaller and lighter
and has a 30-hour battery life (compared with eight hours for the mid-sized iPod). Sony also boasts that its
player can hold 13,000 songs, more than even the bigger iPod.
Apple has not wasted much time in responding to this challenge. It hit back at the capacity comparisons,
pointing out that the Sony device could only hold that many songs if the data were compressed, reducing the
sound quality. And, within weeks, it had upgraded the iPod, with 12 hours of battery life, and dropped the price.
As these two companies lock horns, a battle over standards is looming. The iPod can download music only from
iTunes, while the Network Walkman can take songs from the Sony Connect service, but not from iTunes. Some
industry-watchers think this could turn into a struggle like that between the Betamax and VHS formats for video
recorders.
The iPod's cult status has spawned no fewer than 200 accessories--BMW has even adapted some of its cars so
that drivers can play their iPod through the vehicle's sound system
Aside from the battle between Apple and Sony (and various lower-level copycats), there is a continuing fight
between those who think consumers want to own music (such as Apple, which allows its customers to keep
their songs for life) and those who think they would prefer to rent it from huge libraries of songs, to which they
can gain access by paying a monthly subscription fee (Rhapsody, Roxio, which bought the Napster name, and
others). The subscription services have suffered from doubts about the quality of "streaming"--the means by
which songs are delivered to computers. They also make it difficult to listen to songs anywhere other than
through a computer, and charge an additional 79 cents for this privilege.
However, this may change with the launch of a new version of Microsoft's anti-piracy software, widely known as
Janus. One of its applications is designed to make it easier to download song collections from PCs to portable
players. Microsoft also plans to launch an online music store as early as the autumn.
Apple has come up with a product of beauty and, at the same time, changed an entire industry. It has also
rejuvenated its own financial fortunes--a more-than-doubling in year-on-year sales of the iPod has contributed to
a 30% jump in revenue in the latest quarter, to $2 billion. But Apple-watchers, even its most loyal fans, have
been here before. It did the same to personal computing, with the Apple Mac. But Microsoft came along, copied
it, and squashed it. Apple will have to fight hard to ensure that doesn't happen again.
Subject: Digital music; Computer peripherals; Competition; Computer industry;
Location: United States, US
Company / organization: Name: Apple Computer Inc; Ticker: AAPL; NAICS: 334111, 443120, 511210; DUNS:
06-070-4780; Name: Sony Corp; Ticker: SNE; NAICS: 334310, 334419; DUNS: 69-055-3649;
Classification: 9190: United States; 8651: Computer industry
Publication title: Economist.com / Global Agenda
Pages: 1
Number of pages: 0

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Publication year: 2004

Publication date: Jul 23, 2004
Publisher: The Economist Newspaper NA, Inc.
Place of publication: London
Country of publication: United Kingdom
Publication subject: Business And Economics--Economic Situation And Conditions
Source type: Magazines
Language of publication: English
Document type: News
ProQuest document ID: 208741424
Document URL:
https://proxy.geneseo.edu/login?url=http://search.proquest.com/docview/208741424?accountid=11072
Copyright: (Copyright 2004 The Economist Newspaper Ltd. All rights reserved.)
Last updated: 2010-07-13
Database: ProQuest Research Library,ABI/INFORM Global

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Bibliography
Citation style: APA 6th - American Psychological Association, 6th Edition
The race to catch the iPod; (2004, Jul 23). Economist.Com / Global Agenda, , 1. Retrieved from
http://search.proquest.com/docview/208741424?accountid=11072

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