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iPod competitors can't compete with Apple

post #1 of 46
Thread Starter 
Apple Computer's massive iPod shipment volume is allowing it to produce digital music players at a cost far below its competitors, and thus will remain atop the digital music player market for years, says one analyst.

Gene Munster, an analyst at PiperJaffray, recently surveyed a broad number of digital music players to see if any competitors can compete with Apple's iPod based on price.

The study looked at 20GB and 30GB players from device makers: Creative, iRiver, Samsung, and Sony. "Apple's 30GB iPod provides the lowest cost per gigabyte at $10, followed by Creative's Zen Vision:M at $11," Munster wrote in a research note. "It should be noted though that the Zen Vision:M has a few more features (i.e., personal organizer, recorder, more song storage, more hours of video, and an FM tuner) than the iPod."

The analyst al.so noted that the only other video capable devices were from Samsung and iRiver, and cost between $15-$25 per gigabyte, while those without video capabilities cost at least $11 per gigabyte.

Looking closer at device maker Creative, Munster said he was impressed by the features of its new Zen Vision:M, a knock-off of Apple's 30GB video iPod. However, the analyst believes the key question was: "Will Creative be able to pack these features into a 30GB device and price it below an iPod?"

"The answer is no," Munster said, noting that the device is $329.99, $30 (10%) higher than the price of Apple's 30GB iPod. Although, the iPod's competitors often have similar, if not broader, feature sets than the iPod, none have proven they compete in the two key areas of user interface and "cool" factor," he said.

"We believe that non-iPod devices must compete on price to gain adoption, but Apple has such massive relative shipment volume with the iPod that other MP3 player manufacturers are not able to replicate the economies of scale achieved by Apple," Munster added. "We believe this reality will allow Apple to sell iPods at the lowest prices in the market, thus retaining the iPod's pole position for years."

PiperJaffray maintains an "Outperform" rating on Apple shares with a target price of $79.
post #2 of 46
HELLO?!?! the creative zen vision:m thing is twice the thickness of the iPod. I think that's kind of a major factor here.
post #3 of 46
Creative ...the gluttons for punishment.
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post #4 of 46
early to market with a great product means economies of scale, and further dominance. The question is how to you continue to innovate? Do you design 30 different kinds of ipods, throw them at the market and see what "sticks" like sony does? Although this might be the way to make sure that "I thought of it first," ultimately i don't think this is how apple functions, nor should function. They offer a couple of options and thats it. stopping the ipod mini for the introduction of the nano was fascnating. (Of course they're reworking the mini... people loved that thing. And when it's back it will be better.)

I do think, though, that you can't leave gaping approaches for your competitor, though. The playstation portable, with its superior screen size, is problematic. Would you rather watch "Lost" on an ipod or a PSP?

How do you bring something like that to market and compete with the hardware subsidy sony recoups on game sales? Well, how about movie downloads, music, and other media integration.

you could argue sony is building a similar empire with the psp, was merely my point. It didn't get much press behind the xbox 360 and the ipod, but I think that thing is going to be huge.
post #5 of 46
All this article did was point out blatantly obvious business ethics of tons of companies, not just apple. This happens all the time and in every market place, not just mp3 players. This is just how companies make a successful product, I don't get why when apple does it's suddenly different or in creative's eyes "unfair." Any of the other companies that were mentioned in this article would have done the same thing if they were in apple's position it's just common sense. Hell, some of the ones listed do do just that, just in other markets.
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post #6 of 46
Quote:
Originally posted by benny-boy
you could argue sony is building a similar empire with the psp, was merely my point. It didn't get much press behind the xbox 360 and the ipod, but I think that thing is going to be huge.

I hear that the Nintendo DS is doing very well, certainly far better than any of the iPod's competitors in its market. The reasons being a "coolness factor" like the columnist mentioned, coupled with - surprise - superior human interface! Games like Nintendogs and that Brain Trainer thing doing so well in Japan of late, keep the Nintendo portable a better platform for those who like games that aren't the Playstation 2's poor brother but actually have creativity and design to them.

Nintendo and Apple have much in common in their respective niches (Windows pc vs. Mac) and portable leads (Game Boy, DS vs. iPod). They outperform their competition based on design more than anything else. Though of course volume pricing helps when you can get it. Not that I am a Nintendo player myself (I've bored of games overall) but the similarities between the two companies are quite strong and I expect they'll both do well in the years to come.
post #7 of 46
As iPod users' individual libraries continue to get larger with more music, TV shows, etc., the more intractable iPod's market share is going to get for competitors.

Unless there is some sort of change in DRM down the road whereby Apple is required or voluntarily opens up its DRM to competitor devices, competitors are going to have an almost impossible time getting existing iPod users to switch. That leaves only first-time MP3 buyers -- still a large market -- but the window is closing a little more each day.
post #8 of 46
I don't put much faith in analysts, but I'd be quite happy if AAPL were to continue on it's path toward $80...$90...and beyond...

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #9 of 46
He gets paid to tell us things we already know? Man, I gotta get me a job like this.
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post #10 of 46
the zen vision 30GB has 'more song storage' than the 30GB ipod? err HELLO?

can someone at least read what they are pasting onto AppleInsider? or add some [incorrect marketing bullshit] comment
post #11 of 46
Quote:
Originally posted by starwxrwx
the zen vision 30GB has 'more song storage' than the 30GB ipod? err HELLO?

That's because they upload WMA files, which are usually smaller than their MP3/AAC counterparts.
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post #12 of 46
Quote:
Originally posted by starwxrwx
the zen vision 30GB has 'more song storage' than the 30GB ipod? err HELLO?

can someone at least read what they are pasting onto AppleInsider? or add some [incorrect marketing bullshit] comment


I believe that when stated on the product packaging, Creative notes that it uses 96kbps encoding versus the 128kbps encoding that Apple assumes. Sure, that's worse sound quality, but it means more storage and that is just another selling point to Creative!
post #13 of 46
Actually, it's more like 64kbps WMA.

Link
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post #14 of 46
Even 160 KBit/s WMA would barely be as good as 128 KBit/s AAC.

I wonder when Apple will finally introduce AACplus...
post #15 of 46
Quote:
Originally posted by Chucker
Even 160 KBit/s WMA would barely be as good as 128 KBit/s AAC.

I wonder when Apple will finally introduce AACplus...

That's just TOO funny! The Li-ION battery test is "tested" with 128kbps MP3 files (4 minute files, hope you boys are listening to dance music or any modern electronica) and the storage capacity is "measured" with 64kbps WMA. How much further can you confuse the average consumer?!
post #16 of 46
Quote:
Originally posted by Gene Clean
Actually, it's more like 64kbps WMA.

Link

WMA @ 64kb/s sounds like its coming out of either my ass or the toilet.
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post #17 of 46
So, how do I buy shares in AAPL?
post #18 of 46
Quote:
Originally posted by eAi
So, how do I buy shares in APPL?

You mean AAPL, and your bank, if it's any good, will probably let you setup stock purchases at a cheap rate.
post #19 of 46
Quote:
Originally posted by theapplegenius
WMA @ 64kb/s sounds like its coming out of either my ass or the toilet.

Yeah, it's pretty bad. Though I'm not sure how they plan to provide 64kbps WMA files, when two major Apple competitors (major is loosely used here) Napster and Real offer files at 192kbps.
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post #20 of 46
Obviously its all marketing hype as to 'storage' in terms of number of songs, and I know why they do it, but why does AppleInsider still publish it in their article ??
post #21 of 46
Quote:
Originally posted by Gene Clean
Yeah, it's pretty bad. Though I'm not sure how they plan to provide 64kbps WMA files, when two major Apple competitors (major is loosely used here) Napster and Real offer files at 192kbps.

It's like Sony with their supposed 30 hours of playback and 3x the storage that is calculated with 48KHZ ATRAC, while they offer 192k files on their music store.

Remember the 13" Apple RGB Trinitron monitors? Apple was the only one considering the viewable-screen size instead of the picture tube size. Other monitors from the competition, of the same size as the 13" RGB. where advertised as 14" monitors. Eventually Apple renamed the same monitor 14" Apple RGB monitor, because they were disadvantaged.

I don't think Apple will do the same for audio, they'll stick to their guns. Anyway while the situation is similar, it's not the same, competitors all use different numbers to cheat in their storage and battery specs.


At the risk of going out of topic, I cannot resist commenting about Apple/Nintendo having similar philosophies, since I'm also fan of both companies. The best in all that is that they are complimentary. Apple doesn't make games and actually need more of them on their platform, Nintendo doesn't distribute music and movies and doesn't design OSes and interfaces.

Don't expect Apple to get a partnership with Sony on the PS3, since Sony wants to use the machine (also) to sell music and movies, and are competing against Apple on that. Obviously, it won't happen with Microsoft on the 360 either.

Nintendo needs a solid store front end and interface to sell NES, SNES and n64 games online on the Revolution, with a DRM system. Apple could provide all that and while they are at it, enable music and video downloads. The Nintendo Revolution doesn't support HDTV, but you don't need HD to watch 320x240 movies, or even an eventual 640x480 iTMS video format...

Oh and if it doesn't makes sense to you, just look at the Apple Front-Row remote, then look at the Revolution controller...
post #22 of 46
Quote:
Originally posted by benny-boy
early to market with a great product means economies of scale, and further dominance. The question is how to you continue to innovate? Do you design 30 different kinds of ipods, throw them at the market and see what "sticks" like sony does? Although this might be the way to make sure that "I thought of it first," ultimately i don't think this is how apple functions, nor should function. They offer a couple of options and thats it. stopping the ipod mini for the introduction of the nano was fascnating. (Of course they're reworking the mini... people loved that thing. And when it's back it will be better.)

I do think, though, that you can't leave gaping approaches for your competitor, though. The playstation portable, with its superior screen size, is problematic. Would you rather watch "Lost" on an ipod or a PSP?

How do you bring something like that to market and compete with the hardware subsidy sony recoups on game sales? Well, how about movie downloads, music, and other media integration.

you could argue sony is building a similar empire with the psp, was merely my point. It didn't get much press behind the xbox 360 and the ipod, but I think that thing is going to be huge.

Creative does this more than Sony does. They have, at last count, 27 different models. And that's not just different amounts of memory or colors, that's models.

The idea is to flood the market with so many models that wherever one goes there is always more of their models than anyone else's. Then there is a better chance that one will be bought.

The problem with this marketing concept is that none of the models sell enough to make them profitable. This is Creatives' conundrum. They are the second largest maker, but lose money. A quarter ago their sales went up more than 100%, but they lost $250 million dollars because, as they complained, Apple had cut the price of their players, and so Creative had to follow.
post #23 of 46
Quote:
Originally posted by Gene Clean
He gets paid to tell us things we already know? Man, I gotta get me a job like this.

I thought you did!
post #24 of 46
I bought my 3 ipods because they are the best. They are small and easy to use. I think that is why people are using them because they are simple. I don't see any reason this will change.
post #25 of 46
Quote:
Originally posted by Bmaier
I believe that when stated on the product packaging, Creative notes that it uses 96kbps encoding versus the 128kbps encoding that Apple assumes. Sure, that's worse sound quality, but it means more storage and that is just another selling point to Creative!

Sony did the same thing, remember, except that they were using even lower bitrates.
post #26 of 46
Ever heard before that Apple is benfititting from "scales of economies".
Good to hear this; first time for me.

copeland
post #27 of 46
Quote:
Originally posted by melgross
Creative does this more than Sony does. They have, at last count, 27 different models. And that's not just different amounts of memory or colors, that's models.

The idea is to flood the market with so many models that wherever one goes there is always more of their models than anyone else's. Then there is a better chance that one will be bought.

The problem with this marketing concept is that none of the models sell enough to make them profitable. This is Creatives' conundrum. They are the second largest maker, but lose money. A quarter ago their sales went up more than 100%, but they lost $250 million dollars because, as they complained, Apple had cut the price of their players, and so Creative had to follow.

I just dont understand the philosophy behind the pursuit of Apple's victorious creation. The iPod has a staggering market share, and although the lack of pursuit would surely raise echoes of a monopoly, a company like Creative really needs to sit back and watch the show instead of trying to compete with this behemoth.

I know that both sides of that statement can be argued, and surely Creative has a long standing trend of creating products that engage the multimedia user, but besides being a transient manufacturer name at your local retail store, Creative has far less weight than Apple. It seems commercial suicide to try and take on Apple in the iPod market. Just look at the profit figures: is Creative really looking out for its shareholders?

If Creative intends to compete in any seriousness, they will not only need to market the Zen player just as strongly (read: every bus station across the US), they will also need to gain the trust of users with a sleek, easy integrated music solution, NOT just leave them to fish around some random music download store. Having a specified retailer (like the Apple Store) makes the product easier to buy, too, NOT leaving the average user to figure out who sells the darn thing. They will need to lower prices (read: secure large quantities of supply from business connections), NOT just cry about how Apple has already gobbled up all resources. They will need to create a player that is actually just as thin as the iPod (read: portability is obviously a huge selling point) and NOT augment their sub-par design with other features (read: radios aren't in iPods and they sell just fine...)


2 cent rant...
Brian
post #28 of 46
Quote:
Originally posted by Bmaier
I just dont understand the philosophy behind the pursuit of Apple's victorious creation. The iPod has a staggering market share, and although the lack of pursuit would surely raise echoes of a monopoly, a company like Creative really needs to sit back and watch the show instead of trying to compete with this behemoth.

I know that both sides of that statement can be argued, and surely Creative has a long standing trend of creating products that engage the multimedia user, but besides being a transient manufacturer name at your local retail store, Creative has far less weight than Apple. It seems commercial suicide to try and take on Apple in the iPod market. Just look at the profit figures: is Creative really looking out for its shareholders?

If Creative intends to compete in any seriousness, they will not only need to market the Zen player just as strongly (read: every bus station across the US), they will also need to gain the trust of users with a sleek, easy integrated music solution, NOT just leave them to fish around some random music download store. Having a specified retailer (like the Apple Store) makes the product easier to buy, too, NOT leaving the average user to figure out who sells the darn thing. They will need to lower prices (read: secure large quantities of supply from business connections), NOT just cry about how Apple has already gobbled up all resources. They will need to create a player that is actually just as thin as the iPod (read: portability is obviously a huge selling point) and NOT augment their sub-par design with other features (read: radios aren't in iPods and they sell just fine...)


2 cent rant...
Brian

IF, Creative got rid of most of their players, and just kept the ones that were doing best, they would lose a lot of marketshare, but make a profit. By extending the marketing on just those few models, they would raise consumers awarness of them.

But, they have other problems. They don't have a closely tied store that is popular, and they don't have the scrollwheel, which has been acknowledged as the best controller.

The problems they have in the computer space are well known. They are disliked (to put it mildly! Die Creative, die!, is a slogan I've seen often.) by PC users where they have put more than one company out of business through unsavory means. Their audio board business is dying. The portable player business is what they need to stay afloat.
post #29 of 46
What amazes me about the stupidity of Apple's competitors here is that they aren't going after the iPod users as a market. The biggest market is the existing userbase, not trying to convert new people to your product versus Apple's marketing.

I'm sure brand loyalty is high amongst iPod users but there still seems to be no attempt at courting that market. I'm sure there's plenty disgruntled iPod owners though too. But... None of the competitors support AAC. None of the competitors work with iTunes.

If many of the iTunes/iPod users have just kept the default AAC encoding used in iTunes then there's a load of people out there that have libraries encoded in AAC that probably don't want to have to reencode everything. Most of the chipsets used in these players support AAC but they don't add it as a supported feature.

Secondly, How hard would it be to add iTunes library sync support instead of the lame drag and drop method used by almost every competitors product? There's literally dozens of tools out there that do it already between an iPod and your PC so it's not like the code is hard. I've a large iTunes library - I'm going to buy a player that works with iTunes. Simple as that.

Every time I see a new player on Engadget - and there's some nice ones out there such as the Cowans - I have to rule them out because they don't support iTunes or AAC. My mobile phone has better codec support than all the iPod competitors and even syncs with iTunes with a neat little 3rd party hack. It's just bizarre that competitors don't directly target the file format and software that the market leader uses.
post #30 of 46
Let's face it: Your average consumer doesn't care about anything that's been talked about in this thread. They've likely never heard of ATRAC or AAC and certainly wouldn't think about what, if any, difference exists between 128kps versus 256kps. They've heard of mp3s and probably think that all digital music is mp3, even though they don't know what "mp3" actually means.

Consumers care about ease of use and the "cool" factor. iPods and iTunes offer a top to bottom, fully integrated system. It's easy to use. No other mp3 players have such integration. Buy any non-iPod player and you have to figure out which online store to buy from, set up the player with Windows Media Player, yadda yadda. Pick up an iPod and you can figure out how to use it within seconds.

iPods are also cool. The ads show people dancing around. Celebrities like 50 Cent have put them in their music videos -- which I think was the main catalyst for its popularity explosion. They have name recognition. Hell, "iPod" is becoming the next "Velcro." People are buying iPods because their friends have them and they want one too. Existing users are hooked because they're actually great products.

Yes, in a business sense Creative and others' strategies are losing terribly in this game based on component costs, bit rates, etc., but consumers don't care about all that stuff. Apple has come up with a top to bottom easy-to-use product that's really cool and marketed well. This game is at the 2-minute warning in the 4th quarter with Apple leading by 4 touchdowns.
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post #31 of 46
Quote:
Originally posted by aegisdesign
What amazes me about the stupidity of Apple's competitors here is that they aren't going after the iPod users as a market. The biggest market is the existing userbase, not trying to convert new people to your product versus Apple's marketing.

I'm sure brand loyalty is high amongst iPod users but there still seems to be no attempt at courting that market. I'm sure there's plenty disgruntled iPod owners though too. But... None of the competitors support AAC. None of the competitors work with iTunes.

If many of the iTunes/iPod users have just kept the default AAC encoding used in iTunes then there's a load of people out there that have libraries encoded in AAC that probably don't want to have to reencode everything. Most of the chipsets used in these players support AAC but they don't add it as a supported feature.

Secondly, How hard would it be to add iTunes library sync support instead of the lame drag and drop method used by almost every competitors product? There's literally dozens of tools out there that do it already between an iPod and your PC so it's not like the code is hard. I've a large iTunes library - I'm going to buy a player that works with iTunes. Simple as that.

Every time I see a new player on Engadget - and there's some nice ones out there such as the Cowans - I have to rule them out because they don't support iTunes or AAC. My mobile phone has better codec support than all the iPod competitors and even syncs with iTunes with a neat little 3rd party hack. It's just bizarre that competitors don't directly target the file format and software that the market leader uses.

It's not that simple - while AAC is open source, Apple's DRM encoded in each song is not, and they would have to license its use by paying Apple a licensing fee. That's why people like Creative's CEO are screaming "unfair!", cause Apple did it to them before they could do it to Apple.

It may be that eventually Apple could license their DRM, but there's nothing in the market right now to force them to do that. They'll only do it if they can see themselves making money by letting their competitors use their property. And since doing that now would only allow people like Creative to dig into Apple's iPod market share - that is NOT going to happen any time soon!
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post #32 of 46
Quote:
Originally posted by benny-boy
Would you rather watch "Lost" on an ipod or a PSP?

Would you rather carry around an iPod or a PSP?
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post #33 of 46
Quote:
Originally posted by rwahrens
It's not that simple - while AAC is open source, Apple's DRM encoded in each song is not, and they would have to license its use by paying Apple a licensing fee. That's why people like Creative's CEO are screaming "unfair!", cause Apple did it to them before they could do it to Apple.

It may be that eventually Apple could license their DRM, but there's nothing in the market right now to force them to do that. They'll only do it if they can see themselves making money by letting their competitors use their property. And since doing that now would only allow people like Creative to dig into Apple's iPod market share - that is NOT going to happen any time soon!

Sorry, you have this wrong. To answer your points...

It doesn't matter that AAC is open source or not. The algorithm requires a licence as it's patent encumbered, just as mp3 is.

http://www.vialicensing.com/products...icenseFAQ.html

There is nothing preventing Creative from adding AAC support to their players AFAIK since the chips they use support AAC.


Apple's DRM is irrelevant. I made no mention of the iTunes Music Store, only iTunes and the iPod which will function perfectly without any DRM encumbered usage. I've 8000+ songs in iTunes, mostly in AAC format. None of them from the store.

There is nothing preventing Creative from adding the ability to sync their players with iTunes AFAIK. Plus there's plenty of utilities with source out there from which they could base their code.


DRM is not the issue here despite people like Real's CEO and Microsoft claiming that the iPod is a proprietary locked in system - it's not. It's only the store which is a locked in system, not the hardware and not iTunes (the software, not the store).
post #34 of 46
Quote:
Originally posted by melgross
I thought you did!

What?
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post #35 of 46
Quote:
Originally posted by Gene Clean
What?

"He gets paid to tell us things we already know? Man, I gotta get me a job like this."

post #36 of 46
Quote:
Originally posted by melgross
"He gets paid to tell us things we already know? Man, I gotta get me a job like this."


What is that supposed to mean?
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post #37 of 46
Quote:
Originally posted by Gene Clean
What is that supposed to mean?

It's a joke Gene. Just like your original comment.
post #38 of 46
cosmonut,
You're 100% right; I'd definitely rather carry an ipod. But weren't we all hoping a year ago that the "video ipod," once the mythical creature reared its head, boast a 4 or 5 inch wide screen that ran across the face of the entire ipod (which would be held sideways?). Start selling that, and sony (with it's silly UMD movies) would only have games to survive on when facing the eventual itunes movie-tv store.
post #39 of 46
Let's not forget that the iPod has been and continues to be a music player first and foremost. If portable video takes off, Apple may change that by releasing a second line of iPods that have a larger screen turned sideways. I really don't see that happening, though.
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post #40 of 46
Quote:
Originally posted by Gene Clean
What is that supposed to mean?

That you are an analyst in disguise and responsible for today's stock dive.

Admit it!
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