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HP to stop bundling iTunes next year

post #1 of 32
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Following the termination of its exclusive deal with Apple Computer, Inc. to distribute re-branded iPods, Hewlett-Packard is preparing to reengage in the digital music business this January, and will likely do so without Apple's iTunes software, reports Macworld UK.

"The company's executive vice president Todd Bradley confirmed such plans last week, during which he also revealed the company would honor its contractual obligation to install iTunes on PCs HP ships until January 2006," according to the report. "Beyond that, the future of even vestiges of the HP/Apple deal are shady."

Bradley's comments corroborate an August AppleInsider report entitled "HP likely to stop bundling iTunes by '06," which quoted American Technology Research analyst Shaw Wu. In the report Wu predicted HP would abandon iTunes as its default music player by 2006 in favor of forming a new relationship with Microsoft and its Windows Media Player technology.

Similarly, Macworld UK also believes: "It's likely HP will now choose to deliver solutions based on Microsoft's Windows Media technology."

In January 2004, HP and Apple formed a strategic partnership where HP agreed to install Apple's iTunes music jukebox software on its computers in exchange for the rights to sell HP-branded iPods. Apple also sought the benefits of HP's 100,000-plus retail outlets world-wide, knowing they could quickly expand the iPod's reach.

Unfortunately, the partnership barely got off the ground. Almost immediately, the two company's began to quarrel over price protection on iPods and other business aspects. At one point HP halted orders to Apple for new iPods for several weeks, protesting a need for price protection which Apple failed to offer.

But by May of this year, it seemed as if the two companies had worked through their differences. HP began expanding its iPod offerings to include the iPod mini and iPod shuffle. At the same time, Apple was quietly negotiating its own presence in big box retailers such as Wal-Mart, which had previously sold only HP-branded iPods.

Only several weeks after launching a pilot prgram at Wal-Mart, Apple forced its foot in the door of another large HP iPod retailer: on July 21, AppleInsider reported that Apple had landed an iPod deal with RadioShack. Eight days later HP announced that it would stop reselling iPods.

According to Apple, HP iPod sales accounted for less than 8-percent of total iPod shipments during the last quarter in which sales results for HP iPods were released.
post #2 of 32
Meh, it's HPs loss
post #3 of 32
Wonder if this is related to HP getting in bed with HD-DVD.
post #4 of 32
Ironically, before the "Great Culling" of Compaq branded products, HP actually had a well respected brand of MP3 players (don't think they were WMV specific) that sortof loosely tied in with the iPaq brand.

If I were HP, I'd look at seriously repositioning their PDA products as lifestyle devices; ie. stick 1.8" and 1" HDs in different models and position them as handheld photo viewers/vaults, audio players, and PocketPC devices. Phone functionality optional.

It would certainly be their strongest strategic move, as their PDAs I'm sure have some residual brand respect if not current brand respectI'm not up on the current PDA market as it doesn't really tweak my interest. I'm willing to bet that professionals in the 25-50 year old range that PDAs are targeted at are also a large segment of the music player market still, despite the growing popularity in the "youth market."
post #5 of 32
Quote:
Originally posted by Booga
Wonder if this is related to HP getting in bed with HD-DVD.

No. That has nothing to do with it. Apple doesn't care what HP does regarding HD-DVD. This is about righting what many thought was a mistake. HP not making their own player and accepting a bad deal from Apple. HP is a bit torqued by that according to my acquaintance from HP.
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post #6 of 32
Even though it may seem as though Apple doesn't need Hp, it was bad business practice doing what Apple did.

You don't compete directly against your business partners.

I'm not saying that it was a bad move in and of itself for Apple to go to Walmart and RadioShack, but it was bad politics.

With Hp removing iTunes from their machines, Apple will lose the recognition of people who buy those machines. The fact that it has been on those machines has been responsible for many people coming in contact with the product for the first time. Hp sold 8.5 million computers in the 3rd quarter worldwide, almost as many as Dell.

Apple should have found a better way to end the relationship, if that was what they wanted.
post #7 of 32
Quote:
Originally posted by melgross
Apple should have found a better way to end the relationship, if that was what they wanted.

I think it was HP that ended the relationship, not Apple.
post #8 of 32
Quote:
Originally posted by iBill
I think it was HP that ended the relationship, not Apple.

HP ended it because apple treated them like crap. Sign an agreement to distribute iPods, then try to screw them by not offering them buy-back capabilties when Apple comes out with a better and cheaper iPod, leaving HP with a boatload of overpriced product. Yeah, its all HP's fault.
post #9 of 32
Quote:
Originally posted by zedrac
Meh, it's HPs loss

How in the world is it HP's loss? No one bought an HP machine to get a bundled version of iTunes (a piece of software you can download for free and install anyway)! It wasn't a selling point. In fact, it was done more to get the iPods. But apple didn't want/need them for the iPod sales, so they lost that deal. So now there's no need for the iTunes thing.
post #10 of 32
Quote:
Originally posted by Louzer
HP ended it because apple treated them like crap. Sign an agreement to distribute iPods, then try to screw them by not offering them buy-back capabilties when Apple comes out with a better and cheaper iPod, leaving HP with a boatload of overpriced product. Yeah, its all HP's fault.

That's the point.

The problem is that Apple will make other companies wary of entering into deals if they think that the deal is one that Apple might want to scrap.

I used to have this problem with my partner. sometimes I wanted to hit him upside the head. If I didn't stand on top of him, we would have gotten a rep of being renegers. If someone would be given an estimate for a job, and it turned out to be too low, he would want to charge them a higher price, after the deal was done. Not good. Ya take ya lumps!
post #11 of 32
Quote:
Originally posted by Louzer
HP ended it because apple treated them like crap. Sign an agreement to distribute iPods, then try to screw them by not offering them buy-back capabilties when Apple comes out with a better and cheaper iPod, leaving HP with a boatload of overpriced product. Yeah, its all HP's fault.

Uh...let's see here...HP has got have about twice as many lawyers as Apple. Why the heck did they even sign a deal that put them into that position?

It's HP's fault.
post #12 of 32
I don't see how HP can enter the MP3 market without cruisifying theirselves. It's just too late. I mean, iRiver and Creative BARELY have a chance if at all.

Although on the other hand, I am concerned that HP might have a insider understanding about how the iPod works, etc., that theirs can copy it.
post #13 of 32
Quote:
Originally posted by Chris Cuilla
Uh...let's see here...HP has got have about twice as many lawyers as Apple. Why the heck did they even sign a deal that put them into that position?

It's HP's fault.

It isn't their fault that Apple did what they did. Perhaps they could have sued, perhaps not.

Part of it was the change in leadership at Hp. If Fiorina was still there, things might be different.

In all fairness to Apple though, they might have felt that Hp was slow out of the gate. Hp didn't do much to get the product into any of its foreign dealerships, so that 100,000 sales points were really more like 15,000.
post #14 of 32
Quite honestly I was always amazed that HP entered into this agreement. Why not just resell Apple's iPods if they wanted a piece of the market? Seems to me they would have sold more of them at lower cost to HP.

And frankly, while it was a bit sketchy how it all went down, based on Apple's past behaviour I can't see how they can expect to be surprised.
post #15 of 32
Quote:
Originally posted by ChevalierMalFet
Quite honestly I was always amazed that HP entered into this agreement. Why not just resell Apple's iPods if they wanted a piece of the market? Seems to me they would have sold more of them at lower cost to HP.

And frankly, while it was a bit sketchy how it all went down, based on Apple's past behaviour I can't see how they can expect to be surprised.

At the time, it seemed that Apple and Hp were going to have a broader relationship. It looked as though Hp wanted to leave MS's orbit in the area of media.

We'll probably never know the extent of what was intended, but it likely involved more than iPods in the long run. But the problems they both had from the start wasn't a good sign.

The new leadership at Hp is taking the company down a somewhat different direction.
post #16 of 32
I think it's Apple's loss and a mistake. I was actually surprised that ~8% of the iPods sold were by HP (I remembered ~4%). That is a pretty good number, in my opinion! By this time next year, iPod + iTunes will have lost significant marketshare, partially due to this loss.

Microsoft learned long ago that you have to keep the product IN THE FACE of the consumer to keep a majority marketshare. I think people will use what is available to them. If iTunes is on the machine, people might go out and buy an iPod. Without that, they might just use the competitor's software, which advertises a non-AAC product.
post #17 of 32
I don't think its that personal its just business. You are going to partner with who is more likely to achieve your objective and make you more profit.

Apple expected IBM to make a 3Ghz G5 and a low power G5 for the laptops. But they didn't.

Intel expected Microsoft to support Itanium sinking billions of dollars into the project. But Microsoft at the last moment pulled any support for Itanium.

Apple will sell more iPods in WalMart and Best Buy than thru HP.

In a way what does it matter if HP comes pre-loaded with iTunes, if Apple continues to sell more iPods. People will need to download iTunes anyway.
post #18 of 32
Quote:
Originally posted by fluidinclusion
By this time next year, iPod + iTunes will have lost significant marketshare, partially due to this loss.

That's an interesting idea. Care to back it up with something less vague than "partially because HP no longer bundles iTunes"?
post #19 of 32
Bad business Practices. If HP were still in on this deal they would be selling 4 gig minis for over suggested by Apple price. Bundling Itunes with HP's saves someone the hassle of downloading Quicktime and iTunes. Since 80% of the home users HP has will be using an iPod, they just download the software. It's a bit of inconvenience but not that much. I have seen the other MP3 players and meh, none has really done anything. I see lots of them being handed around, but nobody uses them after a while. iPods get used, alot, In our office over the last three years. Everyone has stopped using the other MP3 players and everyone, OK 45% of our office has an MP3 player. 1 person still has another version, It's weird actually. And i must have recommended 4 iPods as Christmas gifts this year alone. HP is going to lose out in thelong run. They didn't really help distibution, And Apple's next internet run is going to leave alot of people in the dust. Imaging all those switchers now being able to use the internet free from viruses and worries of attack.
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post #20 of 32
Why does everyone mention downloading itunes as a hassle? It comes on a cd with the ipod. Every other company's player does pretty much the same(including creative).

Last year when I was still on windows I owned a sony player and the software to fill it up came from...you guessed it a packaged cd that came with it.

Just because we're mac users doesn't mean we have to look at things on the windows end so unrealistically.

Is some girl going to best buy to buy an ipod and says "but the computer I bought doesn't come with itunes!" and get something else? People expect everything they need to get up and running to be inside the box and it is.

What's the problem with that? What percentage for people that bought ipods over the past year had a computer that already had itunes on it? Does this really influence sales of ipods? I doubt it.

IN FACT most people I know that DO have itunes preloaded on their computer didn't even know they did until they got an ipod. When they installed the cd or downloaded from the net they were surprised to learn that they already had itunes.

Having to install drivers (or in this case itunes) is pretty much standard practice for anything you buy for a windows computer.

HP is only one of many pc vendors and way more people than those who own just apple and HP computers have ipods.
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post #21 of 32
From Apple's POV, I guess they should try to maximize the business deals in their favor, on the other hand, people who got stuck with a shitty HP iPod (PC only), might think ill of Apple.

From HP's perspective, it's good they get out of a lousy deal, probably engineered by Carly Fiorina. On the other hand, doing a "better" deal with MS is making a deal with the devil.

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post #22 of 32
The original HP deal could have been Steve's RDF at work, but I rather liked Carly so I don't think that's exactly right. Things were different at HP then and I wonder what worse a position HP would be in if they decided to sink funds in the media player business.

I think the real goal of the PC manufacturers is to offer free music players to lure in naive/"value conscious" buyers. Apple did this at back to school time and I'm sure sold tons of laptops since they'd come with a free iPod mini. Difference here is that the iPod is a solid, reliable, trendy product!

Anyhow, HP still has a chance to innovate by converging their media players, cameras, and printers. I'm not saying all the products will be insanely great, but they'll be better than Dells' crap. I can't say I'd run out to buy an HP PC though.
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post #23 of 32
Quote:
Originally posted by mcloki
Bundling Itunes with HP's saves someone the hassle of downloading Quicktime and iTunes. Since 80% of the home users HP has will be using an iPod, they just download the software. It's a bit of inconvenience but not that much.

What the h*** are you talking about? 80% of mp3 owners may have iPod's but what makes you think that every home computer owner is MP3 player owner? That was just the point, not every one is interested in MP3 players, even that small icon on desktop or that small sticker on box can make someone think "If big company like HP trusts APPLE, maybe I can as well".
post #24 of 32
Quote:
Originally posted by melgross
It isn't their fault that Apple did what they did. Perhaps they could have sued, perhaps not.

It's not even about suing. It's about Apple doing what the contract allowed them to do.
post #25 of 32
Havn't seen this much crap for a while on these boards. Carly Fiorina did the deal with Steve bacause she was feeling the heat after the predictably disastrous Compaq 'merger' and wanted some of that iPod action. Apple's negotiators did what THEY ARE OBLIGATED TO DO. The got the best deal possible. Carly is gone and the new management team will distance themselves from the previous regime's deals; as all new management teams do. This is their earliest opportunity to exit. End of story. I doubt that continuing the deal was ever the remotest possibility. This will not effect Apple one iota. No story.
post #26 of 32
Quote:
Originally posted by SpamSandwich
From Apple's POV, I guess they should try to maximize the business deals in their favor, on the other hand, people who got stuck with a shitty HP iPod (PC only), might think ill of Apple.

Are you sure? if they use the same OS that Apple does then why is it not mac compatible?

Would/could/has Apple released a version of iPod updater that makes them Mac compatible?
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post #27 of 32
Quote:
Originally posted by SpamSandwich
From Apple's POV, I guess they should try to maximize the business deals in their favor, on the other hand, people who got stuck with a shitty HP iPod (PC only), might think ill of Apple.

No one got stuck. The HP iPod is not PC-only. It is not sh..ty either, it actually had a better warranty.

Quote:
Originally posted by Chris Cuilla
It's not even about suing. It's about Apple doing what the contract allowed them to do.

It's about more than that. Apple entered into the partnership with HP. Then deliberately tryed to cut off HPs Access to the market with its deal with Walmart and RadioShack. That is just not playing nice with your partner. Of course, I love Apple products and have no love for HP or its products but Apple played dirty pool with its partner.
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post #28 of 32
Quote:
Originally posted by AquaMac
Apple entered into the partnership with HP. Then deliberately tryed to cut off HPs Access to the market with its deal with Walmart and RadioShack. That is just not playing nice with your partner. Of course, I love Apple products and have no love for HP or its products but Apple played dirty pool with its partner.

Apple entered into a deal with HP to allow HP to sell HP-branded version of the iPod through HP's distribution channels.

Apple created retail/sale agreements with two retailers.

Apple is doing business. Nothing wrong with what they did. I just don't see how they knifed HP in any way. If Apple violated their agreement with HP, that is a different story...and they'd probably have been sued. But if it is just that HP either a) signed a deal that favored Apple too much, and/or b) didn't know how to execute their end of the deal very well...then it is HP's fault.
post #29 of 32
Quote:
Originally posted by AquaMac
No one got stuck. The HP iPod is not PC-only. It is not sh..ty either, it actually had a better warranty.

It's about more than that. Apple entered into the partnership with HP. Then deliberately tryed to cut off HPs Access to the market with its deal with Walmart and RadioShack. That is just not playing nice with your partner. Of course, I love Apple products and have no love for HP or its products but Apple played dirty pool with its partner.


Actually, my brother bought an HP iPod and, yes, it WAS PC only. As far as the warranty goes, I'm not aware of that aspect...

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post #30 of 32
Quote:
Originally posted by icfireball
I don't see how HP can enter the MP3 market without cruisifying theirselves. It's just too late. I mean, iRiver and Creative BARELY have a chance if at all.

Although on the other hand, I am concerned that HP might have a insider understanding about how the iPod works, etc., that theirs can copy it.

I too think it would be hard to break into that market without something interesting. One of the larger of the competitors, Rio, is dead and gone. Every electronics brand seems to be in that market.

I thought it was a mistake when HP had the "invent" tagline but simply did an obvious rebrand of a competitor's high profile product. I don't see how HP would have an edge in designing a product through a sales and distribution arrangement. How the iPod works is reasonably well known, if not, easily reverse engineered.

Competitors couldn't beat iPod with more features and a lower price, and there are some that look nice, but nothing to sway the mindshare away from Apple.
post #31 of 32
Quote:
Originally posted by SpamSandwich
Actually, my brother bought an HP iPod and, yes, it WAS PC only.

So you couldn't use the Mac iPod updater? I had used a PC formatted Apple iPod on a Mac without issue, though I did eventually reformat it.
post #32 of 32
Quote:
Originally posted by Chris Cuilla
Apple entered into a deal with HP to allow HP to sell HP-branded version of the iPod through HP's distribution channels.

Apple created retail/sale agreements with two retailers.

Apple is doing business. Nothing wrong with what they did. I just don't see how they knifed HP in any way. If Apple violated their agreement with HP, that is a different story...and they'd probably have been sued. But if it is just that HP either a) signed a deal that favored Apple too much, and/or b) didn't know how to execute their end of the deal very well...then it is HP's fault.

I agree with you that Apple is doing business, and it is fair game to try to get in to store chains, I am glad that Apple did. I would rather have an Apple iPod myself.

Still, Apple can be a tough partner to deal with. HP should have had its deal nailed down better with Apple. They bought iPods at a certain price, and then the price went down, and there they were, higher costs, effectively, to meet the new price points of Apple. I don't blame them for not wanting to keep iTunes on their pcs.

It would not have hurt to have iTunes on HPs, and to have relationship with HP. 8% is 8%.

I never did see much of any advertising that HP did to push the iPod. They really need to look at their own part in this. Really, they would be as well off to just ask Apple if they(HP) may sell Apple iPods, and get a price where they make something, buy an allotment, and then push them. They don't refuse to sell their printers to Apple users. That is business. I buy HP printers. I think they are better than their pcs, at least in my experience.
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