iPod Shows Soft Underbelly? Not Just Yet

If you hear the words “France” and “Military” in the same sentence no doubt jokes immediately spring to mind. One-liners like “Surrendered to a bar of soap” or “Cheese eating surrender monkeys” or, for tech minded among us, the Google prank. Gags aside the French get a bad rap when it comes to military victories and the low esteem the public holds the French Military in undoubtedly has more than a little to do with the Maginot Line. The Maginot Line, you’ll recall from that arduous summer studying military tactics, was a series of fortifications designed to prevent Germany from, yet again, invading France. The French relied too heavily on the fortifications so when Germany swept into France by going around the Maginot Line France’s reputation was cemented. Strangely the Maginot Line held with only one fortification falling before the fall of French government. Apple’s version of the Maginot Line is the integration of the iTunes music store with the iPod and while people sincerely believe they can dethrone Apple from atop the electronic music market by just biding their time or making ever more silly mp3 players they are simply wrong, the only way to beat Apple in the electronic music field is by innovating something completely new and going around Apple’s carefully placed defenses.

As it stands precious little innovation seems to be coming down the pipe but plenty of folks are sure Apple’s ride is over. Gene Munster, an analyst that usually has only the best things to say about Apple, was quoted by CNN as saying “Its inevitable that over time their market share declines” The reason Mr. Munster gives for this is that no particular product can dominate the consumer electronics market for more than two or three years. Going by past experience that is seemingly true, consumer electronics rarely hold such a large percentage of the market over such extended periods of time. Yet Mr. Munster forgets that the iPod is much more than just another consumer gadget people can get rid of on a whim. Once you couple the iPod with songs from the iTunes music store you’re stuck (short of EULA violating hacks) using the iPod as you mp3 player until something sufficiently compelling comes along to replace it.

To flesh out that notion we need an example. Take the seemingly slow uptake of CD technology. Putting a finger on the exact moment in time when CDs took the place of cassette tapes is a difficult notion but it was a long, hard slog. Which is remarkable, while audiophiles may argue the merits of records versus the sound of a compact disc there is by and large agreement that cassette tapes are, in nearly every way, inferior to compact discs. Yet people had significant investments in their cassette tapes and were loathe to throw that investment into the local landfill or, perhaps, they were a little too embarrassed to repurchase a Flock Of Seagulls album. In any event consumers felt the need to keep tape players long after they had overstayed their welcome from a technical standpoint.

The iTunes/iPod relationship is similar with one small exception: you could buy any cassette player to play any tape but you have to have an iPod to play the music purchased from the iTunes store on the go. So any struggle to supplant the iPod/iTunes duo is going to have to be more compelling than the CD/cassette player comparison. Somehow one suspects that if Apple’s competitors haven’t showed a music delivery and playback system that rivals Apple’s offerings yet the chances of said companies rolling out something completely revolutionary in the next eighteen months are slim. One more thing to note at this point: As wildly popular as iTunes seems people still prefer the tried and true method of buying CDs. Sure iTunes was a music buying revolution but the revolution isn’t happening as fast as many think it should.

Still hope springs eternal that Father time and consumer apathy will push iTunes out of the limelight. Record companies are said to be giddy with the prospect of Apple losing a substantial amount of market share and, therefore, market clout. The thinking, according to the same CNN article mentioned earlier, is that as Apple loses market share the online market will grow. Which is another way of saying that if Apple doesn’t own the market the record companies will enjoy more freedom to jack up the prices.

If all this seems familiar it is because Apple has been down this road before. BuyMusic.com was going to decimate the iTunes music store, after all iTunes was Mac only (one recalls the founder of BuyMusic.com gloatingly saying that iTunes was great but that it was on the wrong platform). In the end Buymusic.com was all hype, a music version of Pets.com with Tommy Lee playing the part of amusing corporate shill. There have been a string of other pretenders, Wal-Mart, Sony, Napster but they are all trying to do the essentially the same thing: Attack the iPod and iTunes directly which simply isn’t going to work.  Companies can throw every conceivable download model and crank out ever more clever music players but until they bring something to market that is as simply much better than the experience Apple offers, both quantitatively and qualitatively, they will fail. It is the equivalent of attacking the Maginot line directly, if you want to win you have to go around the obstacle.