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Microsoft Takes Aim at Apple’s iPod

November 15th, 2004

Microsoft, a company long known for waking up to a market after its competitors only to dominate that same market, has finally woken up to the digital music market.

Microsoft has long had half baked attempts to make digital music work, with Windows Media Player and Windows Media Centre. However, Apple’s growing dominance in the portable music player market has obviously caused some consternation in Redmond.

The lines in the sand have been drawn and they basically come down to platform and choice, Microsoft’s way of doing things, versus style and leadership, Apple’s way of doing things.

For many years experts have tried to classify Microsoft and Apple: Two companies who make similar products but do so very differently, for very different reasons and with drastically different results. Microsoft tends to see a successful market, improve on it slightly, offer lower prices and then license the technology to dozens of other vendors who then go out and do the real legwork. Apple, on the other hand, likes to do everything themselves. From negotiating deals with record companies to designing and buying hardware and software to distribution and royalty management.

Apple likes control of the products it sells. Microsoft likes control of the markets it releases products for.

Apple’s iPod is undoubtedly the market leader. In the third quarter, 2 million iPods were sold. More than every other competitor combined. And much more than the second quarter. And Apple is expected to widen that margin this holiday season. However, Apple’s largest competitors like Dell, Samsung, Sony and Rio are taking a very Microsoft-like approach: they are betting on the long term.

Microsoft, and its posse, feels that ultimately the ability to play more songs from more music stores on more devices will win out over the ability to play a few songs on a handful of devices. It’s worked before. Sony’s Betamax video player suffered a similar type of defeat. Consumers tend to ultimately like choice.

“Over time, proprietary standards always lose because industry standards always win because you get more for less,” said Michael A. George, the general manager of Dell´s consumer business. Dell has just introduced a 5GB music player, using the Windows standard, for $199, some $50 less than Apple´s iPod Mini, which has 4 gigabytes.

In addition to choices in hardware, several companies are coming out with more innovative choices in music stores. Napster to Go, for instance, lets users download thousands of songs for $10 per month. As long as they keep up the subscription they can effectively download whatever they want. While they don’t own the songs, it’s entirely possible many users won’t care.

By next holiday season, most vendors are saying they will have much sleeker and more attractive portal players, a toast to Apple’s award winning industrial design principles. Combine that with the more than 50 stores currently online and it may be enough to start swinging the tide. At that point, industry watchers expect Apple to enable the iPod’s existing ability to play Windows Media Audio files, something Apple chose to turn off – thus limiting users’ choice to only buying from the iTunes Music Store – a move which would signal desperation, but would also mean users could choose the store of their choice and still keep their iPod, and existing music collection.

All in all it’s rarely safe to bet against Microsoft, but it’s also rarely safe to bet against consumers – consumers who have obviously chosen the iPod as their product of choice. And, until other manufacturers can not only come out with a product similar to the iPod, but also one that will entice existing users to dump the music collections they have already paid for, we may be in for a few more cycles of competition and innovation – something which is ultimately good for every consumer.

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