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iTunes, Apple ultimately in trouble?


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#1 of 133 OFFLINE   Michael St. Clair

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Posted December 29 2003 - 03:07 AM

Fast Company thinks they might be.

http://www.fastcompa...ne/78/jobs.html

Interesting quotes:

Quote:
Even using a generous operating margin estimate, iTunes won't turn a meaningful profit until it hits Jobs's stated goal of 100 million songs sold. Jobs has said he hopes to do so by April, but at the current rate of 1.5 million songs sold per week, that is more than a year away.

Quote:
Once again, Apple has pioneered a market--created a whole new business, even--with a cool, visionary product. And once again, it has drawn copycats with the scale and financial heft to undersell and out-market it.

Quote:
"Companies that rely too heavily on creativity flame out," Anderson says. "In many ways, execution is more important. Apple is innovative, but Dell executes."

Quote:
it's clear that the iPod contributed substantially all of Apple's 2003 estimated operating income of $24.8 million, excluding onetime charges. Without the iPod, Apple is in trouble.

Personally, I'm still suspect of the whole 99-cent DRM-limited lossy-encoded download model in general (not just Apple's flavor). I think for album buyers it offers lousy value compared to Redbook CD. It is interesting to see that some competitors are offering certain 79-cent downloads, 88-cent downloads, and also unlimited on-demand streaming for flat rate. I may still have some issues but at least some providers are working on adding more value, and I expect this to increase substantially.

No, I'm not anti-Apple. And I'm not predicting that Apple will lose their grip on this market...I just acknowledge the possibility. And I'm glad we have pioneers in the tech field, and Apple is definitely one of them. Send flames elsewhere.

#2 of 133 OFFLINE   gregstaten

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Posted December 29 2003 - 09:26 AM

My biggest problem with iTunes is the sound quality of the purchased tracks. They sound, to my ear, better than 128 kbps MP3s, but only about as good as 160 kbps MP3s. If they offered a higher quality version, I'd be more likely to use their service.

-greg

#3 of 133 OFFLINE   Peter Kline

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Posted December 29 2003 - 10:06 AM

The "Apple is doomed" beat goes on. This has been happening for nearly 20 years and is a running joke with Apple users. Apple had one of it's best years even in a down economy. Next December there will be another similar article.

#4 of 133 OFFLINE   Garrett Lundy

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Posted December 29 2003 - 11:52 AM

I dunno, Apple Computer might have to eventually fall back on making computerPosted Image (At least they are the only supplier of the un-PC).
"Did you know that more people are murdered at 92 degrees Fahrenheit than any other temperature? I read an article once. Lower temperatures, people are easy-going, over 92 and it's too hot to move, but just 92, people get irritable."

#5 of 133 OFFLINE   Michael St. Clair

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Posted December 29 2003 - 12:03 PM

Quote:
The "Apple is doomed" beat goes on. This has been happening for nearly 20 years and is a running joke with Apple users.


I certainly wouldn't make a prediction that Apple is doomed.

However, many people are claiming that Apple owns the lossy download market and that the battle is over.

There is certainly a potential scenario where Apple fails to sustain their grip on the lossy download market but does not become 'doomed'.

Not everything has to be so polarized.

#6 of 133 OFFLINE   Michael St. Clair

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Posted December 29 2003 - 12:04 PM

Quote:
At least they are the only supplier of the un-PC

Um, heard of Linux machines from various vendors? Posted Image

#7 of 133 OFFLINE   Lee Scoggins

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Posted December 29 2003 - 01:01 PM

Quote:
Apple had one of it's best years even in a down economy. Next December there will be another similar article.


I agree. Apple is doing well.

The premise that innovation hurts companies could not be more wrong. While I like Fast Company generally, the article was not well written. Read the books by Clayton Christensen and "Creative Destruction" by Dick Foster. High performing companies generally innovate well and learn how to quickly get into and out of new markets.

Quote:
However, many people are claiming that Apple owns the lossy download market and that the battle is over.


It's far too early for anyone to have control. Posted Image You gotta give Apple a hand for the job so far though.
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#8 of 133 OFFLINE   Seth_L

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Posted December 29 2003 - 01:22 PM

Quote:
The "Apple is doomed" beat goes on. This has been happening for nearly 20 years and is a running joke with Apple users. Apple had one of it's best years even in a down economy. Next December there will be another similar article.
Down economy? Not really. The recession is long over. The company I work for had a sales increase in 2003 of 80% over 2002 (which was a previous record year).

#9 of 133 OFFLINE   Christ Reynolds

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Posted December 29 2003 - 01:25 PM

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Um, heard of Linux machines from various vendors?
yep, we've heard of them. but he didnt say "un-windows" did he? the majority of linux systems are still PCs. last i checked, PC does not automatically equal windows.

CJ
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#10 of 133 OFFLINE   Michael St. Clair

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Posted December 29 2003 - 01:32 PM

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yep, we've heard of them. but he didnt say "un-windows" did he? the majority of linux systems are still PCs. last i checked, PC does not automatically equal windows.


Uh, yeah, and by your argument, all Macs are PCs (Personal Computers), as opposed to Mainframes, Midranges, and Minicomputers. Besides, he said only, and you say most, so you have already taken my side. Thanks for the support.

Quote:
Down economy? Not really. The recession is long over. The company I work for had a sales increase in 2003 of 80% over 2002 (which was a previous record year).

I can't argue with that. We laid off and contracted substantially in 2001 and 2002. In 2003 our we've grown so fast we can't even bring in temps fast enough to keep up with processing sales. I also like how the mainstream media likes to spin retail sales as being down, when they actually grew over 2002.

Quote:
It's far too early for anyone to have control.


Then I expect you to point that out from now on when people claim otherwise. Posted Image

#11 of 133 OFFLINE   Stu Rosen

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Posted December 29 2003 - 01:50 PM

I can't imagine that the iTunes market is even all that critical to Apple (other than as a very effective marketing tool for the iPod).
 

#12 of 133 OFFLINE   Christ Reynolds

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Posted December 29 2003 - 05:23 PM

Quote:
Uh, yeah, and by your argument, all Macs are PCs (Personal Computers), as opposed to Mainframes, Midranges, and Minicomputers. Besides, he said only, and you say most, so you have already taken my side. Thanks for the support.
despite your not-very tricky semantics, we both know what garrett and i meant about the PC. when you create the rules, it is easy to win the game. you win.

anyway, about itunes or any other downloading service, i will most likely not join any of them. i can see the benefits, but i would rather pay a couple dollars more and have the cd, with artwork, in my hand. if i dont like it, i have something physical i can sell. i cant sell the downloads i pay for, even though they cost almost as much. i'm sure it has been discussed to death elsewhere. i may not be the world's biggest apple fan, but i know they are a company that will usually try new ideas before other companies, and they have the fan base to be successful.

CJ
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#13 of 133 OFFLINE   Garrett Lundy

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Posted December 30 2003 - 12:10 AM

Actually what I meant was:

Apple is the only computer company to offer its own exclusive OS and physical tabletop "computer". Any company can sell a version of Linux (Since the source is essentially free), and any company can make and sell computers with off-the-shelf parts.

Thus Dell, Gateway, Compaq, Alienware, and others could all build you essentially the "same" PC. But only Apple can sell its Mac OS and its Mac computer. Thats all I meant, They have a market-lock on non-windows, non-linux machinery.Posted Image

Sorry for the confusion.:b
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#14 of 133 OFFLINE   Lee Scoggins

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Posted December 30 2003 - 01:08 AM

Quote:
I also like how the mainstream media likes to spin retail sales as being down, when they actually grew over 2002.


Agreed Mike...check this out.

http://story.news.ya....c&sid=95609869

There was a much more positive story on Bloomberg earlier (total credit card sales are up some 10-14% over last holiday) but I could not find the link. The economy is starting to roll again. Posted Image
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#15 of 133 OFFLINE   RolandDeschain

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Posted December 30 2003 - 01:57 AM

Hysterical.

What everyone misses is that the iTunes Music Store is nothing more than a loss leader for Apple to sell more iPods, period, end of story.

Let 100 other "downloadable music" sites come online, doesn't matter. No one else has the iPod. For every iPod sold, that's another potential iTunes Music Store customer. For every Dell DJ sold, well the rest of the market can cannibalize itself accordingly.

Apple essentially sold out of iPods this season, they sold virtually every unit they made. Now with the intro of low cost models on Jan 6 there will be even more potential customers of iTunes Music Store. If you look at iTunes as simply a service for iPod users and not an entity designed to make money on its own, then you will begin to understand.

Amazing how the point can be missed so repeatedly.

#16 of 133 OFFLINE   Lee Scoggins

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Posted December 30 2003 - 02:12 AM

Quote:
If you look at iTunes as simply a service for iPod users and not an entity designed to make money on its own, then you will begin to understand.


This is what I have been saying on the prior thread. The best way to evaluate results is to look at hardware plus software. As long as that's positive, then Apple will keep doing this for quite a while.

The other thing to remember is that as the market for iPod like devices takes off, the costs of distributing digital music will plummet. I imagine we will see a day where the software side will be profitable.

The problem with the Fast Company article is that it suggests that innovation is not valuable. Far from from it - the big success stories of our time like Target, numerous technology firms, Fedex, Kinko's (how bout that merger?), Lexus cars, Kendall-Jackson wines, Sonicare toothbrushes, all come from big innovation that is focused on the consumer benefits - Apple is focused on that with the iPod.

The fact that some of Apple's innovations have been ripped off by others involves a question of execution and implementation. Even so, on many of these innovations, Apple has made serious profits and garnered some very loyal customers.
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#17 of 133 OFFLINE   Shane D

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Posted December 30 2003 - 02:29 AM

Quote:
quote:

The "Apple is doomed" beat goes on. This has been happening for nearly 20 years and is a running joke with Apple users. Apple had one of it's best years even in a down economy. Next December there will be another similar article.

Down economy? Not really. The recession is long over. The company I work for had a sales increase in 2003 of 80% over 2002 (which was a previous record year).



that poster never mentioned 2003, i think he was talking about 2-3 years ago when ALL computer makers were losing money, BUT apple, apple didnt have a bad quarter until a year and a half or so after everyone else started losing money

#18 of 133 OFFLINE   Chad A Wright

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Posted December 30 2003 - 05:36 AM

What everyone misses is that the iTunes Music Store is nothing more than a loss leader for Apple to sell more iPods, period, end of story.


This is what Steve Jobs has said numerous times in interviews. He's publicly stated that if the iTunes music store never did anything more than break even he'd be happy, because it would sell iPods. I know it sold me one. I always wanted an iPod, but before I had a legal, cheap way to download music, I didn't spend the money on one.

I am probably the perfect customer that they are looking for. I don't feel the need to own the actual CD, and I want all of my music accessible in an easy and organized digital way. iTunes plus the Music Store plus the iPod provide just that for me.

As to the term "lossy" download music service. I can't argue with that, the compression is lossy. However, I'm also the kind of consumer who thinks it's good enough. If I was using this for professional work, or had a tremendous system, I might insist on higher quality. But, right now, the difference is not enough. The convenience of it all is huge with me.

all come from big innovation that is focused on the consumer benefits - Apple is focused on that with the iPod


This is exactly why I use and love Apple products.

#19 of 133 OFFLINE   Brian-W

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Posted December 30 2003 - 06:25 AM

Quote:

quote:
--------------------------------------------------------------------------------
"Companies that rely too heavily on creativity flame out," Anderson says. "In many ways, execution is more important. Apple is innovative, but Dell executes."

Still laughing at this one...Posted Image

The 'creativity' AND the 'execution' went hand in hand with both the iPod and iTunes. If it didn't, the iPod would have failed a while ago before the iTunes as we know it (purchasing music) came to light. I love iTunes as a program compared to other music managing programs.

And Dell? Yeah, uh-huh. Apple's innovation and Dell's execution sure didn't stop iPods from flying off the shelf, and Apple selling 1.5 million songs a week.

Sorry, didn't read the article, but that quote by 'Anderson' makes him look like an idiot.
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#20 of 133 OFFLINE   BrianB

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Posted December 30 2003 - 08:33 AM

The FastCompany article is about longterm success, not shortterm "gains" in a market. They're saying that frequently what happens is a company like Apple starts a market & does well in it, but in the longterm, they're edged out by companies like Dell who provide a similiar service at a cheaper, massmarket price.
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