01 August 2005

HP-Apple iPod relationship no more

I always thought this was a great deal for Apple in most respects - especially distribution. It also helped establish the iPod in more eyes as a device that did not just belong with Macs. I never quite understood the value for HP except that it gave it a worldclass product. But in many ways it served to highlight HP's own failings - an area it should have been good at.

However, it's now a different world than it was then. The distribution issue is no more - Apple has Walmart and Radio Shack for instance - places it didn't have in the past, and that HP did. There is probably no retailer in the US that would NOT want to sell the iPod. I doubt there will be a big loss in overall outlets.

Financially, Apple should also benefit in the short term. Splitting increasingly tighter margins with another party in the chain does not leave much room. HP might have lost money on everyone it sold, but it still took some of the valuable margin.

For HP it serves to highlight the mistakes they have made, and if the rumours that they can't sell another brand for 12 months, and that iTunes will continue to be loaded are true, then it seems they still have a product weakness.

But I can't help thinking that this is a longer term bad thing for Apple. It needs friends. It is still a small company next to Dell, next to IBM/Lenovo, next to HP, Sony, Toshiba, and of course, next to MS. And of course, there are Nokia and SonyEriccson biting a the heels too. iTunes/iPod does all most people need in the easiest to use way, but as those other companies push out WMA content, and Media Center devices etc. it will increasingly be hard to go against that flow. Apple has to do SO many deals with content people etc that this will consume a lot of its time and energies. I think the Intel deal was more than about chips - it was about changing the competitive landscape, and as much a plus for Intel as Apple. Apple has a big new friend (though it is only a bit player for Intel of course).

Apple's iPod strategy is dependent upon people believing that their actions (buying music, ripping CD's in certain formats etc) are one-time actions. If people believe they'll end up having to re-rip in a different format, or buy music in another format from another store, the appeal of the iPod could change very quickly - esp to non Mac users. I've been pleased that an iTunes AAC-coded file played straight away on my new Nokia phone, but of course, that won't happen for purchased AAC music. We as consumers need Apple to succeed. Sure it needs competition, but if we have ONLY the WMA route to go, we'll be back in the grip of MS, and of usage policies dictated by the large content companies.

I hope Apple replaces HP with some new friends!

No comments: