COMMENTARY | COLUMNISTS | PHIL BAKER

Apple's amazing iPod

Every once in a while a product comes along that can create the tipping point of a whole new industry.

The Sony Walkman, introduced in 1980 by Akio Morita, the founder and CEO of Sony (NYSE: SNE), was such a product. Fighting internal opposition to the product, he took a Sony cassette tape player/recorder, eliminated the record function, improved the playback fidelity, and added a pair of small earphones. That first cassette Walkman, the model TPS-L2, forever changed the way consumers listened to music.

It also spawned an industry that has sold about 300 million units of Walkman in cassette and later CD versions.

Another such product has recently come along, also in the audio category. This product has defined a new category of products and is changing forever the way music is delivered and heard. That product is the Apple (Nasdaq: APPL) iPod. While not the first MP3 player, it's the best designed and most successful of all.

It has been followed by Apple's iTunes Music Store, an online music download service particularly well-suited for the iPod that has proven that people will pay for the convenience of downloading music. With these recent offerings, Apple's CEO Steve Jobs has become the visionary that is leading the music industry kicking and screaming into the digital revolution.

In my opinion, the iPod is one of the best-designed consumer products of the decade. It brings together perfectly executed functionality and gorgeous industrial design into a package that all of us can use and enjoy, not just our kids.

Over the past week I have been testing the recently introduced 15GB iPod model that sells for $399. With the exception of its capacity and extra accessories -- a case, a stand and a remote control -- it is identical to the $299 10GB model. It comes with iTunes software for the Mac and a special version of San Diego's Musicmatch Jukebox software (musicmatch.com) for PCs. The software converts your CDs to smaller digital MP3 files (called "ripping") and then sends these files to the iPod using a syncing process similar to the way a Palm works. Using my older IBM PC CD drive, it took me just a few minutes each to convert the CDs, and then a few seconds each to sync to the iPod. I needed to buy a $49 Firewire card to connect the iPod to my notebook PC. Macs have Firewire, an ultra high-speed connection, built in. There is also an optional USB2.0 cable available for use with PCs instead of Firewire, but I recommend Firewire.

In about an hour I had 162 songs on my iPod automatically arranged and cross-indexed by song, artist and album names. (Making copies of CDs for your own use is perfectly legal.)

The iPod also comes with a free trial of Audible (OTC: ADBL) (audible.com), which sells books, radio programs, magazines, journals and other audio content that can be downloaded to the iPod and played back later.

I downloaded "Benjamin Franklin: An American Life" by Walter Isaacson. I did run into a couple of problems, a cryptic Windows error message that prevented the downloading from starting and a failure of the file, once downloaded, to transfer from the PC to the iPod. A couple of e-mails to Audible's help desk provided simple instructions within a few hours.

I now have 160 songs and a 448-page book on my iPod. And I've used just a few percent of the iPod's capacity. Apple claims a capacity of 3,700 songs on the 15GB iPod. Now I just can't wait for my next airplane trip, even if it is in coach.

What makes the iPod unique, in addition to its functionality, is its terrific industrial design that Apple is famous for. Not only does the product look good, but it works so well with its intuitive controls and displays, masking its powerful functionality. This certainly is one reason why the iPod outsells all other products of this type by more than a factor of 10 even though it is priced significantly higher.

Apple's influence on industrial design is even greater than its influence on the music industry. According to Gad Shaanan, principal of the industrial design firm Gad Shaanon Design of San Diego and Montreal, "Apple has a very high influence on ID and ... Steven Jobs is a master at applying the full benefits of ID to his product category. Apple is willing to step up to the plate and be truly different. That is what makes Apple so special ... I would venture to say that their recent rekindled success can be greatly attributed to good design."

How successful has the iPod been? In its most recent analysts' call, Apple claimed 1 million iPods have been sold since they began shipping in November 2001, with 304,000 units sold in this last quarter. There is an almost equal split between PC and Mac users.

The sales rate is accelerating as a result of its new iTunes Music Store for the Mac and similar services becoming available for the PC. Even though iTunes is available for only the latest version of Macs, U.S. customers have purchased 6.5 million music downloads since the iTunes went online at the end of April, or about 500,000 songs a week, paying 99 cents per song. Apple has shown that millions are willing to pay for the convenience of instant access to digital music and are demonstrating to the music industry that money can be made from downloading music. Apple has assumed the best of their customers, while the record industry has assumed the worst and continues to sue them.

With 300,000 songs in the iTunes library out of a universe of 10 million, this industry is likely to continue its explosive growth. Now if there was only an easy way to convert my record albums to my iPod ...


Baker is San Diego's Ernst & Young Consumer Products Entrepreneur of the Year in 2000 for successfully bringing to market Think Outside's folding keyboard for the Palm and other PDAs. He also serves as a volunteer on EmTek's advisory board. Reach him at phil.baker@sddt.com.

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