COMMENTARY | COLUMNISTS | PHIL BAKER

Apple going after iPod competitors

Apple's (Nasdaq: AAPL) announcement of new iPods this past week was both good news and bad. Good news for Apple shareholders, music fans and accessory companies, and bad news for their competition. While analysts have been questioning whether Apple could maintain a 70 percent market share for music players, the latest move is expected to strengthen its hold even further.

Apple has sold more than 21 million iPods and over 500 million songs from its iTunes store since introduced in 2001. This past quarter more than 6 million iPods were sold, and 38 percent of its $3.5 billion in sales comes from its music business.

Rarely has one company so dominated a consumer product category as Apple has with music players. This past month one of Apple's competitors, Rio, exited the business, and another, Creative (Nasdaq: CREAF), reported large losses.

In a press conference Wednesday, Apple announced a new iPod, the "nano." The nano replaces the aluminum-clad iPod mini, and it has all the makings to be a huge hit.

The nano is a skinny, scaled-down iPod look-alike, about the size of a business card. It comes in black or white and in two capacities, 2 GB and 4 GB, holding 500 and 1,000 songs for $199 and $249. It uses a memory chip for storage, replacing the mini's hard drive, and has a 1.8-inch color screen that displays the album covers as well as your photos.

At the San Francisco news conference, Steve Jobs, Apple's chief executive, said "the iPod nano is the biggest revolution since the original iPod; it's a full-featured iPod in an impossibly small size, and it's going to change the rules for the entire portable music market."

What he's likely alluding to is Apple's rumored deal with Samsung to buy 40 percent of its memory chips at a discount of about 50 percent, which gives Apple a huge cost advantage over all its competitors. It lets Apple move to large capacity, memory chip-based iPods and away from hard drives, resulting in products that are smaller and more reliable, with longer battery life and prices no one can match.

Apple continues to add new functionality to the iPod beyond just music, first adding photos, then podcasting. Podcasting is spoken content that's downloaded and listened to on an iPod using the same iTunes software used for music. The content is free and is obtained at Apple's iTunes online store.

The material varies from my favorite, the locally produced NPR program, "A Way with Words" starring Richard Lederer, to individual rants on all sorts of subjects from technology to politics. You can subscribe to podcasts and they'll automatically update on your iPod when you connect to iTunes.

Apple also introduced a new version of iTunes 5.0 that offers a number of new features including faster searching, Outlook syncing and parental control. However, when I tried upgrading my iTunes running on a PC, the installation failed and I cannot access my iTunes. Based on Apple discussion groups, many are experiencing the same problem. (Of course, I checked only after I had the problem!) So hold off for now before upgrading, at least on PCs. Apple needs to come up with a fix and fast.

Apple's real competition for selling music may come from the cellular providers, who want to sell songs over the air, much like they do ring tones. They think they can get $2 to $3 a song, offering huge revenue possibilities. Apple countered by announcing the ROKR (pronounced "rocker") phone from Motorola. Users transfer songs to it from a PC or Macintosh computer, not over the air. And it holds only about 100 songs. Available from Cingular for $249.99 with a two-year service contract, the phone is ordinary looking with none of Apple's iPod design pizzazz. But it's a first step, and we'll likely see more from Apple in the cellular area.

Local company introduces iPod accessories

The success of the iPod has created a huge accessory market for speakers, earphones, cases, FM transmitters and other devices. According to Apple there are more than 1,000 accessory products being sold. Now a San Diego startup company, Rivet International (www.rivetnow.com), has joined the fray with a line of products for toting your iPod.

They're quick-access cases called the Grab for the iPod. The line includes formed leather cases for the larger models and a plastic case for the shuffle. They come with colorful lanyards that let you carry the iPod around your neck or clipped to clothing while providing easy access to all the controls. Prices start at $20.

Rivet's first product, available at Radio Shack, is an ingenious stainless steel clip with a one-touch release that's designed to attach cell phones and other mobile devices to your belt, purse or automobile.

According to Chief Executive Officer Raleigh Wilson, Rivet's goal is to provide consumers with an affordable, convenient way to securely, comfortably and stylishly wear their iPods. Based on iPod sales, it's a propitious star on which to hitch your fortune.


Baker has developed and marketed consumer and computer products for Polaroid, Apple, Seiko and others. He is the holder of 30 patents and was named San Diego's Ernst & Young Consumer Products Entrepreneur of the Year in 2000. Send comments to phil.baker@sddt.com. Comments may be published as Letters to the Editor.

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