Cringely: iTunes Video Store & iPod Clones Inevitable -Z

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source from http://www.themacobserver.com/article/2005/05/09.3.shtml

Cringely: iTunes Video Store & iPod Clones Inevitable
by Bryan Chaffin, 12:40 PM EDT, May 9th, 2005

Apple Computer will release a video iPod and announce an iTunes video store this year, according to tech columnist Robert X. Cringely. In his weekly column at PBS, Mr. Cringely also said that iPod clones are inevitable as Apple works towards making the iTunes Music (and video) Store the huge source of profits that the iPod is today.

The source of Mr. Cringely's video speculation is twofold, and both reasons stem from Mac OS X 10.4 "Tiger," which Apple released in April.

"Looking at the unused iTunes icons that shipped with your new version of 10.4," he wrote, "you'll notice icons for currently-not-supported ogg vorbis and Windows Media Audio (wma), as well as several others including a variety of video formats, too."

Based on that, along with the supposition that Apple's prime concern is simply being assured that the long-term success of iTunes is guaranteed, Mr. Cringely said that Apple will increase the file formats that iTunes, and by extension iPod, will support.

"At the same time," wrote Mr. Cringely, "the video icons strongly suggest that Apple will also have a video iPod this year."

In addition, he cited Tiger's support of H.264, a video codec that makes streaming high-definition quality video feasible, as another element of Apple's video store plans.

Not stopping there, however, Mr. Cringely looked ahead to shrinking profit margins due to downward pricing pressure on digital media devices, pricing pressure he noted that Apple itself is leading.

"Downward price pressures will eventually hurt iPod profit margins and affect Apple's stock price," he wrote, "so the trick is to know when to switch the business from being a mix of hardware and software to one that is software-only."

In other words, there will come the day that Apple can make more money on the iPod by licensing the name and form factor out to third party manufacturers than it can from making them itself. This is the Microsoft business model where the company makes money on every PC sold from Windows licensing, rather than in making the hardware.

While Mr. Cringely acknowledges that Apple CEO hates cloning competition for his company's products, he argued that the presence of iTunes differentiates the iPod market from the Mac market, where Mr. Jobs killed cloning in 1997.

We should point out, however, that controlling the user-experience is also a prime goal of Mr. Jobs, and that any licensing takes one element of that control, the hardware, away from Apple.

Still, Mr. Cringely's column makes for interesting reading. Note that the parts dealing with Apple come in the second half of the column; the first half deals with changing paradigms in the airline industry.