Windows Supersite Blog’s Complete Misunderstanding of the New iPod Announcements.

As usual, Paul Thurrott gets most of this wrong

Incremental. It’s official, folks. The iPod market is now mature. There wasn’t a single major announcement at today’s event

Which is what most who knew what was going on suspected. And yet there was actually great stuff there if you cared to pay attention.

If you think that’s bad, though, look at the Zune: They had Apple right where they wanted them (i.e. with nothing cool to announce) and couldn’t even pull a new device out of its hat.

Let’s take a closer look at the Zune announcement. They have WiFi to use at home and maybe the office (where you don’t need it because you have a computer), but not in public hotspots that require a browser that the Zune doesn’t have. It’s an embarrassing joke. What’s amazing is that Steve Jobs stated WiFi in most CE devices doesn’t work because they have no browser, yet MS did their stupid marketing bullet-point update anyway. The rest of the Zune announcements went downhill from there.

“New” iPod nano. Or as I call it, the second-generation iPod mini. Or the second coming of the first generation nano. Or Apple’s version of the flash-based Zune. Whatever you call it, one thing is clear: Last year’s “fattie” iPod nano was clearly not the success they were looking for. Back to the drawing boards. Oh, I do like the colors though. And the accelerometer is interesting. Why isn’t it in the classic?

Is putting the word new in quotes supposed to fool us? No one can compare today’s nano to the last generation and not see that it’s indeed very new. As for slamming last year’s model, I didn’t see any dip in iPod sales for the holiday season or the rest of the year. Still 10-11M a quarter. Not bad for something supposedly not a success.

Back to the drawing boards? Apple simply utilized the very design they perfected along with an accelerometer they helped to popularize. This was a natural progression.

Oh, and an accelerometer isn’t in the classic because there’s little reason to rotate it (rotation’s mostly for wide-screen video) and because you probably don’t want people shaking your hard-drive based player.

“New” iPod touch. OK, they lowered the price. And they added back iPhone features like a speaker and external volume toggles that quite frankly should have been there in the first place. Do we salute Apple for that? No. No, we don’t.

Again with the quotes. This is where Paul is the most lost. Then again, he needs to be because the touch is where all of Apple’s competitors are so far behind it’s laughable.

First, at the time of the touch introduction the iPhone dropped to a new price of $399 and required a two-year contract. The touch was $299 with no contract. Do you think your extra $100 and two years of data/voice plans couldn’t buy you a little something like hardware controls and a speaker? The idea that the touch should have had these on Day 1 at its price point just goes to show how suckered Paul is by Microsoft’s belief that you should sell your hardware at a loss.

Now, with millions of iPhone and touch sales Apple can get more aggressive. They added the #1 most requested feature, and also a speaker (which was my #1 requested feature), made it lighter and better sculpted for the hand, refined the interface and dropped the price of the 8GB model by $70, and the others by $100.

I don’t salute Apple for anything, but those are terrific improvements to the touch line and, as I wrote about earlier, the most important update of the day in my opinion. Anything Apple does to get its mobile OS into more hands is great news.

Finally, while we’re on the subject of the touch, there is nothing out there that can even touch (heh, pun intended) the first generation units. Not only the hardware, but Apple’s multi-touch interface and mobile OS X, the iTunes integration, the beautiful screen, and the app and WiFi stores (with WiFI you can actually use). Nobody has anything even close. And yet, today, Apple just rendered it old hat. Remarkable.

NBC shows are back. I love this one, and it’s another example of Apple being the bad guy. A year ago, NBC left iTunes because Apple wouldn’t give them the variable pricing they wanted. Apple claimed (and its closest iCabal fanatics parroted) that NBC just wanted to sell TV shows for more than $1.99. But that wasn’t true: They wanted to sell older shows for just 99 cents per episode. And longer, mini-series-type shows for $2.99. Now, in the words of the New York Times, “both sides now say they got what they wanted.” Put another way, Apple caved to NBC’s reasonable and customer-centric demands and NBC got what it wanted. Bravo.

This is utter nonsense. First, if NBC was “customer-centric” they wouldn’t have pulled their content from the #1 store on the market. In the middle of the season, no less! They gave their customers a big “FU” and now Paul tries to re-write it as some sort of act of courage? The fact that they pulled everything tells you that this was an act of pure greed, stupidity, and hubris on NBC’s part. Much like the record companies providing DRM-free music elsewhere, NBC thought they could put a dent in iTunes’ universe. They were wrong.

What you saw today, Paul, but will not admit because you’re a FUD-spewing Apple basher, was NBC acknowledging defeat and coming back to a store they never should have left in the first place. It hurt them. It hurt their customers. It may even have hurt their stockholders. They’re back now because they know they’ll make $$$, and also realized their little temper tantrum and ego trip did them no good.

The NYT is right, though. Both sides did get what they want: Apple held the line on pricing, and NBC is now back on the #1 online video store. Smart move by NBC to swallow their pride, but they should have done it six months ago.

Oh, and one more thing. There was no one more thing. And that stinks. Because these announcements don’t amount to much more than a cheerleading session for continued dominance.

Stop acting as if the mainstream iPod (the nano) has to sing and dance at each announcement. It simply has to offer the strongest overall product in its category (it does), provide great value (it does), and keep improving (it did). Thinner, longer battery life, accelerometer, improved interface and features, beautiful curved design with great colors, and twice the memory — all at the same price point. Why would anyone pay the same price for, say, a year-old Zune design with WiFi you can’t use and an online store with half of iTunes’ content and horrendous DRM on each track? Not to mention paying for those tracks with “points” that Microsoft collects up front. As for the touch, Microsoft and others are years away from getting there…

The new nano and new touch are incredibly strong announcements, and position Apple very well not just for the holiday season but beyond. The touch, especially, is untouchable by the competition.

16 thoughts on “Windows Supersite Blog’s Complete Misunderstanding of the New iPod Announcements.

  1. How that might work is the margins of the 8GB Touch might be much smaller than the margins on the 32GB Touch.

    Let’s look at the 8GB Touch. The price is $230, right? Apple’s usual cost of goods is about 50% of retail price, so about $115. But, the Touch is almost an iPhone, and we read that the iPhone’s COG is about $170 or so. Take away a few radios, and you still don’t get down to $115. So, Apple’s COGs on the 8GB Touch is surely higher. Add in marketing, sales costs, capitalized design costs, and you get margins lucky to be 20%. The 32GB Touch probably has margins over 35%, and when you average it all out, the Touch line may be around the 30% margins that Apple as a whole averages.

  2. @david,
    It’s called Ramsey pricing. You make the ones who can pay, pay for the ones who can’t, often used by utilities in electricity pricing.

    Of course, the iPods with more ram seem overpriced, as the ram cost differential is not that great, but that’s the beauty. The ones who need the ram, help lower the price for the ones who don’t, thus getting the iPod in more hands. Business 101.

  3. As far as the physical product goes, we aren’t going to see a major revolution until there is a… well… major revolution in tech somewhere else. Maybe a gas plasma 3D hologram that materializes before your own eyes that knows instantly what you want to listen to or watch is in the distant future. Only 3 Quarks thin and only viewable by you. Isn’t that cool?

    Right now, given that we still hold stuff an arm’s length away from our eyeballs, there are certain restraints holding back enthusiastic designers, even those labeled ‘one of the crazy ones’ by their peers.

    I expect minor updates from Apple as we are nearing the limits of thinness and viewing size that defines the iPod touch. It’s like keyboards. Not much has happened, although I give Apple mad props for making them cool again. It’s still qwerty and functions basically the same.

  4. @David,

    Have you ever worked on an assembly line? I have. There are costs involved in changing models, even if it’s just replacing one component (which I highly doubt). It may not make up for the large price discrepancy between the 16GB and the 32GB model, but there are costs involved: downtime, changeover costs, inventory, purchasing, logistics, software changes, training, SPC analysis, etc. These may all seem petty but they exist in the real world. A wand is not just waved and the line starts producing the 32GB model. Now, it could have its own manufacturing line, but many of the costs I just mentioned are still relevant.

    Besides, Apple has a product that no one else has in the iPod Touch. They would be foolish to give it away. As the old Russian saying goes, “Make hay while the sun shines.” The goal of any company is to make money. And when you have a unique product that is in demand you price it as such. If you think it’s too much…don’t buy it. But the reality is people believe it is worth the price. So to each his own.

  5. Minor updates and price adjustments to the iPod lineup is all we’re going to see while there’s no realistic threat to iPod market share. Wish lists will be fulfilled very slowly until Apple sees some real competition.

    The things that continue to irk me are:
    1. Updating an iPod (music or data) takes several times longer than simply copying the same files to a USB memory stick because Apple uses cheap, slow flash.
    2. Apple continues to soak users who want more than the base amount of flash.

    Seriously folks the difference in retail price between 8GB of flash and 16GB of flash is about $25 and that’s for the high speed stuff you find in USB memory sticks. The difference between 16GB and 32GB is about $40.

    So the retail price difference between an 8GB stick and a 32GB stick is about $65. Down at the manufacturer’s level it’s much less than that.

    Yet the difference between an 8GB iPod Touch and a 32GB Touch is $170. There’s no difference in assembly time or anything else to justify the difference except the willingness of the public to bend over and take it.

  6. Paul is too cheap. MS had him at ‘free evaluation copy’. Just another example of MS overpaying for the services of a lame shill.

  7. “At least now we know why Bill Gates adjusted his shorts. To dislodge Thurrott.”

    I’m still laughing from that one! Thanks Art!

    Thurrott’s admitted on the “Windows Weekly” podcast that Microsoft keeps a dossier on him and will occasionally appear at his door to “take him for a ride”. No doubt.

  8. Do you suppose that on a so-called Windows Supersite that banging on about Apple and the iPods is just a little of topic.

    The usual approach with competitors is to assume they just don’t exit – you don’t talk about them or even acknowledge their existence – of course you sweat bricks behind the scenes trying to beat them into the ground, but in public you give nothing….

    And Apple competes big time with PT. he is an idiot and has a complete lack of understanding about business… much like his ’employer’, Microsoft. Apple, on the other hand clearly understands the business it is in. it is now managing the iPod line up for margin not for no-holds-barred growth.

    The market is maturing, thus the challenge is not to push the numbers of units ever higher, but to get as much margin out of the units you are selling or have sold as possible. And what is the Genius in iTunes other than a great way to get people to buy more music on-line?

    Manage for margin… If I was an Apple stock holder I would be very happy.

  9. Paul is on a mission to save Microsoft from itself. Apparently Google is no longer Microsoft’s archenemy in Paul’s eyes. Apple is the bad guy now. He is Microsoft’s biggest fanboy. If I had all those Microsoft advert dollars coming to my sites, I would love Microsoft as well.

    Paul is not cheap but he can be bought.

  10. I beg to differ with the word misunderstand. I submit he understands clearly and completely. I think he simply chooses to misrepresent facts in an attempt to stir controversy.

  11. At least now we know why Bill Gates adjusted his shorts. To dislodge Thurrott.

    The iPod announcements were great, in my view. We can’t become so cynical and our expectations so out of line that we view every move forward with disdain because Apple didn’t “One More Thing…” a portable time machine.

    The iPod touch is such a value at this point and I don’t see anything like it from any company in the world. Apple keeps innovating even with an utter lack of competition.

    I give them serious kudos for that. NBC gets it… maybe with a little oxygen, Paul will start to get it too.

  12. The Touch announcements really were the star of the show. The speaker and the lower price will help sell App Store apps, which will drive the iPhone and iTouch ecosystem further towards entrenchment.

  13. He gets things wrong because he doesn’t have a real job. Analysts are a joke. I would love to go through and compile all his ramblings and show just how often he’s been dead wrong over the years. And yet there he is… collecting money from whomever he can scam into believing he’s some kind of oracle.

  14. While it was true that the Apple event was more marketing than substance (at one time they would have updated like this with little or no fanfare), it was a great marketing move. On the other hand, Thurott has his face so far up MS’s behind that his nose is brown. I mean, he probably has 3-ways with Bob and Clippy.

    Curiously nobody’s ragging on MS for lowering the price on the XBox below that of the WII. The only way they can afford such massive losses is by covering it with the massive earnings they make with their “Windows tax” placed on Dell, HP, and other computer manufacturers. This is typical monopoly behavior. Sell something at a huge loss (your profits can cover it) to put competitors out of business, then raise your prices when you have the market cornered.

  15. I must say I was disappointed in the announcements. I was expecting a MacBook Touch or some new device. But Apple DID improve every iPod. They didn’t stand still.

    And Tom, you are correct: where is the MSFT iPod Touch equivalent? There won’t be one because MSFT can’t do it! Their bloated OS will not scale down to run a full browser on a hand-held device while zooming in-and-out with the precision of finger inputs. Sure, WinCE will run a “baby” browser on a smart phone, but Apple is so far ahead of them and everyone else in the MP3 player arena it’s a joke. This is true innovation. How could Paul say he was unimpressed and scold the Touch when there is nothing like it anywhere else on a non-smart phone, hand-held device? I think the Touch is the greatest product Apple has ever made. Those who say the iPhone is lacking (and it is in some areas) can’t say anything bad about the Touch because nothing else in the MP3 player market comes close. Email, music, full-browser, movies, contacts, calendar, games, iTMS, apps, WiFi, etc. The Touch is the pinnacle of Apple design and innovation (thanks to the iPhone, of course).

    In the end I think Paul was expecting something radical and didn’t get it. So he complained, as usual. At least he fired a shot at MSFT for their lack of any innovation with the new Zune. A measly 2 percent market share? When is MSFT going to pack up the tent and close shop on this dreadful, money-losing loser of a product? As “Dandy” Don Meredith used to sing towards the end of every MNF game, “Turn out the lights, the party’s over.”

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