What Of the Old 2G iPhone? What of the iPod Touch?

[UPDATE 6/10/08] I originally wrote this post based on preliminary information about the iPhone’s new price. Subsequent data made it clear the $199 price is based on a subsidy from AT&T. You can’t buy the iPhone online, but rather must buy it at an AT&T or Apple store and activate it in-house (there is no more at-home activation) in order to get the $199 price.

Therefore, the “true” price of an iPhone is still $499, and the value of the old generation and iPod touch are not impacted as badly as I had first thought.

OK, now that the 3G iPhone is only $199, the resale value of the original 8GB model is now in the toilet. Sure, I could hope to snag some suckers on eBay to pay me a lot, but it’s not my way.

Looks like my old phone will be a hand-me-down in the family.

Meanwhile, I’m surprised the iPod touch did not drop in price today. Still shows $299 for 8GB at the Apple store. Surely it will at least drop to $199?

Speaking of the touch, very interesting to see that the massive 2.0 software update is only $9.95 for touch users. That’s a great deal. Maybe Apple figured the $19.95 for the last update was too much? That update gave five new apps and was impressive ($20 was not that unreasonable) and yet hear the new platform is only $10.

Apple iPod, iTunes, and Music Subscriptions.

According to the Financial Times this is in the works.

Personally, I’ve never been a fan of this model, though assuming it’s optional it finally has a shot to succeed now that the largest and most popular online music store (and second-largest music store) would be offering it for those who want it.

My problems with this model are the same as I’ve always had; the fact that Apple may offer it isn’t likely to change any of it:

  • Renting music makes little sense to me. People listen to their favorite songs over and over (heck, AM and FM radio were built on that principle), not so with most movies or TV shows.
  • DRM, DRM, and more DRM. Heavy DRM is the only way this can be legitimately pulled off (certainly the only way the labels would agree to it, unless they’ve had a change of heart). Don’t expect the same “FairPlay” you have now. Move your tunes anywhere? Just burn a CD and re-rip tunes to remove DRM? I don’t think so.
  • Exploding media. Part of the above DRM requires a way to shut it off when the terms are not followed or expire. We don’t have details on this yet, but without the threat of such explosion the subscription model can’t really work.

So what can Apple do with this model that others can’t? How can they make it successful where others have failed? I can think of some reasons:

  • The Ecosystem. One reason for potential success is the same reason for which they’ve had success with the current model. The iPod/iTunes system just works. Phenomenally well. Hundreds of million of people are already familiar with it and trust it.
  • The Process. Likely Apple would implement it so that getting your tunes under this model is about as easy as downloading their free track of the week now. Just select and download. No new process to learn. No new software or hardware to use, etc. People might make the move from owning to renting just because it’s so easy to try it.
  • The Price. Nokia’s similar model costs them $80 per headset. If Nokia and the labels figure the headset will be swapped after two years (the average) that’s $3.33 a month for all you can rent. Apple’s allegedly offering only $20, so even if you swap iPods every two years that’s only 83 cents a month for all you can rent. Less than the price of one one single right now!

Would I sign up for the subscription model? I’d need a lot more details first. How long does it last, what are the limitations, what’s the cost, etc. If my guess that Apple could pull it off nearly seamlessly for any iPod/iTunes users is correct, then I’d certainly consider trying it.

I like owning my music, and have never even considered renting ever since I got burned by Music Match back in ’00 or whenever when a track I paid 99 cents for wouldn’t even play when not connected to the Internet.

My guess is that if I the rental model was cheap enough, then I’d use it as a “preview”, and still buy the albums I really like. I almost use eMusic in that capacity right now. At only around $2.50 an album (with no DRM) I’m less worried about “wasting” money on a bad album. For something even less than that I would broaden my range, continuing to buy the music I really love.

Finally, one thing occurs to me. In these negotiations, I wonder if Apple is telling the labels something like this: “Look, you’ve claimed iPods are full of pirated music anyway, and you’ve claimed you want a piece of that action. We’re offering you $20 per iPod (we sell over 10 MILLION of these things each QUARTER) and simply legitimizing what you say all our owners are doing anyway. Don’t quibble with us about it; put up or shut up!” If Apple is not telling the labels this, they should be.

What do you think? Is Apple considering this? Would you join a subscription service?

[UPDATE:] There are still no real details available yet (heck, the whole thing is unconfirmed rumor at this point), but some rumored details are floating in. Ah, yes, streaming only. Maybe you can keep 50 tracks a year. That would hardly be the transparent model I alluded to above. And, no, I personally wouldn’t be interested in such a model.

An iPod Shuffle or Ice Cream? This Could Get Messy.

kibonipod.jpg

So a Brazilian ice cream maker has started a promotion where some of its Popsicles will instead contain a free iPod Shuffle.

Cool idea (pun intended). However, in looking at the pictures of what a winner looks like, I predict the next time we hear about this will be because stores have a lot of poked, prodded, and broken Popsicle packages as users try to determine if they’ve got a winner.

Zune Site Claims Zune Beats iPod Seven Ways.

2nd-gen-zune-04.jpg

Do the new 2G Zunes have what it takes to compete with the latest iPods?

Well, in an article titled “7 Ways Zune Beats iPod?” Team Zune Luv certainly thinks so. In fact, the “team” claims the Zune is

“…better for the consumer in a number of way [sic] that, at this point, the iPod simply can’t touch”

I disagree, so let’s take a look at their list and see what we can make of it:

“Podcast as top-level entry. It always bugged me that Podcasts were a “category” in music (or video) in the iPod. That was just so wrong on so many levels that it is great to see that cleaned up.”

Um, Podcast has had the ability to be top-level on the iPod for a while. The iPod’s top-level menu is customizable. Since Team Zune Luv didn’t know this, how wrong is the rest of this list gonna be? Let’s see…

“Wireless sync. I love people with $300+ media center docking stations for their iPod who still have to disconnect and move their iPod every time they want new content on their player. Us Zune types don’t now. It is 2007 and it’s time to let wireless do what it was meant to do.”

If your device is plugged into an approved dock you can wirelessly sync it. That’s swell, but I wouldn’t normally expect to see “plugged into” and “wirelessly” so close together in the same sentence for the same device, would you?

As for letting wireless “do what it was meant to do”, that would be the ability to browse the web and maybe even purchase music on WiFi. Oops, Zune doesn’t do that.

“Wireless sharing. There is a point to this that is obviously moot unless there is another Zune owner in the room but Microsoft’s focus will keep that from becoming a problem soon.”

Shared Zune files are still DRM-infested and explode on your device after three days. And there are still numerous restrictions on what files can and cannot be shared. This feature was, and still is, a complete bust.

“Subscription music. This has always been a killer app for portable media players but implementation has always been sub-par. That changes with the new Zune.”

Oh brother! Subscription music has failed everywhere it’s been tried. It’s a model clung to by the labels in the futile hope they can sucker enough people into paying them money every month to support the outrageous profits they used to rake in from physical CD sales.

People don’t want to rent their music. At least not enough to sustain any valid business model. Why would anyone be eager to have the music labels avoid letting them own their music?

“Xbox integration. Xbox’s market share is impressive. Being able to both plug your Zune into an Xbox and being able to stream subscription music and Podcasts to your Xbox not only makes the Apple TV concept a little silly but give you a great excuse to own a Gears of War machine.”

Yes, buying a Zune is really just an excuse for someone to get a gaming platform they wouldn’t have bought otherwise. Er… What?

The ability to integrate into a gaming platform (any gaming platform) is pointless to 99% of the music players’ intended market. It’s just another silly “feature” MS added to plug the Xbox and appear “different”.

Counting all brands and models of MP3 players the world over, are there 150 million or so in use right now? How many of their owners even thought about a gaming platform tie-in? I won’t say it’s “zero” (after all, Team Zune Luv is crazy about the idea), but I will say it’s small enough to make zero difference. Oh well, not understanding the customer is a Microsoft hallmark.

“Free upgrade. When has Apple ever added something new to the iPod and helped a previous owner upgrade at no charge? I pray this is the future of the portable media player.”

This one’s been force-fed down our throats by every MS shill and shill wanna-be since the day it was announced.

You guys are only fooling yourself. Microsoft had so many of the Boat Anchor 30 Zunes hanging around in the channel and storage warehouses they couldn’t just toss them all. They’re already losing money on the things, so they needed a way to salvage something from these worthless models. Since the software upgrade to Zune 2 wasn’t that radical anyway, they made it available for the BA30 solely to try to clear that inventory.

Oh, and if the Zune 2 software is so great why does MS have to practically give the BA30 away?

“Radio. I seldom listen to radio but found myself in the gym watching a news clip on the monitor that caught me eye. They do that broadcast the audio on FM thing so I switched over quickly, got my fix and went from there. 3 minutes of usage total – but it was nice to have.”

Three minutes of usage and it made the team’s “big 7” list? Are you kidding me? This has been touted as an alleged missing feature of the iPod since Day 1. And guess what? Nobody cares. It’s never been an issue, probably because OTA radio is all but dead.

I can see why Team Zune Luv put a question mark at the end of the article title. Posing these as a question allows them (him?) to weasel out from under them when they realize the answer to the question is “no”. On the other hand, how much weaseling does one expect from an astroturfing site?

Universal And Yet Another Subscription Model: iPods Need Not Apply.

universalspiralfrog.jpg

So Universal has teamed up with SpiralFrog on a subscription service with a twist; the service is now out of beta and officially launched. SpiralFrog is unique among subscription services in that it’s subscription-less (at least for now). No monthly fee is required, the site is intended to be funded solely by advertising and your recurring visits:

“The only catch — the music is supported by the site’s advertising revenues, so your clicks keep those tracks downloading.”

Even though there is no monthly fee, make no mistake that this is still a subscription service, and therefore has the five disadvantages all subscription services have had so far:

1) Requires recurring activity.

“You must sign up for a free account and provide demographic information in order to gain access to the media. You must also use your account each month in order to keep it active, which is intended to prevent users from simply downloading and not returning to the site.”

Keeping your account “active” is code-speak for them shutting off your music if you don’t use it every month. What constitutes “use” of your account? Not sure. Clearly all tracks and videos are DRMed so they can shut them off whenever they want.

2) Limited content.

“The site… currently carries about 800,000 tracks and 3,500 music videos”
“The site intends to have over 2 million tracks available within the next several months.”

With Universal on board they ought to be able to scrounge up more than 800K for starters. Heck, Apple has almost that many songs available for just ringtones! Two million tracks in the next several months? What the heck is the matter with Universal when — even under excruciating DRM terms — they still won’t open up their library?

3) Risk of losing the music.

Of course you lose your downloaded music if you don’t use the site every month, but that may be your own choice. However, what if their advertising-only model fails (it will), or they begin charging monthly fees (which they’ll do when the ad model won’t fully support them)? If they go belly up you’ll lose everything. If they charge, and all you cared about was “free”, then you’ll lose everything, too. Good luck thinking you’ll have any recourse when any of this happens.

4) Strict Controls.

“Files from SpiralFrog are digitally protected and can be played on mp3 players, but cannot be burned to CDs.”

They are DRMed to a very high degree. Just a reminder that you don’t own these, you’re simply renting them under strict terms. The TOS specifies only three devices are allowed. Since your PC and MP3 player are two of those devices there’s not a whole lot of freedom to play them elsewhere. Compare this to Apple’s five PCs and unlimited iPods approach.

5) Incompatibility with the iPod.

“There is another minor detail, though — the files cannot be played on Apple’s wildly popular iPod MP3 players.”

Well, of course not. The highly restrictive DRM these subscription models use is not on the iPod, and I hope it never is. This is Microsoft’s DRM; note that SpiralFrog’s web site requires Windows Media Player 11. This service will land you knee-deep in the wonderful world of a Microsoft DRM that kow tows to the content providers and leaves little in the way of rights for the user.

Music subscription services have always failed because the vast majority of people want to own their music. The only thing truly unique about this one is that it could be argued you get what you pay for. Even then I think it’s a bad deal.

Apple Solves Their High-End iPod Dilemma Brilliantly!

outlook_1.jpg

I sifted through the rumors yesterday and come up looking pretty good today now that we know what was actually announced. I’ll talk about all the iPod models here, but what I really like is how they handled their high-end models. We’ll get to that in a minute.

Shuffle.

shuffle.jpg

I thought the shuffle would get another GB of memory but otherwise remain unchanged. I was close (no, new colors don’t count). At $79 the shuffle is still a great machine (I own one) and a great value.

Nano.

nano.jpg

The nano rumors of wider, more storage, video capability all made sense to me, and sounded believable from a logistical standpoint. It turns out they were spot on. Prices are aggressive, too. Just look at the radical difference between yesterday’s nano and today’s:

  • Revised user interface (pretty slick). Makes better use of screen real estate and now with cover flow!
  • Bigger screen with a resolution the same as the hard disk-based iPods.
  • Video capable.
  • Double the storage for the same price.
  • Games (including three pre-loaded).

Wow! That’s some improvement for no more money. Look at what $149 gets you in an iPod now!

High-end Models.

Regarding the disk-based high-end models, my concern was coming up with the high-end “iPhone” model that I firmly believed was coming, yet keeping the price reasonable on the high-end. Apple’s high-end was $249 and $349, and I wasn’t sure how they could get the new “iPhone-like” model at such prices (especially the $250 price point). Of course, they could abandon the $250 price point, but I didn’t think they should do that, so I was very curious as to what irregularity there would be in their line, either in terms of pricing or a perceived “hole” in their product line.

As is frequently the case, though, Apple realized what was going on and addressed the issue beautifully (and brilliantly, in my opinion): They simply split the high-end into two lines. They still have the large hard-drive models for those who have huge libraries and/or want to take everything with them. But they also have the new touch interface with the large screen just like the iPhone for people who want all the media experience of an iPhone without the actual phone.

As I suspected, the touch model is not something Apple can sell at a $249 price point, but by splitting the high-end line they were allowed to:

  • Thoroughly refresh the 5G iPod (now the iPod classic), and use it to maintain the $250 and $350 price points, while simultaneously adding improvements and over twice the storage.
  • Add the killer touchscreen and UI to a new high-end model at the $299 and $399 price points.

In the case of the these two models you pick either gobs of storage or a touch screen interface and WiFi. Let’s take a closer look:

Classic.

classic.jpg

The classic now sports the same new interface as the nano. This does not look like a trivial thing to me, or just eye candy. Cover flow is very nice, as are the split menus.

The classic is now all-metal and either silver or black. Gone is the white plastic. The 80GB is thinner than before, and the new low-end (no more 30GB model). Further, the classic’s front end is rounded again. One thing about the 5G I don’t like is that the the front edges are square. It just doesn’t sit in the hand as well as the 4G did. They trashed that with the new classic; the front has a bit of a rounded curve on it. A rounded edge feels better in the hand.

With all the improvements and a 166% increase in storage, the entry classic is the same price as yesterday: $249. The high-end classic is also the same price as yesterday ($349) but has all the improvements and double the storage (160 GB!).

Touch.

touch.jpg

As for the iPod touch, I firmly believed this was coming and wrote about it over three months ago!

What can I say that I didn’t write about before or hasn’t already been mentioned in all the iPhone talk about it’s UI?? It’s an iPhone without the phone (and therefore without EDGE). They even put WiFi in!

No, it doesn’t just drop the phone and EDGE. Aside from those the touch also does not have the iPhone’s camera, speaker, microphone, Email application, or Google Maps. The last two you could check with the browser, but not nearly as nice as the built-in apps.

But it’s thinner than the iPhone, looks just as good, has the same interface and screen that we all love. It’s awesome. Not having the phone circuitry saves you $100 over the iPhone ($299 vs. $399 for 8GB), and you can also get 16GB for $399.

Other Announcements.

So what about the other three announcements today:

  • Ringtones
  • WiFi iTunes Store
  • Starbucks partnership.
  • iPhone price drop to $399 (and 4GB model discontinued).
  • No Beatles.

I can already hear the bitching about ring-tones, but save it for later. Ninety-nine cents for a ringtone you create yourself (up to 30 seconds) from a song you own is infinitely better than the Muzak-style $1.99 ring-tones available from Verizon and others. As for why it costs money at all when you already own the song, or why only a half-million songs are “participating,” you already know who to talk to about that: the record labels. They do not consider a ringtone “fair use” and won’t give them away. Look in the terms of service for all online music stores and you’ll see ringtones prohibited. Still, Apple is offering something far superior (in price and product), to anything currently available (legally) today.

The new WiFi store is quite cool. When I’m at home of course I’ll just use my Mac, but if I’m on WiFi in the office or elsewhere the idea that I can just grab something is nice. When you think about it, it’s a no-lose situation. You never have to use it if you don’t want to, but it’s there if you want it.

The Starbucks partnership is kind of neat, but I can already hear the Strabucks haters groaning about it. But that a lot of people associate the Starbucks “experience” with their music has been true for years. So the idea that your iPod will sport a new button when at a Starbucks so you can easily purchase a song (or at least see who it is) is nice, in my opinion. Further, you’ll get free WiFi access to the entire iTunes store, which is also nice. My biggest problem is that the ink must have just dried on the agreement, since Starbucks isn’t ready to roll it out at all. They won’t have it in my Starbucks for something like six months, and I’m one of the “early” ones. Others won’t get it until 2009. I can’t help but wonder if by, say, July 2009 the whole idea will be obsolete.

It was well-known the 4GB model wasn’t selling, so it makes sense to kill it since they were barely even shipping the thing. Everybody wanted 8GBs. Now they’ve dropped the entry point of an iPhone by $100 while doubling its storage! They can focus on just one model for the Christmas season, which is good because they are going to sell every one they can make.

Finally, there was no announcement on the Beatles, like I predicted. What a shock. No George Harrison, no Beatles. Get it?

Bottom line is that this is an amazing lineup from Apple for the holidays. Last year’s new shuffle, new nano, and refreshed iPod 5G with a price drop was great. But the lineup introduced today blows it far, far, away. Along with the iPhone price drop, it’s clear Apple is not kidding around here.

(All images from Engadget’s live blogging of the keynote today.)

Beatles On iTunes (No), And Other iPod Rumors.

ipod_rumors_1.jpg

All this speculation and whatnot about the new iPods tomorrow. I’m on record about the 6G iPod here and here. As for the nano, the rumors I’ve seen (wider body, larger screen, video-capable, more capacity) don’t sound too crazy so they wouldn’t surprise me. I also think the Shuffle will gain an extra GB of memory for the same price.

As for the rest of the rumors, they’re all over the place and it’s anyone’s guess:

  1. High-end iPods to be flash-disk based.
  2. Wireless iPod for iTunes purchases over the air.
  3. Kiosks for iPod at selected locations, plug them in and buy music directly.
  4. Radio (Satellite?) reception and an instant “buy now” button for purchase of songs.
  5. Music subscription model for iTunes.
  6. Video subscription model for iTunes.
  7. HD movies available in iTunes.
  8. Beatles music available in iTunes.

They can’t all be true; most of them will probably not be. I have a few comments on each:

Regarding #1, I’ve been wondering about the price of the new iPods, especially the high end. Seems to me if Apple wants decent margins it would be hard-pressed to keep prices the same even with hard disks. Wouldn’t flash-based disks almost guarantee a sizable price hike? Further, even two of the 32GB units would make for just a 64GB high-end unit. Whither 80GB? I can see the 30GB iPod maybe replaced by a flash-disk (still wonder about price though), but am not sure about the 80GB.

Regarding 2, 3, and 4, I might like 2, 3 seems kind of silly, but I guess it depends on where the kiosks are and how it’s all implemented (I’d need more details), and 4 would mean little to me. I think radio is dead. In fact, adding the circuitry for radio would likely harm sound quality and drive up the expense with no gain for almost all of iPod’s customers.

Regarding #5, this is the fantasy every Apple announcement holds for record labels who think subscription is the way to go. It’s not happening.

Regarding #6, this would make sense.

Regarding #7, the timing would be great, but I still wonder if the pipe (and consumers’ patience) is ready for the kind of bandwidth these would require?

Regarding #8, a lot is made of Paul, John, and Ringo’s music on iTunes now. Hmmm, weren’t the Beatles called the Fab Four? You know, four, as in… four? Isn’t someone’s music missing? If George’s estate is not allowing the online distribution of his solo work, do you think they’ll allow the Beatles catalog online? I think the answer would be “no”. If they are not all on board, then none of them may as well be on board. Unless Harrison’s estate also has an announcement tomorrow, I don’t see the Beatles online happening

GigaOM wants a sanity check. I checked, there’s no sanity.

Occasionally I go against my own advice and click on a link whose title ends in a question mark. Trust me, you should never do that.

In this case it was a GigaOM article entitled “iPhone’s sanity check, iPods missing a beat?

Since Apple just released their 3Q numbers, and we know they sold 9.81M iPods last quarter, the only sanity we should check is that of anyone asking if iPods are missing a beat.

The article states:

“In first 1.25 days Apple sold around 270,000 iPhone, which is pretty impressive for a device that starts at $500. But it might be having an unintended impact on the sales of iPods, especially the more expensive video iPods.”

Is this just something yanked from the rectum, maybe with the help of a flashlight? It makes little sense anyway, because if you want a high-end iPod the iPhone is not a valid substitute. People want a high-end as much for storage as anything. The iPhone is weak by those standards.

After going through an explanation about how the great iPhone 30-hour sales figure (270,000) is somehow disappointing to Wall Street, it then continues:

“Apart from the iPhone, looks like the iPod sales were down sequentially – something that could be explained by buyer interest in the iPhone.”

From 10.5M to 9.81M is “down,” I’ll grant you that. But we’re talking about a line whose mid- and low-end units haven’t been touched in nine months, and whose high-end model has been substantially untouched for nearly two years. Further, the iPod had no “buzz” all quarter long since it was all iPhone, all the time (with a brief time-out for the laptop line refresh). And yet it still sold 9.81 million units! Don’t just look at how many sold, you must also look at the circumstances under which they sold.

The article wraps up with this:

“Interestingly, the iPod sales declined by about $130 million. In 30 hours or so, Apple got $148.5 million from 270,000 iPhones (assuming $550 median price.) Could this mean that iPhone is cannibalizing the high-end iPod sales?”

So you can compare dollar values to determine cannibalization? How in the heck does strong three-month sales of an unrefreshed iPod line somehow get cannibalized by an initial 30-hour surge of iPhone sales?

It remains to be seen if any cannibalization will occur, but I suspect if it does it will be more from the nano than the high-end model. And, if someone was going to buy a nano but gets an iPhone instead, I think that’s a win for Apple. It’s a trade-up Apple will take any day.