Darel Rex Finley in 888

Remember the iPod Killers?

2014.08.31   prev     next

THE iPod has been in steady decline since 2009, soon after the iPhone appeared, and is now selling a little less than half as many units as it was then. The reason for this decline seems fairly obvious: People are putting their music on their iPhone, and don’t see the need for a separate iPod.

Throughout the iPod’s ’02-’08, seven-year ascendancy there was all this talk about how it was going to be driven out of the market by the “iPod killers.” They were going to cost half as much, and so they would blow away the expensive, integrated product from Apple.

And it never happened. Every purported iPod killer was just as expensive as a comparably specced iPod, and many of them were actually a little more expensive. Why was that? It was because Apple was already using commoditized components. Apple had learned its lesson from the days when it tried to compete against all those cheap PCs, and designed the iPod to be price competitive from the get-go. Pundits, with no knowledge of what a product like this should cost, simply jumped to the conclusion that because it was from Apple, it must be overpriced.

Such pundits truly believed that the iPod was going to be blown away by a product that worked just as well and cost half as much, so every time a new “iPod killer” came out, and it cost just as much as the iPod, they cried foul; they were like, “What the hell, why does this cost so much? What a stupid move; if that company was smart it would be selling this for half that much! They shouldn’t be selling it for $400, they should be selling it for $200, and putting the iPod in its place.” And of course those would-be-iPod-killer products all flopped and the iPod continued to sell like crazy.

Disruption Hooey

Most of those “iPod killer” pundits have stopped saying things like that today, but Harvard’s team-disruption-theory (Clay Christensen et al.) never got the message. They keep repeating that Apple, as the innovative early bird with the highly integrated product, eventually will be beat out by cheap, modular, commodity players. I.e., they didn’t learn anything from the iPod killers of the 2000s. They didn’t even notice. It apparently never occurred to them that the failure of the iPod killers might fortell Apple’s future. They still believe, as per their theory, that the integrator makes a product that soon will be seen as overpriced when the commoditizers come in and put together something that costs half as much. And we’re not seeing that. The phones that are even approximately as good as an iPhone — and I’m not even talking about whether they’re as good in terms of the apps that are available for them, just the basic hardware functionality — cost about the same as an iPhone.

What made this whole commoditization scenario seem to make sense is that in the ’90s the Windows OEM products were so much cheaper. If you could spend half as much and get a comparably equipped computer, then of course most consumers wouldn’t want to buy a Mac. (And that goes in spades if all the software was running on Windows, and most of it not on Mac OS.)

But nothing like that’s happening to Apple now. It hasn’t been happening for many years. All the tablets that are much cheaper than the cheapest iPad are also much worse than the cheapest iPad — and again, that’s just hardware-wise, completely disregarding the huge app ecosystem advantage enjoyed by the iPad.

The disrupto-boys’ mistake is thinking that the integrator must be somehow woefully inefficient. They have this idea that the integrator is good at integrating, but can’t be good at anything else, and so when the integrator has to face up to specialty component makers banding together to make a commoditized product, then it’ll fold up and have to go find an all-new product to succeed with again (but only temporarily, again).

And they just don’t see that it isn’t happening, and that it isn’t happening because it isn’t true. The failure of the iPod killers should have taught them that. But it didn’t, because that simply isn’t what they want to see.

 

Update 2015.02.05 — Two years after Apple revealed the iPhone, Christensen revisited the just-then-peaking iPod, to explain how it had been so successful:

This success story is well known; what’s less well known is that Apple was not the first to bring digital music players to market. ... A company called Diamond Multimedia introduced the Rio in 1998. Another firm, Best Data, introduced the Cabo 64 in 2000. Both products worked well and were portable and stylish. So why did the iPod, rather than the Rio or Cabo, succeed?

Could it be that the iPod’s user interface was a radical improvement over those other devices’? Or that it held dozens of times as many songs?! Naaah. Those glaring facts weren’t even worth mentioning. Instead:

Apple’s true innovation was to make downloading digital music easy and convenient. To do that, the company built a groundbreaking business model that combined hardware, software, and service.

Etc. But Christensen’s in good company: The folks over at Minute MBA are identically clueless (and much more recently so).

 

Update 2016.02.25 — As quoted by Ben Thompson: “In a 2006 interview with Businessweek, Christensen predicted the imminent demise of the iPod:”

Q: Can Apple keep it up?

Christensen: I don’t think so. Look at any industry — not just computers and MP3 players. You also see it in aircrafts and software, and medical devices, and over and over. During the early stages of an industry, when the functionality and reliability of a product isn’t yet adequate to meet customer’s needs, a proprietary solution is almost always the right solution — because it allows you to knit all the pieces together in an optimized way.

But once the technology matures and becomes good enough, industry standards emerge. That leads to the standardization of interfaces, which lets companies specialize on pieces of the overall system, and the product becomes modular. At that point, the competitive advantage of the early leader dissipates, and the ability to make money migrates to whoever controls the performance-defining subsystem.

That didn’t happen at all, of course. But as long as the iPod is now largely irrelevant anyway, Christensen apparently feels perfectly content to learn absolutely nothing from this gross failure of his thesis.

 

See also:
The Old-Fashioned Way
&
Apple Paves the Way For Apple
&
iPhone 2013 Score Card
&
Disremembering Microsoft
&
What Was Christensen Thinking?
&
Four Analysts
&
Remember the iPod Killers?
&
The Innovator’s Victory
&
Answering the Toughest Question About Disruption Theory
&
Predictive Value
&
It’s Not A Criticism, It’s A Fact

 

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