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Strategies & Market Trends : Gorilla and King Portfolio candidates - Moderated -- Ignore unavailable to you. Want to Upgrade?

To: pyslent who wrote (1499)	6/11/2005 1:17:01 PM
From: Eric L	Read Replies (2) \| Respond to of 2955

iPOD: Switching Costs psylent, << Good (if long-winded) article on the state of the industry >> That is, indeed, a VERY good and current article with excellent linked references that are pertinent to our discussion. << I should say that I have not spent a penny on an iTune (despite the assertion in the article above that iPod owners are averaging $50 in iTunes downloads each) >> You are evidently not alone. Let's assume $50 in iTUNES downloads (cumulative per user on average) is a reasonable estimate. If that is the case switching costs for many, if not most iPOD users are not all that high, particularly since as Win-Lose-Draw commented earlier in our discussion ... Less than 1% of iPod capacity is being used by DRMed songs. And...it's quite easy to circumvent the restrictions. Even if the amount was double that we are still not talking a high switching cost from iPOD to a Samsung or LG or Dell MP3 player. This clip from the article also bears on that ... Microsoft's Windows Media Group Manager David Caulton has conducted a market survey whose results give a different slant on this data. Caulton claims that less than 25% of iPod owners are buying any content from the iTunes Music Store and that most files now stored on iPods are DRM-free, MP3-encoded tracks that users can migrate to other players. Online purchases, Caulton points out, are also only around 2% of the worldwide sales of CDs. "The digital-audio market is the equivalent of the PC industry in 1982 to 1984," Caulton says. "It has crossed the chasm in awareness but not in adoption." But you knew he'd say that, right? There could be other switching costs for users that has opted for pricey accessories like a speaker dock or high end car adaptor, but I'm beginning to think that --Mike's statements that "the cost of switching is no more than the cost of a Christmas or birthday present that bought the iPod in the first place. ... With all of that being the case, I don't think the cost of switching will prevent consumers from doing just that -- switching." With no shortage of music stores using technology from Microsoft and others and several free alternatives to the excellent iTUNES media manager including Windows Media Player 10 (WMP10), the cost of switching in that regard for the user is limited to an hour or 2 of familiarization to a new interface. The operators of music stores including the wireless carriers have no switching costs. None of them use Apple technology (the Harmony hack aside) because Apple hasn't licensed FairPlay and the AAC and AAC+ codecs are available from proprietors that are delighted to license them. << For the same amount of money, I prefer owning the physical CD and ripping to the much more flexible mp3 format. >> I've been of a like mind, but while I generally prefer owning the physical CD I'm now in something of a fill-in mode adding tracks rather than the complete CD to my HDD collection before a rip and burn where I'm only interested in a track or two from an artist or an anthology. << As a means for music discovery, it's ability [the older Real Rhapsody's] to generate personalized radio stations (customized by one's musical tastes) and then allow one to cross-reference whatever it's playing (jump to the artist's catalog) blows the doors off of anything that iTunes can offer. >> You are mirroring exactly what I attempted to express and essentially describing the base radio functionality that hooked me on the free Rhapsody 25 service from Real. The optional customization functionality you mentioned, capability to skip ahead, and additional stations in the $3.33/month subscription version of Rhapsody Radio have prompted me to try the 14 day trial version. I might also add that after spending the last two evenings comparing the functionality of MMJ+10 audio manager which I've used in its various versions since it was released to Rhapsody v. 3.0 with a cross check against iTunes and making sure my complete audio collection was properly imported to the Rhapsody player, I decided to use Rhapsody as my primary audio manager and will be uninstalling Musicmatch once I'm sure the Rhapsody player is stable which I'm not convinced it is yet. While there are some tradeoffs, on balance the Rhapsody player has leapfrogged MMJ+10. and is on a par with iTUNES for usability and has some added functionality and flexibility. One qualification on that statement -- I'm not synching to an MP3 Player so I can't compare that functionality, but I suspect that Real and others may have ways to go to catch Apple's synch to iPOD, across a wide spectrum of devices. That however, is not an insurmountable barrier. Apple offers a great end-to-end solution to sell its well designed and engineered devices, but in the generic sense the solution can be easily duplicated by patching together various proprietary, proprietary open, and comittee-based technologies to provide the MP3 device manufacturers with requisite infrastructure. That is very much in progress. Thanks for the link. Best, - Eric -