Apple to License iPod Clones?

May 10, 2005

PBS pseudonymous pundit and longtime industry gadfly “Robert X. Cringely” thinks Apple is due to get out of the iPod business soon, and just license the software to other manufacturers.

Apple’s own downward price pressure on portable media players gives us another element of the probable iPod strategy that hearkens back to my question of a few weeks ago whether iPod is the razor or the blade. Ultimately, what Apple wants to do is make its money through iTunes, where the profit margins are better in the long term and the system is easily scalable. It was necessary to create the iPod platform to make this happen. But downward price pressures will eventually hurt iPod profit margins and affect Apple’s stock price, 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. That switch, which I believe to be inevitable, will happen shortly after Apple begins to license iPod clones.

Never happen. A lot of us have said this a lot of times regarding various Apple products over the years (I remember arguing the point passionately re: the Mac in 1991), and it’s not ever happened once.

If Apple stays true to their historic course, if the price-pressure gets too much, they’ll just continue to sacrifice the low end of the market and build higher end, more feature-laden players.

Of course, they don’t seem terribly scared of low-end price pressure, or they wouldn’t have just brought out the Shuffle (which pwned the low-end market in record time).

At the high end, the portable media player market is ripe for the plucking, and all indications seem to be that that’s where the high end of iPod is heading.

There are plenty of other manufacturers in the “iPod competitor” business. A large part of the reason they’re also-rans is because they aren’t Apple products, and they don’t come with that cache of “cool” that seems to stick to Apple products like stink sticks to a skunk.

The HP iPod — which admittedly I never would have expected either, but is really just a deal to get iPods in more retailers, not a product licensing exercise — succeeds largely because once you have it in a case, it’s indistinguisable from one bought at the Apple Store.

On the other hand, if you license the technology to five other manufacturers, they’ll all add their own spin to differentiate it, at which point it will cease to be a “real” iPod, and become just another HD audio player.

Which is not to say that Cringley isn’t right, when he says that it’d make sense to license clones, but making sense has never been a terribly strong part of Apple policy.

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