OPINION

How Far Will Apple Go to Stop the Dell MP3 Effort?

Last week I thought it would be interesting — given that both the Wall Street Journal and TechNewsWorld had covered my professional relationship with Dell regarding its new MP3 service — to chat about what it would take to beat Apple. But in my analysis I left out one important thing: Apple is tricky. Already there are rumors of a redesigned iPod nano that would position well against this new Dell offering, and the Apple-funded sites seem to be aggressively trying to disparage this as-yet unborn product. Someone seems scared to death of this as-yet unborn product. (Note: I have not used the words “iPod Killer” myself, but Apple folks tend to be a little paranoid).

Since we talked last week about how Dell might create a successful service, let’s talk this week about the lengths Apple might go to in order to stop them. The question of course, now that it may be a monopoly in this space, is whether Apple will get in trouble for trying something similar with Dell to what it pulled on HP. As Microsoft discovered, the rules change a lot when you are a monopoly, and Dell is likely not going to go quietly into the night like HP did.

Before we start, though, check out these funny Olympics ads from Lenovo — the first provides a unique repair experience and the second makes an interesting statement about “light.” I’m getting psyched about the Olympics. See, some folks know how to be funny without being mean.

We’ll conclude with my product of the week: a new dual-mode router from Cisco’s Linksys division that puts media on its own high-bandwidth wireless channel.

Apple’s HP Trick

HP was actually in — thanks to Compaq — the MP3 space three years before Apple. Instead of launching its own HP-branded MP3 player, HP licensed the Apple iPod, and some may remember that I said at the time that it would beat Apple’s own offering. What most don’t know is the reason I said that is because Steve Jobs himself had promised that result when he approached Carly Fiorina, the then HP CEO.

I figured if Steve said he would make it happen, it would happen. While I’d told HP they were likely going to get screwed by Steve, they convinced me they had all avenues covered and that this promised outcome was guaranteed by Steve. They argued, if this wasn’t so, why would Carly give up her own product for the iPod? Why indeed.

The history, as I understand it, was that Steve — who has one of the best intelligence gathering engines on the planet — got wind of the HP product and became convinced that this third-generation player would take significant market share and possibly even beat his iPod.

So he personally called Carly Fiorina and asked her why she would take a risk with her own offering when she could have assured success by licensing the best player on the market. He went on to say that Apple wasn’t really interested in competing in this space — they were a PC company after all, and that HP was much better suited (due to its vastly larger retail presence) to taking this product to volumes that could easily exceed Apple’s.

HP wanted to be able to transcode files on the device to WMA or be allowed to play secure AAC files on their Media Center offerings, and Steve indicated that would probably be no problem. It also wanted to provide a choice of colors and the first device it showed was blue. Steve indicated that was OK with him but, to make sure they didn’t do anything crazy, he would have to approve all colors other than white.

After the contract — which locked HP out of the MP3 market until Apple dominated it — was signed, Steve would not allow transcoding or any unique connection between HP’s Media Center and the proprietary iPod protected format. In addition, Steve vetoed every color HP proposed, including black and red, as inappropriate for iPods, even though subsequent iPods have come in a number of colors (including black and red).

Apple got away with this, but at the time it wasn’t a monopoly. It arguably is now, so the rules have changed, because killing a competitor can have painful consequences if you do it wrong.

So What Does Apple Do?

I can say one thing Jobs won’t do, and that is call Michael Dell and offer him the same deal he offered Carly Fiorina. That is because if he did, you’d hear the laughter from Texas all the way over in China at the Olympics, but Steve Jobs is an Olympic-class trickster. Recall last week I mentioned he tricked one of the top reporters into giving him a clean bill of health and possibly put the poor guy’s reputation at risk.

So first he moves to sour the well. Apple has a set of top reporters that it feeds products to and who give it favorable reviews. Simply by spending time with them, Jobs can likely get them thinking negatively about Dell’s new product and be primed to disparage it as soon as it actually launches (though I doubt some will wait that long). I’d be surprised if many aren’t already primed to go negative on this product even though it isn’t finished yet.

Then, much like what typically happens during an election, he takes the advantages of the product and spins them as negatives. Recall when he didn’t have video, how stupid video was, or when he didn’t have flash how stupid flash was. The aspects of the product that he can’t match he positions as disadvantages. I think the McCain camp actually is working from his playbook this year, come to think of it, and Paris Hilton isn’t pleased.

Finally using a roll-up of the reporters he has primed with the negative spin he has created on the product’s advantages, he finally closes with the product’s disadvantages, leaving the market wondering why anyone would build such a product, and calls it a day. This is kind of like what he does to Windows Vista with every Mac vs. Windows ad.

But that is my guess as to his playbook. What do you think?

Product of the Week: Linksys WRT610N True Dual Band Router

I like to move video around the house, and I’m not a huge fan of pulling category 5 wiring (though I’ve pulled a lot of it). The problem with 2.4 Ghz is it is easily interfered with, and the problem with 5 Ghz is not many products use it. The ideal case would be to use both bands; the lower band for data, which can stand the interference and where the hardware is the most common, and the higher band for video, where you can dedicate the channel and get a clean video stream. The Linksys True Dual-N Band Router (I’ll be so happy when they start to use consumer product names) is attractive so you don’t have to hide it, it is easy to set up, and it works.

Give me a tech device that does more than anything else, doesn’t break the bank (lists for US$199 but Amazon was showing it for $149), and looks cool, and it’s sure to be in line for my product of the week.


Rob Enderle is a TechNewsWorld columnist and the principal analyst for the Enderle Group, a consultancy that focuses on personal technology products and trends.


15 Comments

  • Rob,

    As a consultant working in this industry for over 20 years and having worked for all of the companies in your dissertation within the last 2 years I can state clearly and positively, you’re out of your mind and making things up to fit your wild imagination.

    Nothing you speak of has any semblance to truth, you’re off by a meter here and a meter there, but you’re not on target with any of it.

    Perhaps your suppositions are based on rumor and innuendo tied together with string and glue and wishes and hopes and prayers because the AM ount of times you have been correct lately is very low.

    You’re about as accurate as Doug McIntyre.

    Another genius.

    • Actually I’m not assuming they will; I’m assuming they can. Will is a different word with different meaning. We are talking about an incomplete product here.

      The only assumption I’m making is Dell has learned from Zune and won’t repeat the same mistake(s).

      You folks are really overplaying my involvement (not that anyone really cared what the truth was) which consisted of a one hour meeting after which I was asked what I thought about the service. That was my "consult", not really the same thing is it?

      And in "tricky", I mean what they did to HP which is why I spent so much time retelling that story.

      I think my "objectivity" is in better shape at the moment than yours.

  • BTW yes I work at Dell and no I’m not blind loyal to them at all but come on guys Rob isn’t a paid Dell employee and is just writing down some thoughts about what is coming up ahead from both Dell and Apple.

    Now in defense to my employer you need to look and rethink thoughts that Dell can’t design with style and panache in mind. Look at the LCD display that was released last year at CES and the just released Studio PC and the new Latitude business laptop line refreshed just yesterday which show a heck of a lot more style than Dell has ever released as well as the Studio has more features and enhancements than anything Apple has recently released in that form factor and format.

    Looks like Dell has learned how to design and go for the high margin fluffy stuff that Apple has owned the market in the last seems forever and look for HP to fall in line right behind because that’s a never ending battle there.

    Apple can’t afford to really go after the PC market such as selling OSX because they can’t develop to cover all aspects of x86 hardware that are out there.

    So count on them staying a niche company with high priced and high margin devices until Dell and HP enter every market that Apple currently owns and maybe they’ll survive just like before.

    They survived recent downturns only because of the IPOD and might have to again or maybe not if Dell continues their streak of finally releasing functional and sexy devices at much better price points and their upcoming mp3 player might be just as functional and better priced than the IPOD.

    Let’s all wait and see huh!

  • Mr. Enderle, please don’t let the Apple fanboys stop your honest and insightful reporting. While Pogue and the gang continue to mislead the public, we need more journalism like yours. Straight to the point and getting to the core of the industry without picking favorites. I think Dell is positioned to compete as long as they execute with top notch marketing. And Steve won’t be able to do anything about it, this side of negotiating exclusivity deals for all the music out there.

  • "I have this mental picture of Apple folks scared to death they will look like the French Swimming Relay Team today. I actually like that mental picture. "

    Nope, you have your usual picture of producing sensationalist headlines and getting hits on your web page. How many iPod killers have there been? How many apps have Apple sold since the opening of the App store? Do you really think Dell reentering the mp3 market is going to make Apple scared? Really? Nope this is just a few people correcting your rubbish excuse for advertising dressed up as journalism.

    So the 20 people maybe who have responded to your article are a concerted effort to take down Dell? Do NOT flatter yourself.

    It’s the internet, I don’t have to use my real name, I signed up like this years ago when you spouted some other FUD ridden nonsense. I’m not going to sign up again just to assuage your paranoia.

  • Rob, I’m just a normal person who is responding to the stupid paranoid and just downright dumb output you have generated by the article here today. Not been paid by Apple in any way shape or form.

  • I can see from some of the comments that folks don’t actually know Apple’s practices.

    http://gizmodo.com/gadgets/meta/incorruptible-editor-mccracken-resigns-from-pc-world-257590.php

    Makes you wonder how many people posting below are paid by Apple doesn’t it?

    Doesn’t this feel really political? Impressive FUD effort though, much better than anything I’ve ever seen Microsoft or IBM do against an unfinished product. Wonder how much this is costing Apple?

  • This article is a joke, right? I mean, beside all of the questionable, unsourced, defamatory and possibly libelous claims, why would anyone listen to anything from Rob "Never Right" Enderle? He’s wrong so often if he said, "The light is green" and you drove forward, it’s likely you’d be t-boned by a car that actually had the right of way. Another loser article from Enderle.

  • But seriously if Dell is using you to advise them on this stuff I don’t think Apple has very much to fear. Which is too bad because, unlike you, I really do think competition is good for us all.

    Message to Dell: If you want to learn how to do it better than Apple don’t use a guy that’s gotten it wrong over and over and over and over again when it comes to Apple.

    BTW: Who exactly are these "Apple Funded Sites"? Last I heard Apple won’t even play for product placement let alone web editorial placement. I don’t see any Apple ads on MacWorld, MacInTouch, iPodLounge, etc. so I don’t think it’s ad revenue. Do you just mean review copies?

  • Really, you don’t believe MacDailyNews is Apple-funded? You know better than that.

    Unlike McCain, Apple doesn’t have to lie about its opponents. Dell couldn’t compete with Apple, and they won’t be able to in the future when it comes to PMPs for a very good reason. They have zero sophistication when it comes to design. They wouldn’t know how to put together an attractive piece of hardware if they tried. They had to buy Alienware to have a sexy computer in their line.

    (Disclosure, I’ve owned Dells. They used to be decent machines.)

    Dell has no idea how to take on Apple, and to think they might actually hire the one man who is so consistently wrong about Apple it just hilarious. Well, maybe Thurrott is less accurate at times, and Dvorak is, well, Dvorak (the Zathrus of computerdom).

    Too bad Dell can’t find the equivalent of Jonathan Ive to actually give them a modicum of a chance to compete in terms of design. They certainly won’t get it from a jack-of-all-trades (master of none) analyst.

  • I have to laugh at Rob’s portrayal of this scenario. I AM sure Walt Mossberg is sad that he has been outed as an apple fanboy by Rob. Dell may have some success with its new player but I AM not sure Apple is shaking in its boots and sending out its legions against Mr. Dell’s and Mr. Enderle’s project. It’s your fault Rob that people complained that you failed to state your participation in the Dell project. Your excuse that it was reported elsewhere so you saw no need in including it is RIDICULOUS. Clearly Rob your credibility is the one that should be suspect. Next you will be saying that Apple’s MobileMe screw up, and yes it was a screw up, was caused by them diverting resources to plot against the Dell music player. I laughed when you wrote that "Someone seems scared to death of this as-yet unborn product" when you previously wrote so enthusiastically about " the yet unborn product." You claimed you never wrote that it was going to be an iPod killer but you implied such when you wrote "This suggests that the way to beat Apple is not to go after Apple customers but to go after those who don’t currently use MP3 players." Rob as so many have opined in the talkback to your last article " Who the heck pays you money for this crap?"

  • Robert,

    As a paid "consultant" to Dell – do you think you are actually in a position to argue any of this? Unless of course your "consultation" is actually positioned articles in this online magazine. I think the words "Conflict of Interest" spring to mind. You lost this battle when you took the money.

    If however you’re input was more on the design side what the hell do you think as an aging techy / self publicist you know about what young people require to play their music?

  • I know that you try very hard to sound reasonable, but the hysteria creeps out just the same.

    Why would you possibly think that anyone is terrified over Dell’s possible new service? Because it’s being ridiculed?

    I remember you stating how wonderful their first efforts were, and how successful they should be. The same thing with MS’s Plays For Sure, and also with the Zune.

    I also remember Dell getting out of that business as soon as they could manage. And how are MS’s efforts doing?

    Why would this be any different?

    It’s easy to disparage Dell’s efforts, as they haven’t done that well with consumer products.

    You are assuming that Dell, with your help, will do better than MS. A lot of hubris there.

    Also, Apple’s intent to continue to improve its products doesn’t mean that they are "tricky", a pejorative term, as you know quite well, which is why you used it.

    I hope your income stays where you want it to be, but Dell isn’t gaining anything from this partnership.

    You wonder why people criticize you so severely. It’s because you throw objectivity out the window.

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