Cringely: Apple to license iPod clones, move to iTMS | iLounge News


Cringely: Apple to license iPod clones, move to iTMS

In an interesting article for PBS, tech pundit Robert X. Cringely says the iTunes Music Store is Apple’s future — not the iPod. He says Apple will license out the iPod technology at the right time to become a software-only company when it comes to digital music.

“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,” Cringely says. “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.”

“As Apple’s profit drops on each iPod it makes, eventually the per-CPU figure will approach what Apple might receive from licensees,” he says. “At that moment it makes more sense for Apple to license clones than it does to make more iPods. Licensing clones at the right time would lead to huge clone sales, effectively killing any significant iTunes competitor. And in the long run, iTunes is where the money is.”

Cringely also notes that (previously mentioned) unused icons in the version of iTunes included with Mac OS X v10.4 hint that new audio format support and a video iPod are just around the corner. “And 10.4 gives us a peek at another evolution of iTunes, which is the inevitable expansion of the system to carry additional audio file formats,” he says. “Looking at the unused iTunes icons that shipped with your new version of 10.4, you’ll notice icons for currently-not-supported ogg vorbis and Windows Media Audio (wma), as well as several others including a variety of video formats, too.”

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He’s delusional. The whole purpose of iTMS is to drive the sale of hardware—iPods. There’s next to zero profit margin in online music sales, especially for a service that charges only 99 cents a song. Apple is, in fact, building it to be a self-sufficient enterprise… but the timeline for that is at least mid 2007. At present, there is no way for the sale of digital media to carry anywhere near the profit margin necessary to sustain a full company. It will never match the iPod.

Even Steve Jobs has been crystal clear about this. He’s not selling iPods to sell iTunes, it’s the other way around. iTMS was started as a courtesy service and an incentive to sell iPods, where there’s far more money to be made.

As for clone sales and additional format support, it’s always possible… but this is far more an echo of wishful thinking by tech-savvy iPod users than a realistic scenario. The Tiger icons aside (countless features have been buried, never to be utilized by anything except speculation) I’d love to know what all these assertions are based upon.

Posted by Rageous on May 9, 2005 at 10:38 AM (CDT)


The icons have been there for ages haven’t they?

OH NO! iTunes 4.5 for Windows contains an icon for WMA, OGG and a “Movie” icon. I bet iTunes 4.6 will have the new features in it whenever that comes out.

Posted by Daveoc64 on May 9, 2005 at 11:45 AM (CDT)


Yes, and Apple will also stop making computers, and just concentrate on OS X.

Posted by pickme on May 9, 2005 at 2:54 PM (CDT)


this is just funny

Posted by M Bargo on May 9, 2005 at 4:38 PM (CDT)


Apple has always been about making hardware and software that integrate with each other, which has resulted in great products. I don’t see Apple changing the way they do business anytime soon.

Posted by jmaurand on May 9, 2005 at 7:46 PM (CDT)


Where do I apply for a job like this? I want to sit at home writing stuff out of my *** and get paid for it..


Posted by narco on May 10, 2005 at 1:23 AM (CDT)


What the hell, is this guy a tech pundit or something?

Apple won’t license their DRM, even to increase ipod sales. And licensing the ipod to sell iTunes doesn’t make money sense.  It’s not like apple has a history of licensing hardware or software.

Oh wait, what about the HP ipod, the Big Switch to itunes only is already happening!

Posted by __redruM on May 10, 2005 at 11:42 AM (CDT)


I may be a cynic, but that sounds quite plausible to me.  Why keep on paying money for development, new tooling, etc, when you could just make money managing other people’s music?

Posted by frankarooney on May 11, 2005 at 9:51 AM (CDT)

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