Tell me honestly….how many iPods do you need ?

Apple is close to proclaiming that an amazing 100,000,000 iPods sold.

That’s why I bring up that question “how many iPods do you own?”. You probably say they are mad….but I know some people with more than 5 iPods..

Well, if you are not a techno freak, chances are you will be contended with one iPod most probably selected on your needs based on form factor and capacity storage.

If you like to watch movies (lucky Americans can even purchase movies through iTunes Music Store) or require large capacity storage for insane amounts of music, you will go for the iPod Video.

Most probably, you own less than 100 CDs , and therefore do not require a large capacity storage. Chances are that you may purchase the sleek iPod Nano should you have fewer songs to keep it mobile.

Finally, if you are looking for a 'Press and Play' MP3 player, you will probably go for the iPod Shuffle. Hang it it to your jean, your jacket, shuffle your library randomly, this is the easiest way to tune your life.

Evaluating Consumer needs only give you part of the total picture. It is interesting to understand Consumer's usage behavior to complete the picture.

Some people like to have music at Home, in different rooms. There are currently several way to do it. The Old School method would be to get multiple HiFi systems in each room. For the advanced users, they might stream from a central location like iTV, or a Mac/Pc using Airport or any other streaming device. Finaly, some other people will plug multiple iPods in multiple rooms to stand alone speaker sets. In such a case, there is an high chance you run for multiple iPods, one especially in the bedroom to wake up to the sweet crisp music from iPod.

Should you have a car and carry your favorite tunes, you can plug and unplug your iPod to dedicated car stereo system or even stream it through radio waves (which I will not recommend unless you do not care about music quality). The easiest would be to have a fixed iPod in the car. This saves the hassles of commuting your iPod back and forth from home and forget it sometimes in one or the other location while you need it in the other one.

Should you jog or go to gym , you can definitively use the iPod Video or Nano.However, you wont probably take the risk to damage the hard disk of the video iPod and avoid to get sweat on the sleek designed Nano. For such a reason, you might be tempted to go for your cute little iPod shuffle and even have a matching colored one carrier to hang it on your tee shirt or short.

Finally, the best companion for a daily usage is still the iPod nano. Take it with you, carry it in your pocket, bring it at work and it will supply you with enough music for the day.

Well, If you are anything like people who focus on usage, yes there is a chance you would carry multiple iPods and at same time contribute to the Apple Stock raise.

Oh, I forgot to add one important point. You need to have an iPhone as well....

iPhone and iPod success genes

iPhone – Apple’s newest flagship product is set to debut soon. After the phenomenal success with iPod, Apple is prepared to venture into the mobile space.

The iPod and iPhone share not only similar features but ‘genes’ as well. They were designed by people who truly understand consumer needs and placed emphasis on design rather than just technology.

This ‘thinking’ and approach is probably the main factors that fuelled iPod to such greatness and why competition lagged behind. Many others simply went out bought high capacity hard drives or Flash memory, engaged a low cost design firm in China and produced MP3 players. However, though many of these MP3 players had more sophisticated features, it failed to compete with iPod.

iPod succeeded because it provided more than just a player. It integrated hardware, software and content. It essentially had its own eco-system.

The iPhone is likely to embark on a journey. Apple is building strong connections with network operators to build a sustainable ecosystem. However, operators and content providers are independent and thus Apple will not have full control. This is one of the reasons why Apple took such long time before entering the mobile phone market. They needed to ensure that all parties in the eco-system could provide the require backbone to support its phone features.

The iPod story is a key lesson for all current and aspiring Apple competitors. Do not simple launch a fully featured or touch screen phone, it will not be able to compete with iPhone.

The iPod and iPhone are like myths and it will go down in history for good reasons.

Creative Zen Stone : can it renew to success ?

How to succeed against Apple ? How to come back to profitability ? What product should a company create in order to try to bring its sales closer to the 10 000 000 iPods shipped during last quarter ?

When Apple stock sky rocket to $100.40 , reaching his highest level for the past 10 years, Creative stocks falled from $31.75 in March 2000 to $5.91. The market sanction is tough, the lesson to learn tougher. However, one should acknowledge the number 2 position of Creative Labs in terms of sales.

Manufacturing an MP3 player is easy. Technology becomes affordable, design shop houses are opening at every corner of the street to propose the 'iPod killer' design to any manufacturer, software is know. So , why is it so difficult to find the iPod, why is it difficult to get profitable on that market ?

First of all, more than on any other market, margins are tight, really tight. Accurate distribution process, strict inventory control, proper component prices are some of the key elements that can turn your 'gold mine' products into a financial disaster for your company. For a product sold at $99, it is not rare to have a margin around 5%. When you have to consider the taxes, import duties, shipment and retail margin, any swing in market price, key component, inventory is extremely dangerous. Driving profitable MP3 sales is becoming a exercise close to driving an F1 formula.

A key success element comes through your product creation. However, companies like Creative Labs need to make choices. How to you want to fight Apple ? Choose your battle and strategy and stick to it. When you have an opponent as strong as Apple in front of you, the direct and frontal attack rarely succeeds. It might hurt from time to time, disturb you but it is unlikely it is going to win over the long run.

Trying to fight Apple can be assimilated to a judo fight. Use your opponent strength against him. If your opponent is stronger and heavier, be faster and smoother. Make him swing until he falls on the floor.

Apple does not succeed only because iPod is better designed, integrated with iTunes or properly supported by the music industry. iPod is becoming a generic name, an icon. People want to buy an iPod regardless of your technology or your price.

It is not because you will offer a $10 cheaper product than iPod that you will sell it. It is not because you offer an higher capacity product than the iPod that you you will sell more. The result will only be a drop in your margin.

Creative new product Zen Stone is a nice designed product. However, will it capture the iPod shuffle product market ? It will certainly capture some sales and take some market shares from other competitors but will not shuffle the iPod supremacy.

Digital Video for free, not for now.

Steve Jobs commented yesterday that 'he would not hold a parallel at all between the video industry and the music industry'. It is not surprising that there is no rush to open DRM for video.

In our earlier article, we mentioned that the music revolution phase II has started .
It is true we can question what will happen about the video. Let's now be realistic and reasonable.

We can always debate on the illusion and wish to live in a society where products such as videos and audio are free. Will such a debate be of any consequence? We are living in a world driven by rules, economics, constraints, both financial and technical. It is amazing to see so much debate arising as a result of internet and the new digital revolution.

Regardless of whether the audio or video is produced on tape, DVD, broadcasted on radio or made available online, the content remains the same. The only difference is the medium that is used to allow the consumer to access it. In the past, (the hardware time versus the internet time), you needed to go to a shop and buy a movie. If you decided to give a free copy to your friend, you would have to find a way copy it. Most were aware that making copies for reasons other personal backup, was illegal . These restrictions make sense, as the artists and the record companies need to protect themselves against free distribution.

In my opinion, Steve Jobs is absolutely right in his statement that the concept of DRM-free audio cannot be completely applied to video. There are just too many differences from technology to business, including from consumers’ point of view that videos can now be freely distributed.

New distribution systems are now being introduced. Various factors will influence the type of system developed to deliver audio and video. Some factors may include the type of content (e.g. movie, music video, audio book, etc), and length (e.g. trailer vs full length). Another important consideration is how the content will be consumed. For example, will it be used primarily at home through devices such as the home theater system, computer, etc or if it is mean to be used while mobile ? Consumption while being mobile may also vary, as it depends on how and where will be used.

Video on Demand (VOD) is already available to consumers and newer ways to distribute content are being explored. What is the ultimate goal ? Definitely to generate additional revenue for companies and also to satisfy the consumers’ need mobility and virtualization. This goal is not necessarily by choice, because traditional channels of content distributions are suffering.

Consumers needs will only increase.They want more and faster access to unrestricted content.Providers will want to cash in on these needs.The bottom line is that everything comes at a cost and requires time for technology to be developed. We can either continue to live in a dream world or face the reality we need to accommodate current standards.The industry and professional are working on answering ‘our’ needs. In the meantime, let's be patient and take one step at a time.

I am sure that in time, the lines between that dream world and reality will be blurred.

Digital music revolution Phase II

Are we entering the phase II of the Digital Music revolution ?After releasing the iPod, launching the iTunes Music Store and capturing almost 80% of the digital market, Apple(NMS:AAPL) is now answering some specialists scepticism on digital music by releasing free DRM music on iTMS (iTunes Music Store). Is it just an evolution or the era of a new revolution ?

EMI just announced they will be releasing a major part of their catalog through a free DRM system on iTunes Music Store from May. The songs will be sold at a more expensive price ($1.29 instead of $0.99) but will be encoded at 256kpps AAC instead of the regular 128kbps for the other songs.

Is it the start of the Digital Music revolution, phase II ?The first wave started in November 2001 when Apple introduced the iPod. It was the first time a company really understood consumer needs and introduced a music player, made for consumer by 'people-thinking consumer' to answer one need : listen music seamlessly without reading a 10 pages owner's manual.

However, it is only in April 2003 when iTunes introduced for the first time a seamless approach for digital music download that the 'in depth' revolution has started.This ecosystem mastered not only the software (iTunes), the hardware (iPod), the OS (Mac OS X) and the content (the music). Consumer were finally offered a viable choice to download digital music without violating the law and the artist rights.

April 2007, almost 4 years after releasing the iTunes Music Store, the consumer will now be able to pay for 'free music' without protection. What are we talking about ? From a technical point of view, the DRM is a digital locker, requested by record companies, to protect the song from being copied between multiple computers and multiple devices.

One could argue the system does not make sense, that the music is free when it is posted on internet and we should not pay for it. We must not overlook the fact that without the DRM system, consumers may not have add the opportunity to enjoy legal on line music.This DRM system does not differ from any other locking system that is applied from industry on various formats or technologies.All music store have unique DRM and for the inconvenience of the consumer, they do not share the same lock. Music bought on a specific store is not compatible with another store and same goes with the player. Even the latest released Zune player for Microsoft(NMS:MSFT) is not compatible with the in house initiative 'Playsforsure' that tried to unify the DRM around one camp (digital player manufacturers + music content + Microsoft) against the iPod-iTunes alliance.By removing this DRM, consumers will be able to share content with anyone else, regardless of platform or devices. It means people will be able to buy music on an iPod and, play that same song on another device (but not through iTunes).

Is Apple taking a risk ? No, Apple is again leading the revolution. This move could see increased revenue for the company while its competitors continue a price war. Most importantly, it will benefits the market, the consumer and the investors. This abolishes the views of many critics on the closed Apple - iPod - iTunes ecosystem.

Now, there will be questions that still need to be answered.

1) Will it be available to other regions ? When ?We can expect this to be introduced to US market first. Music rights are usually managed locally, so how will the other regions be impacted and at what cost ? Let's not forget that there are still many regions not covered by the iTunes Music Store to date. At the same time, there are some regions which do not have the full service (for example video download).

2) Other labels ?EMI has opened a hole in the DRM fortress, we can bet that other labels will follow. They will not only see the opportunity for additional revenue, but the ability to be closer to their audience. Most probably, they might not have other choice than to follow the others in that battle.

3) Consumer reaction ?What now will be the consumer reaction ? Is he going to spend more money for having a free DRM ? iPod - iTunes users are divided in two categories. The first one are the 'Apple fans'. Whatever happens, they will remain loyal to the brand. They will probably upgrade some of their songs, to try the system, promote it and listen to the sound quality difference. Not only AAC is already more qualitative than MP3, but doubling the bit rate to 512kbps will definitively make a difference.The second category is the mass market. Progressively, they will prefer to buy non protected songs because they will like the freedom.4) Video impactWill this system be adopted by the video industry ? Probably yes but not in the short term. The video market download is really immature today. Consumer have a different attitude compared to audio. You normally listen to music multiple times whilst you hardly watch a video as often. Secondly, listening to music can be a passive activity while watching a movie requires full focus.There are more reasons that will prevent to movie industry to follow the same system immediately. For example, the size of the file and the financial impacts related to Cinema, DVD, Blue Ray Disc and HD DVD are many hurdles that need to be overcome.

The above points are not part of a natural evolution of the digital market. A complete new revolution is now happening. Selling free DRM songs a couple of years ago was just not possible. Let's not underestimate the impact it will have on the market, on the industry and the consumer.

The revolution of the digital market phase II is on and is not over.