Analysts agree with Jobs on iPod strategy

Joined on stage by legendary rockers Bono and The Edge from U2, Apple Computer Inc. CEO Steve Jobs on Tuesday expanded Apple's hugely popular iPod line-up with two new models. During the event, held in San Jose, Calif., Jobs said that Apple didn't feel video was the right way to take the iPod, opting instead to add a color screen and allow users to sync photos with their device. Analysts agree with Jobs' strategy and feel the pricing for the devices is right.

An enthusiastic Jobs rolled out the new line of products that included a black and red special edition U2 iPod, a color screen 60GB iPod, and the introduction of the EU iTunes Music Store, allowing residents of nine new European countries to buy music online. Jobs also confirmed the Canadian iTunes Music Store would open next month.

Apple and U2 have been very careful about partnerships and who they have worked with in the past, but Apple executives said it was a common interest in music that brought the two sides together initially.

"There was a common interest in the move to digital music and how that could be put together in a way that works for both musicians and customers," Phil Schiller, Apple senior vice president of Hardware Product Marketing, told MacCentral.

"Artists like U2 -- and other great artists -- are Mac users," said Schiller. "More artists use Macs to create music than any other computer, so that creates an affinity between Apple and artists that's pretty unique in the industry."

Apple could have worked with any number of artists for a special edition iPod or for an endorsement, but analysts feel that U2 bring a lot to the table for Apple.

"I would hazard to say that U2 has evolved into the Beatles of this generation," said Tim Deal, Technology Business Research analyst. "They have enormous appeal and have continually reinvented themselves in order to remain relevant. Above all of that, the band has enormous credibility -- when they endorse a product, the masses take notice."

The 20GB iPod U2 will ship in mid-November for US$349, and sports a black case equipped with a red Click Wheel. On the back are custom engravings of U2 band member signatures. The iPod Photo looks identical to its music playing-only cousin, but it uses a 220x176-pixel resolution color screen capable of displaying 65,536 colors. Available now in 40GB and 60GB capacities, the iPod Photo costs US$499 and $599 respectively.

"The price is right in line with Apple's ongoing iPod strategy," said Deal. "Given the additional functionality, the boost in storage space, and the collector's appeal of the U2 iPod, I think they will see strong sales."

Not video, photos

Jobs was adamant during his address on Tuesday that video -- the technology that so many rumors swirled around -- was not the right direction for the iPod. One reason Jobs brought up as an upside for turning to photos was that "there are no copyright issues, you already own them." The devices that do support video are larger allowing for a screen big enough to view a movie, which makes them less mobile.

"There will always be those who think that gadgets like the iPod should have Swiss-army-knife functionality, but I agree with Steve Jobs, it is not the right form factor for video," said Deal.

Add the capability for users to sync their iPhoto libraries (or a folder of their choice) from the Mac to the iPod gives Apple a tightly integrated solution to offer its customers. This integration is something company executives feel gives Apple's it's strength.

"Because we have all of the teams working together -- the iTunes, iPhoto, iPod software and hardware and marketing teams -- we can create a unified experience that goes from downloading music to taking your camera and hooking it into iPhoto all the way to syncing with your iPod. Nobody else can do that -- that is Apple's strength," said Jon Rubinstein, Apple senior vice president iPod Division.

iTunes Music Store comes to Canada, EU

Jobs took a moment to announce the EU iTunes Music Store, allowing residents of nine new European countries to buy music online and the Canadian iTunes Music Store, which will open in November. Jobs said he didn't usually share data, but today he wanted to show the strong growth that the online music store has seen.

Since May, Apple has seen a 64 percent growth rate for the number of songs sold from its music store. The numbers break down like this: May (10,830,573); June (12,331,133) July (15,103,099); August (15, 665,890); September (16,229,956); October projected songs sold (17,726,830).

"It's not luck, we have a team that works incredibly hard at the music store," said Apple's Schiller. "People forget that Apple is the one that created this market and every step of the way we've been innovating faster than anyone else."

Even though Apple has been increasing the number of songs sold in the face of increasing competition, Technology Business Research analyst, Tim Deal still feels that competitors will have an affect on Apple's number of songs sold.

"I think Apple will begin to lose share to competitive alternatives, but should Apple continue on this aggressive iPod roadmap, it will likely maintain dominance," said Deal.

Working with artists

Apple's Schiller would not comment on whether the company is seeking other bands to work with as closely as they have worked with U2, saying only that they "are certainly trying to work with artists in exciting ways."

However, Deal believes the benefits of these endorsements will lead Apple to continue down that road in the future.

"I think these artist deals carry great promotional weight for Apple -- they will need to choose its endorsers wisely though," said Deal. "As a symbol of counter-culture computing, artists like Britney Spears would likely damage Apple's credibility."

The best experience

When it comes right down to it, Apple believes they offer the best solution on the market and believe they are reasonably priced for what the consumer gets.

"In the grand scheme of things an iPod isn't the most expensive purchase in your life," said Schiller. "It's in the realm that a large number of people can afford, so why not get the best thing rather than settle for a piece of junk that isn't well integrated and doesn't work well when you can get the best thing at a price you can afford. We have the best experience on both Windows and Mac."

This story, "Analysts agree with Jobs on iPod strategy" was originally published by PCWorld.

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