Thursday, September 13, 2007

Apple In The News Again

I noticed Apple corporation has been in the news again recently. In fact, I wrote a post about Apple's latest product introductions here, within the past week.

On that point, Herb Greenberg, a periodic contributor to the Wall Street Journal's Weekend edition, and columnist/analyst for MarketWatch, penned a piece calling Apple's recent price cuts into question. Essentially, Herb noted the recently-emerging disparity between volume growth of iPods, and the revenue growth rates corresponding to those unit growths. The price cuts, say Greenberg, should cause shareholders to worry that product maturity has finally caught up with Apple and its signature product line.

I like Greenberg. He's one of my favorite guests on CNBC, even if I don't always agree with him. His irreverent, often-minority viewpoint attracts my attention.

Even in his Journal column, Herb quotes another analyst, one Charles Wolf, as noting that the real growth in revenues for Apple's iPod line come from the halo effect it has on other Apple products and services- the Mac computres and the iTunes online store.

In this, I think Wolf is correct. Apple has more than a single hot product line. It has an entertainment system. As I've noted before, you can quibble all you want about its compatibility with MP3 players, and the copyright protection. But nobody forced anyone to buy iPods. They simply are compelling price/performance offerings.

All those iPod owners have helped fuel the iTunes store revenues, no matter what Jobs wrote earlier about how much stored iPod music is ripped off of CDs already in the owners' possession.

Granted, Greenberg charts Apple's declining rates of unit and revenue growth of iPods over the last two years. I don't think this is news to either Jobs, or the firm's management team. In fact, I'd say the recent spate of new products and lower prices is calculated to ignite both growth rates, due to totally new price/performance points. Certainly Apple has done for the iPods, by adding video screens and capacity, something Forman's grills, with which Greenberg compared them, never could.

One Forman grill is pretty much like another. Yes, the larger sizes and removal grill plates are nice product line extensions. But not so vital that most people would replace their existing grill. I haven't. Part of their original allure was the incredible ease with which they can be cleaned. Who really had to have them removable?

The new iPods are very different. Whole new, valued functionalities are included, at dramatically lower prices.

Speaking, or writing, of Apple's entertainment system, another Journal article mentioned that NBC is removing its video content from iTunes after their contract expires in December. Apparently, Fox and NBC hope to collaborate on their own, new online video site.

While I still believe there won't be just one site which all video viewers learn to visit, as Comcast's CEO contended some months ago, I believe a few, such as YouTube and iTunes, tend to predominate their respective product/service spaces.

Will people re-learn to visit iTunes for music and some videos, then skip over to (the new NBC-Fox site), remembering their TV program shopping list while they buy more content there? Perhaps so, perhaps not. I suppose die-hard program fans will do that, if they haven't already visited the free replay sites right after the episodes aired. Or wait to rent them on Netflix.

Personally, I think Apple is still in the driver's seat on this one, because of formats. Will the downloads on Hulu support iPods? If not, will iPod users bother?

GE/NBC is too diversified and sprawling to have anywhere near the intellectual horsepower and financial incentives to attract sufficiently talented people to out-manage Apple on this. Fox is similar. Apple, by contrast, tends toward laser-like focus on their few product lines- music players, downloading services, computers, and now, phones.

Besides, Apple has Jobs. Neither Fox nor GE appear to have a similarly motivated, talented key executive facing off against Jobs in this matter.

In accordance with my recent piece on financial institutions, competitiveness, and diversification, it should be no surprise that my money is on Apple in this fight.

No comments: