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Strategies for a discontinuous future.












Tuesday, March 22, 2005
 


Apple vs Apple

See, one of the reasons that I'm not historically cool with Apple is that creatively, Apple roolz, but strategically, Apple makes some big mistakes. Viz iTunes, the closed model, and the monopsony strategy. Here's another nice example - charging 10% to accessory mfgrs for 'Made for iPod' branding.

Not to beat a very dead horse, but one of the basic lessons of digital strategy is to exert platform power by creating thriving markets for complements. This creates economies of scale at worst, or entire ecosystems at best. Charging for branding is a silly idea.

I know, I know, Macfanatics, it's driven by Apple's 'relentless focus on giving consumers Apple quality'. But I think the marginal cost of this strategy - killing a large segment of the exponentially accelerating accessories ecosystem, which could drive Apple's platform dominance in the exploding personal media and digital media markets - is much, much, much, much greater than the marginal benefit - the retention of a relatively small number of quality-obsessed macfanatics.

In fact, I'd challenge you guys to give me an example of a 'Seal of Approval' program whose long-term benefits have outweighed it's long-term costs. The examples that tell us regulating complements is a strategic error are countless: Nintendo (vs Sony) is probably my favorite. (Via Fred)

-- umair // 5:00 PM //


Comments:

I don't see it that way. I see it as a kind of "celebrity endorsement, a very powerful endorsement indeed. It may also help comsumers differentiate between competing products. Assuming that Apple does not give the branding to lame products, it's a quality endorsement as well.

The "ieconomy"(those companies doing business in Apple's orchard) is becoming crowded with multiple manufacturers for the same accessory. So it may prove to be a practical method of increasing marketshare. Unit sales go up, costs go down, the branding fee is absorbed throughout the "ichain." The real benefit is not marginal at all when you're trying to increase your unit sales.

I do think the price tag is too high. It seems to me that 2-3%of wholesale cost would be reasonable.
However I must confess, that a positive review from iPodlounge.com is perhaps just as valuable as the made for iPod branding. But in this market, nothing is more valuable than a prime spot in the Apple Store, and that potential makes the "Made for iPod" branding" very worthwhile.

And besides, the iPod is a powerful brand, why should Apple allow others to use it for free?
// Anonymous // 9:51 PM
 

Um, I think the "Good Housekeeping Seal of Approval" has been helping sell millions of products for over 50 years.
// davey // 10:36 PM
 

Not that I agree with it, but "Intel inside" comes to mind.
// Anonymous // 11:30 PM
 

Nintendo didn't lose market share because of "the seal of quality", it did because the n64 used ROM cartridges, and those were costly and reduced the margins by a large amount compared to cd-roms the Playstation was using. It was a time when people were impressed by the multiple video cut-scene that started to appear in videogames. Still the n64 didn't flop completely, for example it was number one or close second in many countries. The PS2 is what really solidified Sony's market because it was released years before the GameCube.

Anyhow, the lisencing charge was required to publish on the n64, as for the iPod program (which already existed before anyway) nothing prevents you from selling iPod accessories, and Apple won't harrass companies that don't use it.

Perhaps you won't have access to how to plug software into the iPod OS but these are the things that should really need quality control. I don't wan't to see the iPod starting to crash and have problems because of 3rd party add-ons.

One of the reason Windows users buy iPods, is because it's their way to express they had enough with the PC market "jungle". They see the iPod, the simple iconic device, turn around and see the jungle of other mp3 players and say to themselves "oh no not this time".
// Anonymous // 5:05 AM
 

Nintendo didn't lose market share because of "the seal of quality", it did because the n64 used ROM cartridges, and those were costly and reduced the margins by a large amount compared to cd-roms the Playstation was using. It was a time when people were impressed by the multiple video cut-scene that started to appear in videogames. Still the n64 didn't flop completely, for example it was number one or close second in many countries. The PS2 is what really solidified Sony's market because it was released years before the GameCube.

Anyhow, the lisencing charge was required to publish on the n64, as for the iPod program (which already existed before anyway) nothing prevents you from selling iPod accessories, and Apple won't harrass companies that don't use it.

Perhaps you won't have access to how to plug software into the iPod OS but these are the things that should really need quality control. I don't wan't to see the iPod starting to crash and have problems because of 3rd party add-ons.

One of the reason Windows users buy iPods, is because it's their way to express they had enough with the PC market "jungle". They see the iPod, the simple iconic device, turn around and see the jungle of other mp3 players and say to themselves "oh no not this time".
// Anonymous // 5:05 AM
 

sorry, double post... interface is a little confusing for anonymous posting, when you click publish it erases your message and present you with a username and password field.
// Anonymous // 5:07 AM
 
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