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Apple & HP's iPod Partnership: A Pivotal Moment in the DRM Race?

Yesterday, at this year’s CES--that’s Consumer Electronics Trade Show, for those of you not in the know—Hewlett-Packard announced that it would re-sell a variation of Apple’s iPod player, in addition to supporting Apple’s popular iTunes online music store. This partnership highlights a massive strategic shift for Apple, and is one that could potentially reap Apple huge dividends down the road.

In the past, Apple has tended to adopt a “go it alone” strategy, and has assiduously avoided making its software available for Windows machines, or manufactured devices that were compatible with Windows-based machines. Apple’s strategy for much of its 20+ year history has been to try and generate profits by releasing superior products or software than those based on the Microsoft/Intel standard, in an attempt to recapture the dominant position that it once held in the highly lucrative OS market in the early 1980s. The Windows-version of iPod, coupled with Windows iTunes store, marked the beginning of a shift, insofar as it was the first time that Apple had begun aggressively courting Windows-based users.

Apple ostensibly claimed that it was pursuing Windows-based users as a means to sell more of its highly profitable iPod. However, as readers of the BuzzSponge blog will note, it’s highly unlikely that the iPod will continue to be as profitable for Apple in the long run, especially now that much more cost-efficient manufacturers like Dell & Samsung have gotten in the game. These players will likely drive down Apple’s pricing ability over the long run, thereby cutting into profits.

Apple had a much better reason to pursue Windows-users than simply to sell more iPods, however. The war of digital music players is rapidly becoming a battle over who will control the software that will control media content—in short, it’s a battle for owning a digital rights management standard. In this match-up, Apple is pitting its proprietary AAC format for playing music against Microsoft’s WMA format, and Real Network’s RAM format. The rewards are large—theoretically, licensing fees from all content played over a particular software standard. Hence, the competition has been fierce—the last few months have seen a variety of MP3 players either being released or announced that will play an exclusive standard.

The phenomenal popularity of the iPod, the only player capable of playing iTunes, has enabled Apple to pull far ahead of Microsoft and Real Networks in the DRM race with its AAC format. HP joining forces with Apple marks a significant gain for Apple—and a potentially large loss for Microsoft—since it means that an additional number of Windows users will be pushed towards the AAC format. The importance of this cannot be understated, since it looks like the DRM race will be settled via “network effects”—e.g. the first player whose format reaches scale the fastest will likely be support by the majority of copywrite holders and intellectual property manufacturers. Once this happens, the DRM race will be over, and only one standard will prevail. By attaching itself to HP’s PCs and marketing clout, Apple has greatly increased the odds of its AAC format winning the battle.

Posted by Matt Percy | Permalink

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Comments

AAC is not a proprietary format, it's part of the MPEG-4 standard. It's the DRM scheme called Fairplay which is proprietary.

Posted by: Conny Svensson | Jan 10, 2004 12:30:53 PM

I would go even further and say that Apple is making a play to strongly influence (if not control) digital content throughout the foodchain. After all, if digital content is made using Quicktime, then it is more likely to be Quicktime compatible at the level of the end user. IMHO, this explains why Apple has been focussing its software offerings on digital content creation (photos, music, video). Its a huge market and much more interesting than Office suites..

DD

Posted by: DD | Jan 10, 2004 2:59:19 PM

This is big! In addition to what others have said (and check out bill palmer's comments), iTunes itself greatly expands Apple's influence by putting more copies of Quicktime out there.

In addition to being a component based file system that can support the kinds of applications we'll be seeing in a few years time, and its present function, media transport and rendering, Quicktime puts a major portion of the core Apple GUI (and abstract OS) on Windows desktops.

This means that it becomes much more productive in future for Apple to launch a number of new applications and network services for Windows built upon Quicktime, which on Windows can be a full fledged application server.

How this will be leveraged remains to be seen.

Posted by: Michael Fischer | Jan 10, 2004 8:03:17 PM

Conny-

Thanks for explaining the difference between the proprietary and non-proprietary components of AA to me--I really appreciate it, and will incorporate it into future blogs.

In any event, there's a great article in this morning's WSJ about Microsoft's reaction to HP's decision to partner up with Apple on iTunes and the iPod. In a nutshell, it looks like MS was caught off guard, and is trying to reframe HP's choice to go with iTunes & AAC as "consumer unfriendly," since it "limits the customer's choice." (As opposed to the oh-so-consumer friendly WMA standard?) There's also a couple of interesting points in the article: apparently, iTunes has roughly 70% of the market for paid downloads, and the iPod has slightly more than 30% of the market for MP3 players (that is, all players; I'd still bet that Apple's share of the hard-drive based MP3 player market is significantly higher). In any event, both of these #'s bode well for Apple.

Thanks for the comments, everybody--look for more blogs later this week!

Matt Percy
BuzzSponge

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Posted by: Andrew | Jul 11, 2004 11:23:23 AM

I am currently in the market for steel buildings. I have heard that the steel building industry can be deceptive. I ran across a company called Anthem Steel buildings. Anyone ever purchase a building from them?

If not, do you know any other steel buildings companies?

Thanks.

Posted by: steel buildings | Nov 23, 2004 5:32:37 PM

Hey! I just happened to see your post about steel buildings. I do not know very much about Anthem Steel Buildings, but I have heard alot about General Steel buildings.

General Steel is on the radio constantly about steel buildings. I have heard their ads on Paul Harvey for years. They must have alot of experience in the steel building industry.

I have heard horror stories about people getting shafted when purchasing a steel building. If I were to purchase a steel building myself, I would want to go with a company that I could trust. I would take a look at General Steel buildings.

Just my 2 cents...

Posted by: steel buildings | Nov 30, 2004 5:39:36 PM

I may be mistaken, but I thought General Steel was a aggregate machine manufacturing company. I think the name of the company is General Steel Products. This is one of the companies under the umbrella of Fisher Industries.

I was on their website http://www.fisherind.com. It says General Steel Products. It does not say anything about steel buildings. General Steel appears to manufacture machines. I don't know much about the industry.

Is that the same General Steel?

Posted by: general steel | Dec 1, 2004 2:01:53 AM

You are correct. General Steel Products does not sell steel buildings. That is a different General Steel Company. I am talking about General Steel Corporation out of Colorado. They have a website at http://www.generalsteel.com .

General Steel buildings has a number of other websites that I found by doing a quick search on Yahoo. You can find steel buildings at the following sites:

http://www.gensteel.com
http://www.generalsteelbuilding.com
http://www.generalsteelchurchbuildings.com
http://www.generalsteelcorporation.com
http://www.generalsteelbarnbuildings.com
http://www.generalsteelindustrialbuildings.com

This is the General Steel that provides steel buildings. Like I said, there are a number of other companies with the name General Steel, but they do not provide steel buildings.

Posted by: steel buildings | Dec 1, 2004 12:24:21 PM

You are correct. General Steel Products does not sell steel buildings. That is a different General Steel Company. I am talking about General Steel Corporation out of Colorado. They have a website at http://www.generalsteel.com .

General Steel buildings has a number of other websites that I found by doing a quick search on Yahoo. You can find steel buildings at the following sites:

http://www.gensteel.com
http://www.generalsteelbuilding.com
http://www.generalsteelchurchbuildings.com
http://www.generalsteelcorporation.com
http://www.generalsteelbarnbuildings.com
http://www.generalsteelindustrialbuildings.com

This is the General Steel that provides steel buildings. Like I said, there are a number of other companies with the name General Steel, but they do not provide steel buildings.

Posted by: steel buildings | Dec 1, 2004 1:04:11 PM

I Agree...

Posted by: General Steel | Dec 2, 2004 10:24:09 PM

Nice blogg!

Posted by: General Steel | Dec 2, 2004 11:17:28 PM

For sale?

Posted by: General Steel | Dec 3, 2004 12:03:33 AM

All types of steel buildings

Posted by: steel buildings | Dec 6, 2004 2:36:02 AM

Sounds very reasonable for steel buildings!

Posted by: steel buildings | Dec 10, 2004 1:35:58 AM

Check this out!

Posted by: steel buildings | Dec 10, 2004 8:22:09 AM

I saw this article and thought it was interesting...

General Steel - Advantages of Steel Manufacturing Buildings

The domestic manufacturing industry has very diverse needs for their production facilities. The need for a durable, high quality building at a budget price, however is a common need for any industry. General Steel is the supplier that more and more manufacturers look to for low-cost, affordable steel buildings.

You can maximize profitability by keeping production facility costs low. A steel manufacturing facility from General Steel can save you money on start-up costs, construction expense, and maintenance expenditures. Consider some of the advantages:

Flexibility: Regardless of what you product specialty is , a General Steel manufacturing facility can be customized to fit your needs. Utilizing only high-quality steel, General Steel specializes in clear-span construction up to 300 feet wide. With clear-0span construction there is no need for interior load bearing columns. This gives you greater flexibility in the design and layout of your facility. Clear- span construction can be very expensive when using alternative materials such as wood, block or stone.

Durability: Conventional construction methods simply cannot stand up to heavy use and prolonged wear and tear that a steel building can provide. General Steel buildings are specially designed to resist the weather’s elements and pests. That means your manufacturing facility will last longer and require less maintenance, thus saving you money and ensuring that your building will still be
productive and profitable far into the future.

Speed: General Steel buildings are pre-welded, pre-drilled, and pre-punched at the factory, and they are erected quickly so you can start manufacturing your products right away.

Economy: General Steel manufacturing facilities are economical. Using our steel building system can save your company up to 50% compared to the conventional construction costs of more traditional structures. General Steel manufacturing facilities can also offer savings on insurance costs for your company since steel is highly fire resistant.

Quality: You take great pride in the products you manufacture and you should expect nothing less than premium quality from your steel building provider. General Steel uses only high-grade steel that provides straight wall construction, tight connections, and long-lasting durability. You can rest assured that General Steel buildings supplied to manufacturers are designed to last for many years of profitable service.

Posted by: steel buildings | Dec 12, 2004 10:47:58 PM

I agree! Something is not right about that....

Posted by: general steel | Jan 30, 2005 11:38:44 PM

Was this the general steel site you were referring to? It is General Steel, but I don't think it is the same general steel.

Posted by: general steel | Jan 31, 2005 4:55:45 PM

General Steel is a popular name. Have you seen this General Steel site?

Posted by: general steel | Jan 31, 2005 5:33:11 PM

Here is a directory page.

Posted by: general steel | Jan 31, 2005 6:07:23 PM

Here is another one of the general steel pages. This does not look like the steel buildings general steel.

Posted by: general steel | Feb 1, 2005 12:35:46 AM

Here is another one of the general steel pages. This does not look like the steel buildings general steel.

Posted by: general steel | Feb 1, 2005 1:43:17 AM