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by Bryan Chaffin

Apple Dismisses Dell As Unoriginal, But Misses The Point
September 29th, 2003

Apple has issued a dismissive statement regarding Dell's new forays into the innovative world of MP3 players and online music stores, according to the San Jose Mercury News. Dell entered the consumer electronics market with pre-announced products last week, including a TV (like Gateway), a Dell-branded online music store (like Apple), and a Dell-branded MP3 player (also like Apple). The MP3 player will be a rebranded product from Creative that plays MP3 and WMA files that can be downloaded from the rebranded third party online music store that will sell WMA files.

The San Jose Mercury News story includes comments from a variety of industry sources, including some dismissive comments from both HP and Apple attacking Dell's new products as little more than me-too-offerings. From the Mercury News:

"It appears that Dell is re-branding one of the second-tier music services that will be announced soon, just like they are re-branding Creative's MP3 player. There is little original here," Apple's statement said.

Hewlett-Packard, which is tussling with Dell in PCs, printers, servers and other businesses, also had a strong reaction. Earlier this summer, HP announced a retail strategy based on making different pieces of the technology puzzle -- PCs, printers, digital cameras -- work better together.

"There's a big difference between putting your name on something and actually innovating," said Chris Morgan, vice president of sales and marketing for HP's imaging and printing group, pointing out that HP spends $4 billion a year cooking up new technologies and ideas, to Dell's $500 million. "More and more of what consumers want solved won't be solved by a single product."

The full article also talks about Sony's role in this battle, and other related issues, and I recommend it as a good read.

There's little surprise that Apple and HP would make statements criticizing a competitor, of course, but in this case the PR-speak is based on the truth. Dell is little more than a copy-cat company that waits for its betters to figure out something new so that it can then figure out how to do it cheaper. While that's true, that doesn't mean that Dell isn't a serious threat to Apple and the others in this market. Dell almost always does find a way to make things cheaper (in both senses of the word), and it doesn't matter if the company couldn't innovate its way out of a wet paper bag if consumers end up buying Dell's cheap stuff.

The thing is, however, that there is little that Dell can do to make either an online music store or a digital music player cheaper if it is merely rebranding third party products, so perhaps the company's vaunted talents at shaving off pennies will not help it so much. Can you imagine Michael Dell negotiating with record execs for a better price on songs? How about that tool, Kevin Rollins? I just don't see that going too well for the Round Rock, Texas-based company.

Indeed, Dell may also be overestimating the power of its brand in markets outside of computers. Let me rephrase that: Dell is probably overestimating the power of its brand in markets outside of toasters...I mean PCs. Creative's brand is far stronger in this market, as is Apple's. I seriously think that Dell would be better off maintaining its place as a reseller of those companies' products, as it is now. Dell sells quite a few iPods and other third party peripheral, and there's nothing at all wrong with that.

In fact, I wish Dell would actually work with Apple to develop its online music store. A Dell branded iTMS would offer Dell's customers a better experience, and it would offer Apple more market share. Everyone wins. This is a similar argument I made urging Amazon and Apple to work together for that retailing behemoth's online music store.

Who knows if such things are in the works, or if Dell even tried to work with Apple when developing this stuff, but it's no stretch to think of Apple as being the one refusing to license out its technology and products. While Apple's single biggest competitive edge in the PC industry right now is "owning the whole widget," as Steve Jobs is wont to say, the same leverage is not necessary in the online music world.

In many ways, we are looking at a replay of the computer platform wars that Apple lost in the 1990s. Apple has a chance to utterly own the music download business by partnering with as many companies like Amazon, Dell, Gateway, AOL, Sony, Best Buy, CompUSA, Circuit City, and heck, even Talk about going back in time and righting a wrong...These companies are going to partner with someone, and so far it's mainly been Microsoft. How does that benefit Apple?

Right now, Apple owns the most market share and mind share in the digital music player business, and it certainly owns the most mind share of the music download business. That could well change, however, if two things happen: If the Microsoft-aligned companies get their act together and offer something that comes even remotely close to the iTMS experience, and someone like Creative comes out with an iPod killer, then Apple will lose its dominant position without also stepping up its products.

Right now, only Apple is offering AAC downloads, while the vast majority of competing products are adding WMA support to their MP3 players. Apple could find itself in the same position in this market as it has right now with the Mac, which is to say a minority position that can't get no respect. (Please note that I strongly believe that the Mac platform's situation is changing, but that's irrelevant to this discussion.)

Admittedly, we're not close to that, but once upon a time the Mac was light years ahead of DOS and Windows, too. Things change.

When it comes to the music player and online music download business, Apple needs market share, and it needs partners. With both of those things in place, it can set the standard for online music sales, make money from other companies licensing its technology, and simultaneously expand the market for QuickTime, too.

So, Dell is unoriginal, absolutely, but why shouldn't Apple be the company making money from that marginality? Instead of, Real, or whomever Dell is partnering with, getting the goods, Apple should think differently and reach out with the iTMS, and perhaps even the iPod.

began using Apple computers in 1983 in a high school BASIC programming class. He started using Macs in 1990 when the Kinko's guy taught him how to use Aldus PageMaker, finally buying a Power Computing Power 100 in 1995. Today, Bryan is the Editor of The Mac Observer, and has contributed to the print versions of MacAddict and MacFormat (UK).

You can send your comments directly to him, or you can also post your comments below.

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