Apple’s Strategy

Robert Cringely writes:

Is Apple selling iPods to sell music, for example, or selling music to sell iPods? It is most decidedly the latter. Based on a claimed 1.5 billion song sales at $0.99 each, Apple has made gross revenue from music sales of just under $1.5 billion since 2001. Yet in the same time period the company claims to have sold 60 million iPods, which represent (at an average $200 price) $12 BILLION, or EIGHT TIMES as much revenue. So the game is about selling razors, not blades, at least not yet.

Apple deliberately repositioned its movie offerings to be better than broadcast quality but less than DVD quality and quite a bit less than HD-quality. Doing so saves on bandwidth (though less than you’d guess — moving NerdTV from 320-by-240 MPEG-4 to 720-by-480 H.264 increases the required bandwidth by only about a factor of two, the new codec is so much more efficient), but it is also politically expedient when thinking about Wal-Mart, Best Buy, and Target — the three largest sellers of DVDs and, not at all coincidentally, the three largest sellers of iPods, too.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.