You may have seen the recent furore (actually began in January) online regarding the Palm Pre and iTunes. For those that haven’t, the gist of the problem is this;
Palm are releasing a sexy looking new phone, the Pre, which not only looks like the only realistic contender to the iPhone but has a completely bespoke webOS (based on Linux). There’s a comprehensive review on Engadget with some videos.
Palm would like to be able to sync this phone with iTunes, so they made it appear like an iPhone/iPod when connected to do so. Apple took incredible umbradge at this and have released several updates to stop it working. As there are several zealous Macolytes in our agency a debate has been raging via email which I present to you here. The two opposing sides can be summarised as:
Side (a): Consumers should have freedom of choice and Apple should let them use iTunes with the Pre, the decision not to damages their reputation
Side (b): Apple are protecting their business interests and don’t think this decision will damage their reputation
Can't we just use these?
(a) Says:
““Palm is currently locked in a long-running battle with Apple over the Pre’s ability to synchronise with a user’s iTunes library. When the Pre first launched, it could copy across songs from a user’s iTunes library by tricking the software in to thinking that it was communicating with an iPod. But Apple quickly issued an iTunes software update that disabled this capability, only for Palm to issue its own software update for the Pre to reinstate iTunes synchronisation.”
Last week’s launch of iTunes 9 has again disabled the Pre’s iTunes syncing feature, and users are waiting anxiously to see what Palm’s next move will be.
“As we’ve said before, newer versions of Apple’s iTunes software may no longer provide syncing functionality with unsupported digital media players,” warned Apple in a statement.
“Apple’s decision to disable Palm media sync again is yet another direct blow to its own iTunes customers who will be deprived of a seamless and familiar synchronisation experience,” retaliated Palm in a statement.”
Why? Because Apple want you to roll over and receive your iPhone/iPod as a suppository every 12 months.”
(b) Says:
When the Pre first launched, it could copy across songs from a user’s iTunes library by tricking the software in to thinking that it was communicating with an iPod. But Apple quickly issued an iTunes software update that disabled this capability
LOL! Why does Palm have to keep trying to hack iTunes to get it to work? Maybe its because there is no other song purchase program out there that is as good?! Of course with Spotify released as an app that could change! Laughable how Palm have to look for ways to hack iTunes! 
(a) Says:
I know this is one for the blog (SPT – Yes it is!) – but please take your Apple tinted glasses off for a moment! Apple has just denied another reasonable source of income by locking out the Pre.
Maybe they (Apple) should look at the opportunities to open up iTMS to other devices and therefore increase their opportunities of even further revenue generation!
Besides which, you could use Double Twist (http://www.doubletwist.com/dt/Home/Index.dt) and sync anyway!
(b) Says:
Perhaps Apple are trying to protect itself from other vendor’s carbon copying them…
4) Poach a senior iPhone architect – check
5) Infringe Apple’s Multitouch and Gestures Patents – check
6) Hack iTunes ‘integration’ by violating USB regulations and get ass slapped – check
And yet Apple is in the wrong for protecting their own platform? I don’t think Apple needs the dribbles of revenue that the Pre will generate.
(a) Says:
I don’t see how they’re protecting their platform, people who want an iPhone will still get one and allowing their main competitor in the phone sector access to their own music sales channel is surely the best way to capture lost revenue from people who buy a Pre instead?
In regards to these points:
1) Poach a senior iPhone architect – check – unlucky, he obviously felt he could do better elsewhere
2) Infringe Apple’s Multitouch and Gestures Patents – check – the ascension of touchscreens means there will be a lot more of this in future
3) Hack iTunes ‘integration’ by violating USB regulations and get ass slapped – check – again they haven’t hacked iTunes, they make their phone appear like an iPhone as this is the only way to use it with iTunes if you’re not going to be forced into getting a contract from O2 for an iPhone
What’s the beef with getting more people access to iTunes? Maybe you want the software but not an iPhone (this is going to be an issue outside of just the Pre) but all Apple are saying is ‘No, buy an iPhone’. It’s just not (to my mind) a sensible way to get the most out of iTunes…
(a) and (b) Say:
Woah there!
(a)
There are other options to sync, it just strikes me as very odd that Apple have gone down this road that’s al. Fair enough if they don’t make any money from iTunes but they would still maintain a larger presence (from a branding point of view) but letting more people use iTunes. And if they only break even surely that’s an even bigger reason to grow the iTunes user base, rather than limit it?
(b)
I don’t see it as odd in any way. They make much more profit selling iPhones and iPod’s, not content on iTunes. In order to use iTunes, the music biggest retailer in the US, and largest online retailer in the world, you need an iPhone or an iPod. Allowing other vendors to use iTunes would likely mean less hardware sold, but (I agree) increased iTunes revenue. However, the difference between the two would result in negative profit growth.
(a)
I’m hearing a lot of Apple do no wrong talk is all I’m saying. You can’t groundlessly assume that the Pre is an inferior platform prior to a UK release or UK road test – if Apple are that worried that it will rob iPhone marketshare maybe they should just roll out another cash in update? Make it a little bit faster again maybe?
(b)
All I hear is that Apple always do wrong, and have inferior products and software. IMO the Pre is inferior; it doesn’t support native apps, there is no music subscription service, it has poor battery life, apparently feels cheap and the lack of software keyboard is a major disadvantage. (ed. the Pre actually does feature a software keyboard, other facts are uncited as yet)
The Judgement!
Conclusion?
Well as you can see we have not reached any kind of conclusion here, the Macboys love Apple, the others love other stuff.
For my part I think the Pre will be an excellent alternative to the iPhone, the review (above) is positive and considering the iPhone has a 3 year headstart in terms of App developement and software fixes it would be foolish to rule the Pre out yet.
But at the end of the day, Apple, Palm, can’t we all just learn to get along?
“Well as you can see we have not reached any kind of conclusion here, the Macboys love Apple, the others love other stuff. ”
I think we did reach a very fruitful conclusion actually. Stop crying over the fact that you can’t use iTunes!!!
Not sure if this post is entirely fair as you have left out certain very relevant parts of the conversation…notably mine!
I think I made a fair comment about this is what Capitalism is all about!
Yep, as summarised as the stalls were set out at the start of the debate!
It may well be what Capitalism is all about but the manner in which you go about protecting your business interests can make all the difference…
Thumping win for side (a) I think, Apple are already acting in a way which disadvantages the consumer.
Thats why they’re such a successful business then!?
Stu. The ORIGINAL argument that you started was that Apple have made a terrible business decision for not having the foresight to grant Palm Pre access to iTunes, on the grounds that this will generate unfortold wealth for Apple.
The fact of the matter is that iTunes is a loss-leader and generates extremely high revenue, but very little actual profits. Apple’s real profit comes from hardware, which are complimented by great software and services (iTunes). For this reason, it’s obvious why Apple would restrict other manufacturers access to their eco-system. Whether that is good for the consumer, or not, is a different argument; but this debate was originally about what is best for Apple as a business.
One thing you certainly cannot say is that Apple have not garnered a massive 32% of the operating profits from the entire cellular market by making “wrong” business decisions. Most of America hate AT&T, but yet they put up with the apparent terrible service because the iPhone is really desirable product.
“Apple have made a terrible business decision for not having the foresight to grant Palm Pre access to iTunes, on the grounds that this will generate unfortold wealth for Apple.”
I actually said it was short sighted in that they are alienating potential customers and cutting off a potential additional revenue stream (which they are). According to Wired Apple turned over $570 million GP from iTunes in 2007 and has a rough 30% profit margin.
As such it’s a significant part of their business and not one I’d restrict!
@Norton – I’m not saying they aren’t a successful company, they clearly are which is *exactly* why this decision is a surprise.
@Stu
“According to Wired, Apple turned over $570 million GP from iTunes in 2007 and has a rough 30% profit margin.”
Since Apple has never actually released iTunes’ GP, its all guesswork.
According to David Packman, a co-founder of the Apple Music Group, a co-founder of MyPlay and the former COO/CEO of eMusic, Apple’s GM is actually about 11%.
According to Andy Hargreaves an analyst at PacificCrest, iTunes runs a 10% operating margin.
Both Packman and Hargreaves factor in bandwidth charges, server running costs, and credit card transaction fees, all of which are largely ignored by most analysts.
Steve Jobs himself, a man who may actually know what GM his business operates on, has publicly stated that the iTunes store runs at “break even”.
So, depending on who you believe, the annual operating margin on music sales at ITMS of $1.9 billion is anywhere between $190m – $570m.
Now consider the iPod/iPhone.
The cell phone handset industry sold over $65B in the last 6 months. It was recently announced that Apple received 32% of the total handset market’s profits, equivalent to a over $2billion.
iSmashphone.com has an interesting visual on just how profitable the iPhone is, compared to other handsets.
Based on these figures, at best Apple generates 4 times less profit from ITMS than it does from the iPhone alone, and at worst 10 times. That does not even include the 220m iPods that have been sold worldwide, presumably with an equally high profit margin.
You say: “As such [iTunes] is a significant part of their business and not one I’d restrict!”.
While you’re right, it is a significant part of Apple’s business in that it differentiates their higher-margin hardware businesses from the competition by offering the largest online music service in the world, it actually generates a relatively insignificant amount of profit when compared to the hardware it is specifically designed to compliment. Remember the old advertising slogan, iPod + iTunes? You have to buy into the entire package and the lifestyle, or nothing at all. In my opinion the iPod/iPhone isn’t popular just because of iTunes, nor is iTunes popular just because of the iPod. Its the synergy (Palm Pre pun not intended) between them, and Apple’s infamous usability.
I can understand why the Pre would benefit from ITMS opening up, but it makes no business sense whatsoever for Apple to allow it. In fact, it would be down right stupid of them to do so. How much profit will a few million Palm Pre’s on the ITMS network really make for Apple? Not a lot if 220m iPods can ‘only’ generates $200m dollars annual profit. Crucially though, how much will Apple stand to loose if iTunes can be used without an iPod / iPhone? Probably a lot more than my humble mind could visualise, I’m quite sure there are a lot of people with the same views as you Stu.
So for those reason, I disagree that Apple are being shortsighted, and rather suggest that they are protecting their interests in a highly competitive market.
Whether this is beneficial to the customer is an entirely different debate. For me, and many, many millions of people I do not find it a problem whatsoever.
I have to say that that is pretty well handled!
Interesting – I will allow you that point (I used GP rather than a Net as I couldn’t track down any cost stuff – short of requesting Apple’s accounts for 07/08!) and from a purely business point of view it does make sense to protect your high margin products.
However, I would still argue that if Apple were confident enough in their hardware and the sale of the ‘Apple lifestyle’ then opening it to the Pre shouldn’t prove a significant risk. For a company that has always prided itself on being on the side of the consumer it just seems to me like a turning point for them.
Stu, I think the reason that we’re having this argument is because you are secretly bitter that the Palm Pre will not have all its promised functionality (ie. the loss of iTunes, and because of this fact the Palm Pre has become less of an attractive option for users (argue that how you will but iTunes is not the world’s biggest online seller of music for nothing!). You desperately want a Palm Pre because it is an alternative to the iPhone (and because you wanted to appear non-conformist), and now because it won’t come with all its promised functionality, you think this is somehow’s Apple’s fault?
Face it, you really SHOULD be getting the iPhone!
@stu
I’m glad you finally conceded the point regarding higher profit margins!
As for Apple reaching a “turning” point, as you put it, it is my understanding that iTunes has only ever allowed iPod’s/iPhone’s and some Motorola’s to sync. I think Palm is the first company to ever actively flaunt USB-IF regulations and they have quite rightly had their wrists slapped for it.
iTunes has been developed at significant cost to Apple, they don’t make much money from it and it is only there to service their high margin hardware. Why on earth should they have to give away all their handwork for free? I don’t think it’s about being confident, I think they just know that iTunes + iPod is the killer combination.
@Dom Hmm, could be. I just don’t know how much longer they can carry on with their current range of products + iTunes. They have a loyal customer base which is great, but it’s issues like this Palm battle that could help (or hinder) their efforts to gather more.
Maybe doing it through wider access to iTunes isn’t the right way but I suppose the gist of what I’m saying is it seems to have been a missed opportunity. Instead of litigation and jibing from both sides working something out between them would surely have been more profitable and worked out better for the customer (both current and potential).
@Norton This isn’t even really worthy of response
but as you’ve been kind enough to read my post here you go:
(1) Palm Pre will not have all its promised functionality – I dont’ use or like iTunes
(2) and because of this fact the Palm Pre has become less of an attractive option for users – this conjecture is incorrect; iTunes is not a selling point for the Pre it was a bonus of the sync functionality which is still being delivered
(3) You desperately want a Palm Pre because it is an alternative to the iPhone – I do want a Pre however as you well know the only two phones I have been considering are the Pre or iPhone, however as Apple and O2 are looking to capitalise on yet another psuedo upgrade in June/July I think I’ll steer clear
(4) you think this is somehow’s Apple’s fault? – I don’t recall this point ever being made
Stu, you’re definitely making it sound like Apple’s fault just in the very tone of your post and comment responses!
Regarding Point 2. Yes, iTunes IS most definitely a popular application to have, don’t say that this isn’t AT LEAST a considerable selling point for the Pre because that simply isn’t true (looking at the facts that Dom has already provided) and shows a lack of knowledge.
The fact is, multi-BILLIONAIRES have made a very informed business decision, using a combined force of not inconsiderable business experience and acumen! I hardly think this can be termed as a “rotten decision”, “misguided decision” or a “missed opportunity” from Apple, I think I would respect their decision if I were you!
@ stu
“I just don’t know how much longer they can carry on with their current range of products + iTunes.”
Applications, applications, applications.
We are only just entering the smart phones era; a market that has the potential to dwarf even the desktop market, let alone the mp3 market Apple have yet again been the pioneers in an hitherto untapped arena.
iTunes is already the largest and most popular application store comprising of 50,000+ apps that have accumulated over 1 billion downloads in a single year. Yet again we see the exact same business model that has served the iPod so well throughout the years. You want access to almost limitless content? You need the iPhone/iPod. Apple takes 30% profit from every sale, which is just enough to cover operations, but like music sales before it, it is intended to be a loss leader.
Do you believe that apple should open the iPhone SDK to non Apple hardware too? That’s equally not going to happen either!
@Norton
“Stu, you’re definitely making it sound like Apple’s fault just in the very tone of your post and comment responses!”
Not at all, I think you have shown a complete misunderstanding of that point. Dom has said that iTunes it a selling point for Apple products, the Pre is not an Apple product therefore iTunes is not a selling point for the Pre.
This whole discussion has been about whether Apple have made the right decision for the consumer and/or business by continuing to restrict it’s software provision to Apple products alone.
@Dom
That may be true but a large proportion of the apps are totally useless (as demonstrated by Norton – iFart, iPint etc…)
If what you’re saying is true, and that Apple are indeed leading the way then they should be making more of an effort to turn a profit from iTunes rather than forcing everyone to use their hardware.
There just seems to be a fear, rather than a need, which is causing the iron curtain to remain in place currently.
“If what you’re saying is true, and that Apple are indeed leading the way then they should be making more of an effort to turn a profit from iTunes rather than forcing everyone to use their hardware.”
No, no, no man!!
The iPhone/iPod has a GM of 50%. Apps in the store make them very little!
Why do you believe Apple should be making a profit from iTunes, instead of hardware? I don’t understand your logic at all!!
“That may be true but a large proportion of the apps are totally useless (as demonstrated by Norton – iFart, iPint etc…) ”
Useless to WHO? You?
For every one person that hates iFart, there are 100 who love it. iFart was the number one app on iTunes, had over 40000 downloads and netted the developer $30000…
Equally, there is music on iTunes that I will never download. Does that make iTunes bad? I thought choice was a good thing!
@Stu – It doesn’t seem like you’re ever going to give up on this one!
“Not at all, I think you have shown a complete misunderstanding of that point. Dom has said that iTunes it a selling point for Apple products, the Pre is not an Apple product therefore iTunes is not a selling point for the Pre.”
Stu, my esteemed and good friend and colleague, I am perfectly aware that iTunes is a selling point for Apple products! But do you really think the fact that Palm is (at least appearing to be) quite desperate in trying to integrate iTunes is not because it is a major selling factor to the MILLIONS of people out there who do actually LOVE to use iTunes?? How can you blatently ignore this fact in the face of such blinding evidence?? I don’t think I am under any “misunderstanding” or illusions at all!!
“This whole discussion has been about whether Apple have made the right decision for the consumer and/or business by continuing to restrict it’s software provision to Apple products alone.”
LOL, I’m not asleep you know!! Anyway, Cheers for reminding me!
“That may be true but a large proportion of the apps are totally useless (as demonstrated by Norton – iFart, iPint etc…) ”
Thats the only 2 you can think about? Those are the only 2 “fun” apps on my phone! (I don’t even have iPint anymore actually) You haven’t seen the other apps on my phone which I DO find incredibly useful! Namely Ebay, BBCReader, Currency Converter, Skype, BigOven Recipes, Google App, Spotify, Urbanspoon and many others! You can’t make such sweeping statements about something you’ve never quite experienced for yourself!
We’ll have to agree to disagree and leave it at that, this has gone on for too long already!
@Dom
It is, it’s something Apple have just denied a lot of people
@Norton
It may surprise you to know that I have not memorised the “50,000+ apps” in the store, those were just the two most appropriate examples.
You two are both talking about choice, which is exactly what Apple have just removed from anyone who does not want an iPhone (yes that’s right, not everyone wants an iPhone no matter how much you talk about them).
@Stu
The only thing Apple has denied is sync. You can still use, purchase and download whatever you like from iTunes. Use Palm’s sync native solution for that – oh that’s right, they haven’t built one yet!!
@Dom
True – thought before you get too smug lets not forget the troubles with the iPhone launch
Yep, the iPhone is far from perfect, and I must admit I was tempted by the Pre myself!
The real two questions I have for Palm now (that a date has been announced) are:
(1) Why is there no 16gb version?
(2) How quickly can they catch up with Apple’s apps?
1) No 32Gb version either?
2) Unless Palm develops an SDK as completely awesome as the iPhoneOS SDK and builds a substantial user base they will never catch up, but I’m sure sure it will do very well. Their is currently limited appeal for Developers to work with webOS, compared to iPhoneOS.
Bloody hell guys … I hope some work got done today at BM!!
The bottom line is that all is fair in love, war and business strategy! Apple can choose to do what they like in disabling competition and if its up to the consumer to decide if that is good for them or not.
I just cant understand why anyone blindly pays through the nose for what is clearly a ‘nice to have’ accessory as opposed to a real ‘need’.
As I’ve said before Apple are great at marketing by convincing all you applephiles that you really have to have what you dont need. Great job Mr Jobs!
Good points there Brian! Although… after living with an iPhone for over 2 years I have to say I do NEED mine!! No lesser phone will suffice.
God damn Steve Jobs and his incredibly innovative and desirable products. He’s got a lot to answer for and a fat wallet brimming with my hard earned cash
We need gadgets Brian!
Despite the fact that I think Stu & I are going to be the only people we know with pre’s I have to side with the apples on this debate stu. There is no reason at all for apple to grant the pre syncing access, any more then they grant it to any other phone. It would have been a non issue had palm not been so insecure in their own offering that they felt this was needed.
Personally, I have waited 9 months for this phone, if itunes access was that necessary for me I would have gone to the iphone months ago.
@Yoshimi – Precisely! As has already been pointed out, there is an alternative(s?) to iTunes that the Palm can use. Lets face it Palm should have provided their own software from launch.
@Yoshimi_S Sarah you Judas! I take your point that it’s not necessary as such but it would just be nice of them to reach out a bit, try and tempt some more people into the shiny haven that is Apple…
@Dom You never know, maybe they’re beavering away right now (or getting ready to poach some more Apple staff)
@Stuart I knew you would be upset with me, but lets face it, it’s a non-issue. It’s not going to stop us getting the pre (3 weeks to go, yipee, bet I get mine first) and as more manufacturers develop hardware that rivals apples products (which they simply haven’t been doing up to now) it will become even less of an issue. To all things there is a time, this is apples but it won’t last forever and one day all the itunes groupies will be lamenting the fact that the latest tech isn’t compatable with all their apple-ness and we will be laughing.
feel better?
Hmm, a bit. I still can’t belieeeeeeeve that there’s no 16gb version – I might have to start my campaign of @palm harrassment on Twitter again…
@all
Palm Pre’s New Strategy: Forget iTunes, Hello Wireless Amazon Downloads
http://www.readwriteweb.com/archives/palm_pres_new_strategy_forget_itunes_hello_wireless_amazon_downloads.php
Interesting stuff. Could work well for both of them to be honest.