Build A Better iPod!
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AOL acquired Time Warner back in the January 2000 how is it that now it’s Time Warner selling AOL?

Just how can Time Warner sell a company which bought it in the first place? There’s no doubt and no more denying it though, the massively diverse media company that was acquired with dot-com play money is looking to offload at least a large piece of AOL, the company that bought it.

After rumour and speculation a couple of weeks back that AOL was a potential acquisition target with both Microsoft and Google/Comcast, even Yahoo! said to be interested, it turned out in today’s announcement that AOL was in fact on the acquisition trail itself putting a deposit down on Circuit City Stores’ digital music subscription service MusicNow.

That’s not to say the rumours were incorrect. Far from it AOL is definitely up for sale.

So what does Time Warner want with a music subscription site when it plans to sell off AOL anyway? Well it opens up a much wider audience than its existing relationship with iTunes does. The current music service is hampered because it a) is only offered within AOL’s increasingly abandoned walled community and b) only works with iPods (not that that’s a small community).

Having a broader (subscription-based) target audience will accelerate AOLs portal plans and maybe make it more attractive to somebody – though we aren’t sure who.

With both paid digital music downloads and P2P illegal music file swapping both running stagnant at the moment, one could be excused to speculate that we are reaching the end of the early adopter phase of audio convergence. Translating this early impetus into mainstream, long-term commercial success is not going to be straight forward.

Illegal file sharing is still a significant threat and with music publishers attempts to force Digital Right Management onto consumers creating a more than a few problems for themselves. Users are perhaps even more likely to resort to illegal copying and distribution.

You’ve got to ask yourself if this is a business that has legs in the long run. And if it is ever going to work it will have to come down to a balance of DRM, fear and costs that are low enough that it’s not worth putting up with the first two.

In Australia iTunes has finally joined the music download fray (much to the relief of iPod owners no doubt). At this point though, you would have to say that the digital music download market in Australiais already saturated. Users have the choice between multiple destraMusic download sites, BigPond, NineMSN and now iTunes.

Mind you, Dominic Carosa at destra had the good sense to separate his online music business from his hosting business just prior to the iTunes to launch.

But just how good is this music download business likely to get? There are plenty of indications that it just might turn out to be less than the music industry had hoped for. Growth in both legal and illegal music downloads has stalled despite the continued growth in iPod sales.

With Apple selling about a million iPods a minute you have to excuse Samsung for getting a bit jealous of the iPod, iTunes duo which the rest of the industry must figure has totally hijacked their plans for consumer electronics.

But Samsung’s answer to imitate iTunes may not be enough to help it sell more compressed music players. The assumption that the iPod and iTunes integration is behind Apple’s run away success might be a bit of a jump.

Apple certainly didn’t have too much trouble selling every iPod it could get into the country without an iTunes store for people to buy music from. Research outfit The Diffusion Group says it is the iPod’s user interface that is keeping iPod sales strong, not iTunes.


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It’s not even the iPod’s much proclaimed “cool factor” driving new purchases. In fact brand familiarity has more to do with it than image.

Interestingly, older survey respondents (those 25-to-34) were willing to admit it was design aesthetics and quality of interface were the top two reasons for purchasing an iPod. Among those age 35-to-50, familiarity with Apple and iPod brands was the primary reason they chose an iPod. In other words they didn’t know any better and just bought what the young people were buying.

“By comparison, other MP3 brands appear as generic. In many cases, consumers see the iPod as one might see the brand Kleenex – as a category label, not as a brand or subcategory.”

If Samsung, Creative and Sony want to win back what should rightfully be their’s (the right to own the consumer music player market) then they don’t need deals, download sites, better DRM or anything else. What they need to do is build a better mouse trap. They need to build compressed music players that not only look as good as the iPod, they need to work as well too.