Bill Gates is Right, and Wrong About The iPod

by Hadley Stern May 13, 2005

Bill Gates is at it again. Pimping the ugly iPod imitator Creative Zen. Chatting up replaceable batteries, FM tuners, and the like. His comments over the past few months about the iPod have increased probably due to the fact that he doesn’t have a cogent answer for why the iPod is rocking the marketplace. His latest blow is a low one. Not content to only diss the iPod he takes aim at our beloved Mac.

“I think you can draw parallels here with the computer — here, too, Apple was once extremely strong with its Macintosh and graphic user interface, like with the iPod today, and then lost its position.”

There are, indeed, some apparent parrellels to the Mac story. Looking at the issue very simplistically one could say that, indeed, Apple is following its closed system paradigm once again. Want to use an iPod? Great. But you have to buy songs from Apple’s iTunes Music Store. Want to play songs from the iTunes Music Store on a portable player? The iPod is your only choice.

On the face of it this does look similar to so many other Apple decision. The lack of clones (except for a short moment in time). The lack of licensing its operating system to anyone else.

But the big difference that Bill Gates is missing in his analysis is the market context.

The typical iPod consumer is radically different than the typical computer purchaser. By in large computers are used by corporations, businesses, and schools. In this market Microsoft and its hardware ilk have blossomed. Why? Cost. Corporations care most about cost. Microsoft has (so far) won the desktop battles because it won in the boardroom not because it is the better OS.

The iPod is a different story. There is no corporation to set the standard. This means that, ultimately, the consumer will decide. And this time, I think the consumer will pick what it would have picked in the first place, the far superior product.

I picked up the Creative Zen flash player the other day at a local Cambridge Soundworks (where the sales rep informed me that the Creative Zen was, and I quote, crushing the iPod). The Zens were lined up in different colors like a bunch of bic lighters. It felt horribly cheap in my hand. The display looked interesting, but the whole thing felt like a cheap kids toy in my hand.

Now there are some other MP3 makers who make good products. Just like there are some computer manufactures who make decent computers, and, consumers can do Mac-like things like edit home movies, etc. But none of the current MP3 makers come with the integrated model that is the iTunes and iPod experience. It is such a good experience that no one cares that you can’t buy from Buymusic (are they still around?) or Napster.

But back to Bill. He also says that what will ultimately kill the iPod (oh, and yeah, the immensely successful Blackberry) is not the Creative Zen, but the mobile phone. The phone is where you will have your music, calendar, address book, all integrated, of course, with Windows Mobile.

This is where Bill could have a point. The standalone Palm is largely dead. A mere memory of the dotcom days when having a Palm 100 was the thing. Now it is either a Blackberry, or Palm-integrated phone. This is the one device that people are carrying around. Throw in a hard-drive and a decent (read Microsoft) user-interface and suddenly the iPod is like the old standalone Palms of the past, relegated to dusty draws and eBay.

I must admit, Bill’s point about phones makes sense. But not because it will be a better product. Rather it is because of the aforementioned corporations who killed the Mac. In this case the corporation are the Nextels, Verizons, and Cingulars of the world. They want in on the digital music game but on their terms. They also control the hardware and here an iPod phone (if Apple were to ever make one) would die. Firstly because the phone providers control the shelf space, and secondly because they have a say concerning what software goes on their phones. Even if a non-Apple phone running iTunes were to come out they will want to dictate the price and get their cut.

History will ultimately answer the longevity of the iPod. Indeed, if we take Bill’s example of the Macintosh one could argue that the iPod would do pretty darn well to follow in its path. The Mac has survived and excelled. And these days the buzz is all about market growth for the Mac, while Microsoft struggles with challenges from Firefox, Google, and the open source movement.

Regardless of what happens to the landscape I do think a little scuffing of the iPod’s sheen will be good for Apple. Derrick Story said it best recently when he said the thing he liked the most about Tiger was that it reminded people that Apple was not just about the iPod. The iPod is cool and all (and I say this as someone who wrote a book about it!), but ultimately, in the history of Apple, it is far from the most interesting product. But it is fun to see the iPod needle Bill Gates, reminding us that, once again, Apple still has the upper hand when it comes to innovation and design.


  • Why people listen to Bill Gates is a mystery to me. Microsoft has failed in just about any area where they tried to take the lead. Microsoft BOB and TabletPC(Jury still out). The man has no creative vision he merely watches what the competition does. If they identify a market opportunity he comes in and undercuts them and takes their market<cough..netscape and soon to be Blackberry>. I have little respect for the prognostications of Microsoft because it is such a scavenger company.

    As of today most phones have “horrid” user interfaces. I can’t see replacing my iPod with the crap that cell phones try to put out as UI. Add to that the carriers are notoriously finicky about what they let on their networks and I see a non starter here. In fact considering Billy’s track record on predictions I wasn actually encouraged when I read it because you can pretty much take what Gates says and reverse it if you want to see where the market is going.

    Oh and the Mac never had a commanding marketshare of graphics that they’ve lost. I sell to publishing houses every day that are still based on Macs and Quark. He’s smoking something if he things the pubishing industry has gone PC.

    FUD plain and simple.

    hmurchison had this to say on May 13, 2005 Posts: 145
  • I hate the way mac purists bash Microsoft so readily and make excuses as to why they are crap.

    But the story so far is that MS is big, very big and Apple merely dents, if that.  You can complain all you want about how low MS can go but the bottom line is… they are a successful company.  Business at this level is cut-throat (for one of a better word) and to be make the profits and be successful, anything counts.

    You may say Apple is better than MS, it is more creative, it doesn’t steal ideas, it is hip! and maybe it is (I would probably agree with you aswell) but that isn’t going to make a successful company in the same light as MS.

    If any Mac zealot thinks that fan brand support is going to elevate Apple into large market share, over-take the world ala MS status, then they are sorely mistaken imo.
    The only way to make it in this business is to follow the MS model i’m afraid… small sized creative companies are in its nature more creative and can change idea directions easily, but if they don’t change they remain just that. Small.

    Take snipes at MS all you want, but imo they are number 1 for a reason… we here may all think that OSX is far superior to XP, but that’s not the point if the CEO of Apple isn’t looking at the wider picture.  In my view SJ may be a creative genius, but that genius has made not room for a business mind to grow, and it is for this reason that MS will alway be bigger, even if things look good for Apple at the moment.

    rayhau had this to say on May 13, 2005 Posts: 7
  • I don’t really care about Apple elevating itself to large marketshare. I don’t care about being on the majority platform. I like to think of myself as a free thinker and not the computing version of a lemming.

    Microsoft is big and dominant because of inertia. Bill is worried about the iPod because he’s no dummy..he realize that when a company can get critical mass in a particular area or genre the intertial forces that company gains are hard to overcome.

    I’m not a Mac Zealot. I have just as many PCs as I have Macs but I have disdain for MS’ anti-competitive methodologies.

    hmurchison had this to say on May 13, 2005 Posts: 145
  • Cell phones have become camera phones.

    Camera phones have become smart phones.

    Smart phones will become jukebox phones with record stores?

    Watch mediocrity settle in. I agree with hmurchison. The user interfaces are going to be worse than anything currently out there. I can’t find a cameraphone, let alone a phone with form & function that is satisfying to use. If the design is great, the software sucks. If the software is good, the keyboard is too small. It’s always something. And they’re going to add an MP3 player? AND the music store interface? While racing to build the everything-in-one phone, they’ve forgotten that their current phone interfaces…. suck. Additionally, with daily normal use, how long will the battery life be in one of these beasts?

    It’ll be interesting to see which phones are offered by which carriers due to the fragmented market share here in the U.S. That will surely prevent any one carrier to emerge as a winner. If you want a better music phone go buy from Cingular. If you want a better camera phone buy from Sprint. If you want a better smart phone buy from T-Mobile. If you want a better cell phone, buy from Verizon. There will surely be at least one aspect of each phone/carrier that you’ll loathe. Things would be a bit better if all phones worked with all carriers, just as they do overseas. But that’s another arguement from days past.

    Bill Gates says in his arguement against the iPod that he believes the consumer wants choice. Do you think the Nokia phone sold by Verizon is going to let you buy music from the Motorola store on the Cingular network?

    In the near to short term I see the mobile music store a reflection of the current mobile market at best…And it’s not that good…

    The only winner will be Bill Gates and Microsoft if all these phones run Windows Mobile.

    Bill Gates. Propganda machine.

    tom had this to say on May 13, 2005 Posts: 4
  • Gates really hates that Apple creates a product (you name it) that the buyer in turn “loves”. He has never created a product to sell that buyers “love”. Apple creates a movement based on quality, and this is what Jobs loves to do. Not for money. Has Gates and Microsoft created anything? No. They take the innovations of anyone and copies it. Then sells it for a fraction of competitors or gives it away for free no less (IE) markets then %^$%$#$ out of it. PC users truly buy based on price more than anything. Not on what a computer can do for them. They’ve bought into the Microsoft marketing for sure. Dell also. Name one computer application or hardware product Microsoft has created? You can’t.
    I respect Gates as a businessman. Not as an innovstor of technolgy.

    mozart11 had this to say on May 13, 2005 Posts: 35
  • The problem with Bill Gates and Hilary Rosen and the other thick headed is that they continue to attempt to place “Brick and Mortar” principals in shopping to the internet. For instance

    Bill Gates- “People want choice”

    Well when I bought music at retail stores proximity to where I was or lived was a priority as well as having a good music selection. You cannot superimpose these issues in the same way with digital music. is just as close to me as iTunes Music Store. The selection of music is far more similar than dissimilar. Thus will Bill he’s selling me on “clothes that don’t exist’ he merely wants to funnel me to a store that backs his format. Very disengenous.

    Hilary Rosen makes the same mistake. Somehow “choice”, which is mythical, trumps ease of use. Is a Maroon 5 track from napster that much different than the same track from iTunes? Of course not. In fact Apple has the most liberal DRM usage rights so comparing Apple’s to Apples (no pun) I’m likely to get more value with my purchase.

    Apple will license Fairplay but they are doing the right thing by keeping things close to the vest. America loves to create abusive monopolies and the pressure to standardize on Redmond product is omnipresent.

    I look forward to seeing digital music maintain a healthy amount of competition. Once a company creates the better mousetrap they should be allowed to enjoy the fruits of their reward.

    hmurchison had this to say on May 13, 2005 Posts: 145
  • Hmm, an iPod is cool, but how cool are you when you get a phone call on your mobile phone, have to pause the iPod, rip the head phones off, answer the phone, etc. etc.

    Apple just have to put a 3-Band GSM phone into an iPod to let the cool people remain cool.

    You’re listening to your music on the iPod, the call comes in, you check the iPod’s display, accept the call, the music gets automatically paused, and you speak to your caller.  Call over, music resumes.

    Which, I hate to admit, means I think BillG’s got it kinda right this time.

    Anonymouse had this to say on May 13, 2005 Posts: 1
  • The iPod and Mac are true Apple innovations and nothing Gates can say can take that away!  Yes, it is true that the Mac was inspired by a trip to Xerox seeing their windowing/mouse system.. Ok, Steve ripped it off, but Apple’s innovation was that they did rip it off and nobody else had the vision to do that.  The iPod, however, is an innovation and a success which nobody can grant to any company except Apple… and that is an undeniable fact!  Ok, mp3 players and downloadable music was around for years, but Apple had the creative vision to rip off the idea and sell it as an unique invention.  Perhaps, Apple is a fad oriented company relying on minor successes for short periods of time while the likes of Microsoft gain even more share at the expense of Apple.  But Apple isn’t about sustainable long-term successes.  They are a company dedicated to innovation and delivering what the user really wants: hyped technology marketed in a cool way to excite the market only to loose that share to companies which can deliver a cheaper feature-compatible units.  But here are Apple’s undeniable successes from the beginning. 1) Apple II: It started the PC revolution; ok the IBM PC and Microsoft’s DOS eventually won that one.  2) the Mac: ok cheaper x86 boxes with Windows won that one too in the long run.  3) firewire: ok, so USB is now the standard.  4) Newton: now PDAs rules.  5) iPod/iTunes: on top now… but without a doubt Apple will loose this one too.  Here’s what Apple does better than anybody: hype.  They’re good at getting the ball rolling, but extremely poor at sustained execution.  Jobs always criticizes microsoft for lack of innovations, but apple doesn’t truly innovate anything, except hype.  Franky, I think, Microsoft , Intel and Dell like Apple being around.  Apple get’s the ball rolling and the industry says “thanks, we’ll take it from here.”

    Stephen Jobs had this to say on May 13, 2005 Posts: 1
  • True enough, as Gates says, the Macintosh lost its position, but this was not because another industry model took its place but rather only because a competitor in the existing model surpassed it in market share. Indeed, not only did the micro (or personal computer) not lose ground to alternatives but it was a juggernaut in the heady days of the 1980s and 90s.

    So if Gates means to suggest that MP3 players in general will lose out to another paradigm (i.e., the mobile phone), then it makes no sense whatsoever to use the Macintosh as an example. Conversely, if Gates’ point is that the iPod in particular will fail because Apple lacks the “business wherwithal” to sustain it over the long haul, then that explanation is entirely independent of whether mobile phones enter the music scene or not.

    My own feeling is that music on mobile phones will catch fire at some point but that a huge segment of the market will not want their ability to listen to music to be tied to a wireless phone device which could ring or vibrate at any time. Already there are health implications of prolonged exposure to a wireless device, and some people will not want to increase this for their music playback. Moreover, there is the question of pricing which at this point seems exorbitant in the mobile phone arena.

    Maybe the teens will like this merger between telephone and music, but many grown-ups will have no patience for this. There is definitely a place for a music-phone device but I don’t share Gates’ self-fulfilling vision (or wishful thinking) that it represents a tide that will sweep past dedicated MP3 players.

    Jeff Mincey

    Jeff Mincey had this to say on May 13, 2005 Posts: 74
  • “Hmm, an iPod is cool, but how cool are you when you get a phone call on your mobile phone, have to pause the iPod, rip the head phones off, answer the phone, etc. etc.”

    Frankly, many of us are cool enough to answer mobiles when we want to and when it is convenient to us. I get your point but, frankly, I don’t think there are many adults who are that bothered.

    longwayround had this to say on May 13, 2005 Posts: 1
  • Bill Gates is right and wrong at the same time. The Ipod as we know it today will be short lived. However, as soon as the cellular carriers figure out how to get their cut, you will see Ipod software running Cell Phones. The Cell Phone as we know it is also changing and in the not too distant future, your Cell Phone will be a generic hardware device with only software that determines its’ character—Just like the PC today.

    As for the winners and losers—music over the internet will become a commodity where Yahoo, Apple, RealNetworks and the like will compete on price. The final war will be for the vast cell phone market where the winner will be the company with the most Patents and intellectual property. The Rim’s Blackberry pager is a good example and Qualcomm’s CDMA Cell Phone chips are another. If Apple would have filed a few patents on their novel features in the beginning, Bill Gates would be using a Mac and driving a Ford.

    Podlover had this to say on May 13, 2005 Posts: 3
  • The thing no one seems to mention is the fact that your music collection will grow on a cellphone. Where’s the backup and the jukebox on the computer to make sure that your hundreds of music files are safe. And if I can transfer a song from my cell phone to the computer, what stops me from putting the song back on again. Can I burn a song i legally purchase on my cell phone and play it at a party? Or does the carrier want me to buy it again.
    And speaking of buying it again, how are these songs going to work from carrier to carrier. Two years from now when I want a new cell phone from a different provider, will my songs still work? Will they use different formats?

    mcloki had this to say on May 13, 2005 Posts: 25
  • #5 >He has never created a product to sell that buyers “love”.

    Only one, the MS mice.  They are great.

    jfb3 had this to say on May 13, 2005 Posts: 3
  • Second the MS Mouse. That’s one product line they’ve done well and Apple hasn’t.

    hmurchison had this to say on May 13, 2005 Posts: 145
  • I think that it’s bizarre that no one has mentioned the problem associated with cell phone radiation. And before one all too quickly dismisses this issue because it’s not convenient to think such thoughts, just keep this in mind: what good is microwave radiation doing to those biological cells in your head and groin? If iPods (or any MP3 player for that matter) were to converge with cell phones the manufacturer’s of such products would lose my (and my family’s) custom for good.

    sandkipper had this to say on May 13, 2005 Posts: 1
  • Page 1 of 2 pages  1 2 >
You need log in, or register, in order to comment