Is The iPod/iTunes Really That Critical?

My most recent post discusses the real story behind the disruption of the music business. In it, I assert that the iPod and the iTunes Music Store were instrumental in putting Apple on the path they are on today. Are they really that important? Are the iPod and iTunes really central to Apple’s eventual success?

Apple Before iPod

Prior to the iPod’s ascendance to MP3 player dominance, Apple was a niche PC manufacturer. The Macintosh dominated Apple’s revenue, and it was the focus of almost all of their “real” product efforts. Steve’s return to Apple in 1997 changed the fortunes of Macintosh. He wisely killed the clone program (which merely siphoned off high-margin sales and did nothing to grow the customer base), as well as dropping hundreds of other side initiatives and products that served more as distractions than anything else.

But the Macintosh’s growth and revenue opportunities were limited. A new type of device, the MP3 player, was starting to see some growth. The early smartphone market was intriguing, but at the time, limited to the enterprise market, something Apple never really had a footprint in outside of the creative space. Apple’s place in the computing world in general, though, wasn’t all that influential in the late 1990’s. Few saw the need for all-in-one desktops, and the ThinkPad, not the PowerBook, was the gold standard in portable computing. The influence Apple held in the 1980’s was largely gone by the end of the 20th century.

Apple’s first version of the iPod in 2001 was their first step into what we now call “mobile computing”. It was an expensive device, used a FireWire connection and only worked with Macintosh. It was one of the few hard-drive based devices, in part because the solid state devices were limited in capacity, and Steve wanted you to carry “a thousand songs in your pocket”. The iPod was not exactly a stand-out in sales in its earliest days.

Them Came The iTunes Store and Windows

Where things changed was with the introduction of a Windows version of the iPod in 2002, and the iTunes Music Store in 2003. Sure, you needed to buy a FireWire card for your PC, but lots of people did just to get an iPod. When the USB version arrived in 2004, that was basically it for the rest of the MP3 player market. At its peak, the iPod held 85% of all MP3 players (hard drive and solid state) and 90% of all hard-drive based models. Being cheaper, or having more features, didn’t matter. Being from a known brand like Microsoft or Sony didn’t matter. People wanted the iPod because they wanted the iTunes store and the cheap and easy way it allowed them to buy music. It wasn’t mainly about the hardware, it was about the ecosystem it worked in.

While this was happening, Apple started to gain some traction in the PC market. The redesigned PowerBook, released in 2001, presented a new design language for notebook computers. The so-called “tiBook” (because of the titanium skin) featured compact packaging and a design language that made other notebooks look primitive in comparison. It was as notable as the original PowerBook that appeared 10 years earlier, and set a standard that some notebook manufacturers attempted to follow.

The iPod and iTunes put Apple into a position of power and influence in the nascent mobile computing space. Sure, all they did was make a device that played music. But it was a solid, reliable and easy-to-use product. The iTunes Music Store featured music from well-known artists, and included both recent and older tunes. The mythos of “Apple disrupted music” was started, giving Apple new influence that it hadn’t seen in a long time.

When Apple announced the iPhone in 2007, the smartphone market was already a decade or so old. It was dominated by Blackberry in North America, and Nokia in the rest of the world. Both made handsets specific to the needs of the various carriers (resulting in dozens or hundreds of different SKUs under the same model), and the handsets were branded for the individual carriers. The iPhone, however, carried no such branding. The number of models was tiny, usually only offering 3-4 SKU’s to account for variances in carrier technology. The carriers would have sealed units, locked to their network, delivered to retailers, but the carriers couldn’t put their own software on it, couldn’t limit OS upgrades and couldn’t prevent installation of whatever apps users wanted. The boxes didn’t even have a carrier logo anywhere on the outside, and carriers weren’t allowed to put stickers or other branding on the packaging.

I expect that it was Apple’s history with the music business that convinced the carriers to buy into this model. The fact that iPods were everywhere, and were insanely popular, made it clear to the carriers who was in charge. Apple was growing, they were influential, and they had “disrupted the music business”. Rather than see Apple disrupt them, the carriers joined in.

But Without iPod and iTunes…

But let’s roll back the tape. Let’s assume that the music labels don’t do a deal with Apple prior to 2003, leaving the iTunes Music Store with a limited collection of weird labels and artists hardly anyone has heard of. Likely, the store wouldn’t have even been launched. Apple simply didn’t have enough influence over consumers to convince them to buy into a store with content few people wanted.

That leaves Apple with a niche MP3 player that is expensive, with fewer features and initially limited to Macintosh owners. We still have to go through the “buy-and-rip” process to get new music on the device, or download music from the likes of Napster. Without the iTunes store, the iPod simply isn’t that compelling (even with Windows support), when cheaper and equally capable options exist.

In this alternate timeline, perhaps we see Apple try to release an iPhone in 2007 without the massive presence of iPod and iTunes. I doubt that the carriers relent to Apple’s terms of “hands off the device”. Perhaps we don’t get an iPhone at all, or we get one that is as limited and crippled as all the other smartphones out there. But it is, like the Macintosh, a weird and expensive device when compared to the mainstream. More likely, the iPhone without the iPod and iTunes juggernaut before it becomes Newton Redux.

The result: a world where we don’t have the tech media hanging on every product announcement, pushing other stories aside for weeks before and after Steve shows us something new. We don’t have a developer conference that needs a lottery to pick attendees because the number that want to go far outstrips what the conference can support. We don’t have vociferous and vocal critics of Apple and fanbois. There are no lineups at Apple Stores days in advance of a new product going on sale.

Instead of a young and hip Apple leading the technology industry, we have an aging yuppy trying desperately to hang on to their little slice of the PC market. Sure, the Macintosh is innovative again. But the world moves on, and mobile computing instead is lead by others and in other directions. Tablets never become a thing (because there’s no iPad), and instead we see netbooks and even smaller notebook computers running Windows dominating the low-end. The Macintosh in the 21st century is the Apple II of the 1980’s, a machine that isn’t really ahead of its time trying to hold on to a place in the computing pantheon. And Apple is a small-ish technology player making a couple of billion a year with a stock price mired in the basement.

The Seed is iPod and iTunes

Apple’s story today requires the iPod and iTunes Music Store from the early 2000’s. The iPod gives Apple credibility in the early days of mobile computing. The iTunes mythos gives Apple the clout it needs to get carriers to buy into Apple’s model with iPhone.

The iPhone leads to the iPad (and Android tablets), which changes the low-end PC market and kills off the netbook. All of these feed back into more Macintosh sales, helping them grow their marketshare, and largely resist the trend of shrinking personal computer sales. The iPhone also gives rise to mobile apps and the App Store, and an entirely new industry that creates millions of jobs and billions in new revenue.

It all stems from the iPod and iTunes. A niche PC-only manufacturer with limited influence simply doesn’t play a big part in the mobile computing story. No iPod means no iPhone, no iPad, no App Store, no Swift and a different mobile computing world. It results in an Apple that few follow, and generally doesn’t set trends for the industry. The iPod and iTunes Music Store were the transformative event that put Apple where it is today.