Best Buy joins with SanDisk and Real to combat Apple

Not to think less or look down on the consumer, but the key to Apple's sucess is its simplicity and ease of use. A 3-way alliance between Best Buy, Sandisk, and RealNetworks just has too many separate parts that would only make things harder to use than Apple's integrated products.

We list apples competitive advantages, and stack this deal against it, we find something worrysome. Apple should worry about this line up, because of what it represents. Apple was first to market with a hight quality hardware-software-compatibility-brand combo. If it takes these four components to create and expand a category, Apple had it all. No wonder it made great strides in outpacing and trouncing competition.

However, such early successes, though very sweet, are not difficult to overcome. This new service, like Zune, are aiming at rivalling apple's hardware-software-compatibility-brand combination. Apple has created the category-- not every one 3 years ago was aware that one needed an MP3 player, nor was the universe of possibilities available then that the iPod's success has engendered.

Now, that the business model has been established (taking out some of the risk in coming to market), the need has been created (by Apple, but exploitable by anyone), and the economic opportunity clearly demonstrated, it is inevitable that mighty competitors will copy and move in.

The big question is, is this category naturally only has room for one or two players-- think Tide in the US and Surf in Australia, or is it big enough for more.

Typically, consummables have lesser room for category dominators than do consumer durables.

So the question is, are MP3 players consumables, or conssumer durables? My reading is, these are like expensive shoes and jackets-- and like in shoes (or Jackets), there is room for two to four main competitors (medium cost, big chuncks of market share), one or two premier names (high cost, small market share), and a lot of fragmentation at the bottom. And, significant retail power.

Apple has countered these threats by cleverly shaping the landscape-- it offers players accross the board, leverages the networking effect of technology, and markets direct to customer to mitigate channel power.

Neverthless, entry into this industry is only a matter of time. A creative challenger will probably arise aboad, have very CUTE, disposable models, will appeal to high schoolers, and will squeeze apple from the bottom, will grow amongst the iconoclastic 13-17 year old age group, and then will create a premium player, in the Jewlery category to leap frog apple's offerings.

The question is, which global player has the persona and creativity to do this? The answer is, NICHT MicroSoft. I am thinking a bunch of creative high-school dropouts, working in their garage in Vienna, with a dream... in short, some very unexpected source.

I think the key to Apple's success is actually marketing, not simplicity. Look at cell phones for example, they are getting more and more complex and people love them for it. The secret is marketing, I see iPod ads all over the TV but no Sandisk. Therefore a good competator will need a good marketing budget and I think M$ fits the description. There is an almost linear relationship between marketing budget and sales.

And the download service issue is a non issue, not even worth discussion. Don't entertain the illusion that kids pay for digital music.