Analysts are positive about the relationship between Apple and Irish rock band U2, and according to a digital music analyst, Apple is the biggest star in the partnership.
Digital Music News analyst Paul Resnikoff believes the relationship will help both parties, but that U2 may stand to gain more than Apple. He suggests that popular bands would have been queuing up to sign the deal with Apple and that U2 were the lucky ones.
He writes: "If U2 wasn't available for the branding opportunity, another large artist would be waiting. In fact, many artists would be waiting. iPod is clearly the bigger star, selling more than two million players in the last quarter alone. That kind of category-killing dominance is rare, especially with so many competitors on the market.
"Meanwhile, Apple revenues are soaring, with players starting in the mid-$200s. While U2 will likely see solid sales on their new album, Apple is experiencing a different kind of multi-platinum success.
"For U2, the branded device helps to further define an edgy and current act, a remarkable accomplishment after three decades in the business. For the iPod, the partnership enhances the cool factor, with lifestyle and fashion cues playing a strong role next to usability and design factors."
Technology Business Research analyst Tim Deal thinks U2 is a good match for Apple. He told MacCentral: "I would hazard to say that U2 has evolved into the Beatles of this generation. They have enormous appeal and have continually reinvented themselves in order to remain relevant. Above all of that, the band has enormous credibility – when they endorse a product, the masses take notice.
"I think these artist deals carry great promotional weight for Apple – they will need to choose its endorsers wisely though. As a symbol of counter-culture computing, artists like Britney Spears would likely damage Apple's credibility."
Deal believes the benefits of this endorsement will lead to endorsements by other bands in the future. While Apple's Phil Schiller would not comment on whether the company is seeking U2-like deals with other bands he said that Apple "is certainly trying to work with artists in exciting ways".
The price is right
Analysts seem to be satisfied with the price of the new iPods – both the iPod photo and the U2 iPod. Deal said: "The price is right in line with Apple's ongoing iPod strategy. Given the additional functionality, the boost in storage space, and the collector's appeal of the U2 iPod, I think they will see strong sales."
UBS analyst Ben Reitzes thinks likewise. He told CBS Marketwatch: "The new iPods should help boost sales during the important holiday season even though they are priced higher than earlier models."
Apple is confident that the pricing of the new models is correct. Schiller told MacCentral: "In the grand scheme of things an iPod isn't the most expensive purchase in your life. It's in the realm that a large number of people can afford, so why not get the best thing rather than settle for a piece of junk that isn't well integrated and doesn't work well when you can get the best thing at a price you can afford. We have the best experience on both Windows and Mac."
Reitzes believes that there is a market for lower priced iPods, however. He said: "We continue to believe that Apple could announce a new lower-priced, flash-based iPod in the second quarter of 2005 that could eventually be bundled with Macs." The rumored Flash iPod was not announced at yesterday's event.
Jupiter analyst Michael Gartenberg isn't surprised about the timing of the announcement. In his Web log he writes: "While Apple has updated iPods on a yearly cycle, they have added to that cycle to introduce new products when needed like the mini. It's important for them to get this into the market as other products have begun to expand features and get closer to the iPod in terms of functionality.
"It also validates other devices with added functionality such as viewing pictures or video. Of course, it also justifies the purchase of a larger (and more expensive) unit, especially if you're like most users and you fall into the sub 1,000 songs group."
Gartenberg believes that there will be demand for the new iPod Photo. He writes: "Is there demand for this feature? According to our research, about 14 per cent of consumers consider playback of digital pictures on a media player as a desired feature so that's a good sign even without the appeal of the iPod.
"I do think that Apple is going to sell a lot of these for the holiday and they have found another way to keep the innovation going."
He adds: "Those that are interested in pictures, however, might also be interested in video, a feature the iPod lacks at the moment."
Apple CEO Steve Jobs doesn't think that there will be a market for video on the iPod, and Deal agrees: "There will always be those who think that gadgets like the iPod should have Swiss-army-knife functionality, but I agree with Steve Jobs, it is not the right form factor for video," he told MacCentral.
Another function that appears to have quietly found its way onto the new iPod Photo is an integrated antenna, according to Jupiter's Gartenberg. He writes: "In all the iPod news most folks missed this. Very interesting as it has an integrated antenna and storage. Now if there was an EPG [electronic programme guide] and a way to set the thing to record the shows that I want this could be a real interesting product, think TiVo and Satellite radio that's mobile."
Staying on top
Does the news mean that Apple has more of a chance of maintaining its lead in the digital music market? Deal still feels that the competitors will have an affect on Apple's number of songs sold. He said: "I think Apple will begin to lose share to competitive alternatives, but should Apple continue on this aggressive iPod roadmap, it will likely maintain dominance."
GartnerG2 analyst Mike McGuire is also positive. He told Reuters"You're seeing bits of the future here in how the leadership power centers of media are shifting. These are the companies that are going to be the next media titans. Does that include Apple? Yes. Does that include Microsoft, Starbucks and others? Yes."