March 06, 2008

March 6 Dealhack Market Report Now Live at Dealhack

• Dealhack Market Review - Which MP3 player is right for me?
• Lightning Round - a quick rundown of eight great deals.
• Dealhack Deal of the Week - our pick for the best deal featured in the last week.

Chris: With February over and the reports of sluggish first quarter sales circulating, we’re seeing a range of different sales-boosting strategies emerging from retailers. Coupons on infrequently discounted products, deeper discounts on a wider range of products, and quick one, two, and three day specials are all being tried.
 
Spring discounting has also begun with a number of sales focused on products best suited for warmer weather including summer shirts and shoes.
 
Michael: With the recent round of price drops on select iPods and the frequent specials on other portable media players, we thought now would be a good time to look at the current range of options and highlight some of the features to help you find a player that’s right for you.
 
So, if I’m thinking about getting a new MP3 player, what kind of choices do I have?
 
Chris: Well you know, honestly today, there really are two categories. Either an iPod or everything else. What we're seeing is an incredible difference between the Apple products in terms of sales volume and any other product. So, the number two is just an incredible drop off from the number one retailer.
 
If we look at the bigger space, though, just look at MP3 players and media players in general, the main difference among all the different devices is the key storage technology: either disc drive or flash memory.
 
Flash memory is obviously is very light, it's compact, but comparatively expensive for the same amount of storage or a hard drive and even though the hard drives have gotten incredibly small, I mean, it's hard to imagine if you think back to the, the old 5 gig iPod, the original iPod and how that was like a deck of cards, I mean a very heavy deck of cards, but it was about that size. You look at the original devices that are out there with very large hard drives, and they're much smaller today. But the reality is, it is still a spinning disk and that's somewhat less energy efficient and it requires some seek time to find your mark on the player. So those are the key things. Obviously flash, as we've often talked about, is getting a lot cheaper, but it's still no comparison in terms of the per gigabyte cost for a device like this.
 
Michael: Right. Okay, so what does the iPod line look like today?
 
Chris: Well it ranges from the 1 gigabyte iPod Shuffle, which obviously doesn't even have a screen and has a different kind of connector than all of the other iPods, and it ranges there at about now with a new price drop from about $49 or maybe $1 or $2 off that if you find a sale. It ranges from there up to the Wi-Fi enabled 32 gigabyte iPod Touch, which is just an almost unthinkable $499. Of course that sounds familiar back to the original iPod days.
 
But now that's what you get and, you know if you think about the different lines they've spread it out pretty wide trying to capture all of the market, so it starts at that Shuffle level, $49 for 1 gig, $69 for 2. That's a brand new model--The 2 gig Shuffle, into the Nanos, which are still flash based but now have a screen and even support watching movies, although the screen is tiny.
 
So, it's more, it's more if you want to catch a clip or something like that than really watch anything of substance, sort of in the $150 to $200 range. The Classic, which takes the place...I mean, for a long time the Classic lines were what the iPod was. And that's 80 gigs and an amazing, really, 160 gig model. I mean the Classic, it's pricey, $349, but if you've got a serious collection or if you really do have a lot of movies, you can watch them on the device, or increasingly, hook it up to a dock that has an S video or a composite video out and watch it on, on television.
 
So that's there, the Classics and then up to the iPod Touch. Now the iPod Touch obviously is a lot like the iPhone, except it doesn't have the phone part. It has the same touch screen, it is Wi-Fi enabled, it has high speed networking support, so you can use it to browse things like the Wi-Fi iTunes music store, so, you know it depends on what you're trying to do. It's an impressive device, but even at the high end, you only get 32 gigs of storage for $499. So that's definitely tough to do, but it is an impressive device.
 
Michael: Well that's one of those products where you kind of say, well maybe a year from now it might have double the storage and cost $100 less, then it starts to get kind of attractive.
 
Chris: Yeah it's, it's those types of transitions and we've already seen some of that happen. When the Touch first came out, we've already already increased the storage substantially including, obviously going up to 32 gigs. We've seen the software update, which is, it's an interesting thing--Apple has a funny way of handling certain software upgrades. Sometimes they charge for it, sometimes they don't and they give these kind of cryptic accounting reasons for their difference, but the reality is they just choose whether or not to charge for it.
 
The iPod Touch went through a major software revision, lots of new features and messed up the retailers in a pretty big way, but it did lead to some savings and some specials. So that was a way to get a, a discounted device and you know, we'll see those things continue to happen as they innovate. There's, there's clearly evidence that Apple wants to move people more towards the touchline of product because it has on-device purchase capabilities. If you're in a Wi-Fi zone, you can shop at the iTunes music store, buy things, have it delivered directly to your device. It then syncs back to your iTunes when you connect your device to sync it. Obviously that’s attractive to them and it makes a lot of sense and it’s an impressive devise, but still that cost is, is, you know, quite high.
 
Michael: Have you heard about the patent filing or some announcement that indicated a deal with Starbucks where you can sort of type in your drink order on your iPhone when you walk into the store? To me that sounded really, really cool because it seems to be a leading indicator of, maybe the next ten years of where these wireless devices are going to go. Imagine that in every retail context where you can sort of have this interactive shopping experience with your little communicator devise.
 
And what kind of ways that’s going to change our experience? I mean you can do your comparison shopping, you can buy competing products based on what you’re seeing in the store and, and Apple seems to be positioning themselves to be right in the middle of all that. It’s pretty interesting.
 
Chris: Well, it’s certainly true and, you know, Apple, Apple pushes around with a lot of market force. And so in some cases they draw people in and other cases they kind of push people forward, so the relationship with Starbucks is substantial. There’s been a long standing relationship with the music folks at Starbucks and very interesting we haven’t really talked about it here on the podcast, but the changes that are happening where Starbucks has long been partnered with T-mobile for the T-mobile hotspots. And they’re switching to AT&T and that’s all tied to the same types of relationships. It makes sense because of AT&T which has that exclusive relationship with Apple in the U.S. for the iPhone where they’ve had to pay a huge premium to Apple essentially part of every iPhone subscriber’s monthly bill goes to Apple, which is unprecedented in the handset manufacture environment. And that relationship is showing signs in other places, like this transition at Starbucks, where you’ll be able to use your device when you’re there. Obviously iPhone users are attractive and they want to draw those folks in. Ipod touch users will be able to use that. And it’s all part of that same transition. A connected devise is important for that.
 
In fact, I saw a stat earlier this week that the iPhone platform is now the fourth most popular web browsing platform. Windows which has overwhelming majority. Then the Mac, the Linux. Now, of course, it was less than a 10th of a percent. But it was still in fourth place, so it’s, it’s starting to make a dent.
 
Michael: Yeah. Well, it’s pretty cool. I mean the, the announcement I heard indicated ,you know, you put your coffee order in, payment transfers electronically, and then you just go right to pick it up. So I imagine that whole process of waiting in line...you know, I like my coffee the way I like it and half the time ,you know, somebody misses some element of the instruction and so it’s kind of cool the idea of just getting your order in the way you want it every time and it’s faster. So I can see how that can be pretty attractive. I mean it was one of those announcements when I read it I thought, of course, sure. This is naturally where the stuff’s all going. I get tingles when I see that stuff because it’s just kind of a little taste of the future, you know?
 
Chris: Well, it certainly it’s, it’s one of those areas where you can see room for improvement. It makes sense. You can see how it works, but the transitions that are required to make all that stuff possible are massive. These massive companies doing this with a lot of market force and sort of the ability to really bring the consumers along, which of course, Apple has.
 
So anyway. All right. So we’ve talked a lot about Apple. That’s one category.
 
Michael: What about the other MP3 players?
 
Chris: Well, sure. Certainly when you think about all the others who are out there, you get a lot of strengths when you go with Apple in this space, but you also have to carry some baggage. The main one is Apple maintains really substantial margins on their products and so you’re paying a price premium and depending on what you’re trying to do that premium is just going to Apple, it’s not really doing much good for you. So while they’re products are interesting especially once you start digging a little deeper, many users find them limiting. You know, the frustration of some of the battery, battery issues that have traditionally been there. The fact they’re not expandable. The fact that they really are focused on just playing back media.
 
So depending on what you want to do some of the other devices can be certainly very attractive. So, for example, at the low end you can save almost half off with devices like the Zen Stone or the Zen Stone Plus which are basically very similar to Shuffles. The Plus model is two gigs and has a screen, so it’s a lot easier to navigate through your content. It’s a small OLED screen, but it’s there and available.
 
At the higher end is where you really start seeing the savings obviously because there’s more room for a discount. But the recent release of the creative Zen series, the updated creative Zen series. For example a 16 gig player which has a great screen for video, it's completely flash based, and it's available for about $180. That's a huge difference. Now it doesn't have WIFI. It doesn't do some of those things. But if you're not going to be using it that way; if you're really focused on playing back audio, occasionally video, occasionally viewing your photos, it's a tremendous device and a great price. If you're really going on the high end there are devices like the Archos series. For exampled a 160 gig, which is a hard-drive-based player, also has a great screen. It's only about a little over $300. So you compare that to what you get for $350 in an iPod classic, and this is a much more interesting device, it even records video. Which is certainly something the iPod's are not capable of doing. You can directly import video. So it really sort of has that...you know the classic answer: that it depends what you want to do. If you want a device that has a built in radio, that has a voice memo capability, has ability to record radio. Obviously not everybody does. Some people do and that's one of those things you can get for a lower price. They don't directly integrate with software quite as elegant as iTunes. iTunes is not amazing but it's quite straightforward and reliable.
 
Michael: Well thought out and pretty comprehensive.
 
Chris: And so depending on what you want to do, you may want to stay to that but especially with the transition of download music moving into DRM free formats. They tie into a specific store and being you know once you've bought some iTunes tracks you never want to go anywhere else that's moving away. You know we're moving into a mode where you can use different applications, you can change over time, you can use different devices and you can kind of mix and match for the best features.
 
Michael: I wanted to ask, I mean what's the rub on these non Apple devices? The kinds of things I hear are that the software is not as elegant or is just more difficult to navigate. Would you say that is still the case?
 
Chris: I think it's case-by-case true. You know the iPod user interfaces visually quite interesting. You know it looks nice. They've done a great job with that. But it follows a very particular structured pattern which works well for some people and not for everybody. So it's hard to say what's the best interface because it really just depends on the people. Different people respond differently. I think all of them have acceptable interfaces and some are better than others. And in any case if you're using with any kind of frequency you'll quickly adjust to that.
 
Some have really made strides. You know the first generations Zune devices from Microsoft which came out you know a year and a half ago or so they definitely got dinged for some of those types of issues. Like a somewhat awkward interface; maybe a little slow; a little unclear what you are going to do. But there is an example where those devices were WIFI enabled. You can share music. You could send sort of preview files to your friends. It had built in social features. So even though it was a little rough on the edges it had some needed insights. Unlike the iPods, or in a different way than the iPods, it allowed a complete firmware update that added substantial new features. So obviously the iPods do have updateable software but this kind of transition is not how they work. You know, what Apple wants you to do is go buy a new device. But the people who bought the first generation Zune devices where able to take advantage of a massively changed and updated set of features in a new set of software.
 
And of course then there's a whole new range of devices which are getting raves for the sort of just the feel, the quality and even the interface. So you know does that mean Microsoft is about to overtake them? No way, I mean they are so far behind. But they're still managing to sell significant numbers of devices and they've built a fan base because the product is a good product. You know it took them a while but they ultimately produced something good. So you know it depends. Is it worth paying extra for a shuffle? I don't know it's pretty cool and especially if all your music is already in iTunes, then you're good to go. But if what you want is a highly portable device that you can just drag and drop audio files right onto it and it's only a gig so it's not like you're going to have a hard time finding something. Then no, it's probably not worth it because there are better devices when you look at it strictly on a feature standpoint. So it makes sense, Apple has really dominated this space because they've done a great job. But that doesn't mean that there aren't you know legitimately good opportunities, and especially big savings.

Mar 06 08:14 AM in Announcements

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