The iConomy

By Steve Gillmor  |  Posted 2004-01-13

The iConomy

Getting used to the idea of the identity-based economy is job one for both customers and enterprise managers in 2004. This years CES was the kickoff for the iConomy, where users are defined as personal or professional based on the metadata they project to an increasingly powerful set of digital devices.

Even the cab drivers knew the high-level story: Comdex is dead, the PC revolution matured and commoditized. Now content is king, with the PC crowd crashing the consumer electronics party in search of new (and healthier) margins. Bill Gates fondles a personal video player, Intel puts $1,800 HDTVs in its pipeline, and Steve Jobs cuts in for a dance with Carly.

But beneath the surface messaging, some surprising fundamentals are emerging. Take the HP deal to market a branded iPod and point users at Apples iTunes store with its non-Microsoft music endcoding format. If the New York Times isnt making this up, the deal was hammered out the night before the CES announcement—two days after Jobs MacWorld keynote.

Surely Jobs would have mentioned the deal with his patented "Theres one more thing" Bob Barker delivery. Instead, his closer—the $250 iPod mini—left the San Francisco crowd in an uncharacteristically quiet mood as they headed off to inspect the new addition to the iPod platform.

But Jobs is a master of timing, showmanship and brinkmanship. Ask Disneys Michael Eisner, who just closed down his Orlando hand-animation shop as he tries to lock up an ongoing relationship with Jobs Pixar. The longer Jobs holds out, the more concessions Eisner has to make as he battles a board rebellion led by the Disney family.

Perhaps he put the squeeze on Carly, too. After all, what did HP have to offer to the CES crowd—a DRM lecture co-starring The Edge and someone who all she wants to do is have some fun. Hardware? Compaq won the PDA merger battle, bringing along its blend of high price and bulky functionality.

I have a drawer full of them. Palms, iPaqs, the thin Toshiba one. But what stuck to the wall? Or more to the point, landed in my pocket? Phones. Camera phones. Bluetooth connectors to laptops. The BlackBerry is hanging on, by a thread, though the Palm may work its way back in via the Treo. Like Comdex, the PDA is dead.

Next page: The iPod Platform—Apples Ticket to Ride the iConomy.

The iPod Platform

—Apples Ticket to Ride the iConomy">

What Jobs is selling is the iPod platform—the gateway to the iConomy. For Apple, the iPod represents a route around the Macs 5 percent mass market share. The new platform has already captured 30 percent of the music player market, and the iTunes content downloading owns a 70 percent share. But think about it: What percentage of iPod owners have jobs or are self-employed—or will be in the near future? Try 100 percent.

Its the iConomy at work. If you capture the mobile version of shelf space—the belt holster or the arm clip if youre a runner—you become a dominant purveyor of services. The iPod is the razor for the prized 18-to-49 crowd, the repository for the largest discretionary income pool in history. The more blades you sell, the more razors.

Here Microsofts 30 hardware partners work against the software giant. As they try to differentiate from direct competitors, they fragment the market and marketing messages Apple excels in delivering with style and elegance.

By contrast, Jobs gets away with maintaining his margins with the new iPod mini by extending the iPod platform with a new design that delivers the same user interface already accepted as the standard.

This proved irresistible to Carly Fiorina, who, like Al Gore with Howard Dean, cant lose. By endorsing the iPod, HP hitches a ride to an explosively viral constituency—with powerful ties to another powerful market group, cell phone users.

Carly gets Apples R&D budget for free, cachet with the artists, writers, filmmakers and other creative types that produce billions in free media exposure. And HP vaults from No. 2 in the PC market to co-leader in the mobile music space, tying the two platforms together in the process.

For Apple, HP represents a channel with which to extend their iPod platform—to video via Intel HDTV chips, to phones via Bluetooth and WiFi mesh networks—and to the content industries via a new release platform of videophones, RSS-routed mobile storage and Rendezvous-sharing peer farms on the desktop.

I can already see the name of the HP personal video player: the eyePod.

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