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Shiny Apple

Correspondent Spencer Michels looks at how Apple's iPods have rejuvenated Apple Computer.

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  • SPENCER MICHELS:

    For the past couple of decades, Apple and the Macintosh computers it makes have been objects of adoration by a relatively small band of longtime enthusiasts led by graphic designers like Dom Dimento, and photographers like Colette Cann, who need versatile, easy-to-use computers to manipulate images, something Apple pioneered.

  • COLETTE CANN:

    We had Macs since I was in middle school. And the first one we had as a family was an Apple IIE.

  • SPENCER MICHELS:

    But relatively few traditional businesses use Mac computers. Apple has less than 4 percent of the worldwide computer market, down dramatically from two decades ago.

    Today, however, due increasingly to the popularity of its digital music player, the iPod, Apple appears to be comfortably surviving, perhaps even riding high less than a decade after its very existence was in doubt.

    Rik Myslewski is editor of a magazine for Mac addicts.

  • RIK MYSLEWSKI:

    If I had like a $20 bill for every time Apple has been deemed "about to die," I would be able to buy a mansion.

    Apple's not dying. Apple keeps pulling another rabbit out of another hat, and it's always a beautiful rabbit.

  • SPENCER MICHELS:

    The iPod is the biggest rabbit in co-founder Steve jobs' hat right now. Apple's three-year-old digital music player, which can be played with earphones or in a car, or can be attached to speakers, has soared in popularity, become a hot fashion statement, and is leading Apple's recovery.

    The iPod, which sells for $250 to $600, has close to a 60 percent market share in the fast-expanding field of digital music players. These battery-driven devices contain a hard drive which can hold and play up to 15,000 songs. Early in the year Apple introduced a small version, the Mini.

    DAVE RUSSELL, iPod Marketing: Well, I have an iPod also. It has every CD I've ever bought inside of it, so my entire music collection is on my iPod.

  • STEVE JOBS:

    We think music plus photos is the next big thing.

  • SPENCER MICHELS:

    Late this year, Jobs, who recently recovered from cancer surgery, announced Apple was adding photos to the iPod. The new device, which sells for as much as $600, can hold up to 25,000 photos.

    Nearly six million iPods have been sold, many of them at the increasing number of Apple-owned stores around the world, which are generating sizable profits for the company.

    Apple's stock price has nearly tripled since iPods first went on the market. The company promotes itself with savvy ads aimed at the pop market like this.

  • SPENCER MICHELS:

    The Irish rock band U2 recently made this commercial for free, hoping to share the iPod spotlight and promote its new album. And Apple has a deal with BMW to plug the iPod directly into the car's sound system.

  • TIM BAJARIN:

    I see the iPod and the whole concept of this portable media as just the starting point for things that Apple can do over time.

  • SPENCER MICHELS:

    Apple agrees. After making deals with major record companies to distribute their tunes at 99 cents each, Apple's iTunes online record store sold 100 million in just over a year, for an astounding 70 percent market share.

    Apple exec Greg Joswiak says Apple iTunes and iPod have outpaced the competition.

  • GREG JOSWIAK:

    We've become the gold standard for both of those. There's not a product that is introduced without somehow having to refer themselves to Apple, to the iPod, to iTunes.

  • SPENCER MICHELS:

    Apple originally deigned the iPod to accept only songs downloaded onto an Apple Computer from its own iTunes music store but last year, the company made it possible for users of PC's to download songs from iTunes and then transfer them to iPods.

    Computer industry analyst Tim Bajarin estimates that PC users now account for up to 25 percent of Apple's iPod sales. Still, owners of other digital music players cannot download songs from iTunes, and iPod owners cannot play songs from most other online music stores.

    Bajarin says Steve Jobs' push to keep iTunes and the iPod proprietary could be problematic.

  • TIM BAJARIN:

    Yes, it's a risk. But Steve I think goes into that fully understanding what the risk is, and the fact that in reality he wants to create what is the best user experience, the easiest user experience for handling all digital media.

  • SPENCER MICHELS:

    Apple is making a mistake, according to Rob Glaser, CEO of RealNetworks. Like Apple, RealNetworks sells music online, but it also runs a music subscription service where people rent songs for a month.

    RealNetworks has a new software called Harmony that will let iPod owners download its music, a development Apple is not happy about.

  • ROB GLASER:

    Clearly, compatibility is the right thing for consumers. People who we've talked to in the music business really cheer what we're doing because they don't like this incompatibility one iota.

  • SPENCER MICHELS:

    A slew of other online music stores has sprung up where you can legally download music for a fee. These sites are now competing with sites where free swapping of music takes place with questionable legality.

    Wal-mart is offering songs at 88 cents, E-bay is planning a site, and Napster, the formerly illegal site, has gone legit. Microsoft, Apple's old rival, is entering the music business as well, with its own music store.

    More than 60 different digital music players have come on the market, fighting to catch up with iPod. Most use an audio format that Microsoft developed, which allows them to download songs from a variety of sites.

  • SPOKESMAN:

    This is basically an MP3 player which is extremely small. As you can see, it fits in to this little pouch right here.

  • SPENCER MICHELS:

    Sony, which pioneered and long dominated the portable music player field with its popular Walkman, is pitching the choice it offers verses Apple's limited product line.

  • TODD SCHAFFER:

    Sony is the number-one shareholder in the total personal audio market, and that's going to continue. And as I mentioned before, we're about choice.

  • SPENCER MICHELS:

    But for now, Apple is the brand to beat in music. And execs say that will help its core business, computer sales, where the profit is higher but the sales slower.

    Jobs' strategy is to make Apple a digital hub, with iPod and iTunes enticing customers into the whole package that the company calls iLife. It includes programs to edit digital movies, improve and organize photos, and a program called Garage Band to compose music.

    Apple aficionados like Dom Dimento, who uses his computers for work and for play, say they endorse Apple's claim of seamless interaction between Apple products. He very much wants the company to survive.

  • DOM DiMENTO:

    I want these machines to be around forever. It would be… it would be horrible if they went the way of the Whigs.

  • SPENCER MICHELS:

    But customers in the digital world are fickle. And Apple's success today, especially in music, is a rapidly moving target for the likes of Microsoft and Sony.

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