This whole Real-Networks v. Apple flap over the iPod has me scratching my head. On the surface it’s the age-old fight we always see when one company makes money by giving away the razors and selling the blades and another company tries to “free load” and sell their own blades. What confuses me here is that Apple makes most of its profit from selling the razors (iPods), and very little from selling the blades (songs on their iMusic site). (Their Q3 revenue on iPods was 3-4 times their revenue from the iTunes Music Store, and my unfounded guess is that the profit margin is also a lot higher than the estimated ten-cents-on-the-dollar they make on each $0.99 iTunes sale.) That’s one of the things I’ve always liked about Apple’s digital-hub strategy — unlike Sony, they don’t have to be all schitzo about whether they’re an electronics company or a content provider.
So assuming they expect to remain the portable-player market leader based on the merits of the iPod’s design rather than format lock-in (bad assumption?) then why get bent out of shape that someone else is trying to make their product better?