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Apple's iPod Faces Cheap Rival at UK Supermarkets

Posted on: Tuesday, 16 November 2004, 12:00 CST

Nov. 14--Computing giant Apple, creator of the world's most popular portable digital music player, the iPod, is under attack from a UK supermarket, thought to be Tesco.

Within the next few weeks, the highly successful but expensive iPod will face competition on UK supermarket shelves from a lower-cost device made by German white label manufacturer Medion.

According to Medion, the supermarket chain is gearing up for a pre-Christmas launch of the device, which will carry the supermarket's branding. The player will not be a low-quality clone of the iPod, but an alternative developed by technicians at Medion, which makes volume high-tech products such as PCs for HP.

"The idea to make a low-cost alternative to the iPod came out of our Hong Kong office and was inspired by the kind of digital player now being sold in the Far East," said Medion.

The player will be about the same size as Apple's smallest iPod, the iPod Mini, and will store the same number of songs, roughly 1,000. The difference is that Medion's player will be able to download a wider variety of music files. It will be able to handle MP3 files, Apple iTunes files and Microsoft music files.

The biggest impact of the new player will be felt in customer's pockets. The iPod Mini is priced at 179 pounds (258 euros, $333). According to a source at Medion, the supermarket's player will retail at far less than this. One industry source said that player would be priced at under 100 pounds and possibly below f50.

A Tesco spokesman said that the company was not in a position to confirm or deny whether it was planning to launch an own-branded player in the next few weeks.

But the battle about to take place in the UK high street is only a skirmish in a global war between two old rivals: Apple chief executive Steve Jobs and Microsoft chairman Bill Gates.

Despite the success of the Apple iPod, Gates is convinced he can use his traditional strategy of licensing software to anyone who wants it to beat Apple. This is precisely what Microsoft did with Windows to dominate the PC market, despite Apple's early lead in manufacturing the first consumer PCs.

According to a source at Cable & Wireless, which is supplying Tesco with its Tesco-branded internet music store, the fight between Apple and Microsoft over music parallels the battle fought in the 1980s between the Betamax and VHS video formats. That battle was decided by the ubiquity of the VHS standard rather than any superiority in quality.

Cable & Wireless has told The Business it is also in talks with supermarkets and retailers in the UK and in Europe who want to own-brand Cable & Wireless' secure digital music store.

The store offers 400,000 tracks as opposed to Apple's 700,000. But the number is shortly expected to increase to 500,000 and will cost 79 pence each to download.

Microsoft's Windows Media format runs on 70 devices. The combination of low-cost rivals to iPod and the music stores being run by companies like Tesco represents tough competition for Apple and other players such as Vodafone.

By Tony Glover And Jessica Hodgson

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(c) 2004, The Business, London. Distributed by Knight Ridder/Tribune Business News. For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.

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Source: Sunday Business

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