TV-PGSeptember 22, 2004: The iMac G5 continues to enthrall the press, as TIME declares it the "Gadget of the Week." Meanwhile, word has it that Apple only makes four measly cents per iTunes Music Store song sold, and Sony decides that maybe putting MP3 compatibility into its digital music players wouldn't be such a terrible idea after all...
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What, Only Of The WEEK? (9/22/04)
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Still staggered by the nifty five-out-of-five rating handed down by the decidedly un-Mac-centric PC Magazine? Well, hold onto your earflaps, fellow windwalkers, because the press kudos just keep on keepin' on-- and they're getting even more mainstream. Case in point: the iMac G5's latest achievement in extracting dripping gobbets of praise from the pundits is to have snagged TIME Magazine's coveted "Gadget of the Week" award. At least, we assume it's coveted; we're not really big TIME readers, so we're just making an educated guess, here. Heck, we'd covet it, anyway.

If, uh, we were a gadget of some kind.

Look, let's just take it as read that the iMac G5 being named "Gadget of the Week" is a delightful and positive experience and move on to the review that won it that title in the first place, because another volley of warm fuzzies for an Apple product is always welcome to those of us card-carrying members of the 2.x% Market Share Club. The obligatory list of laudatory phrases doesn't really apply, here, because this reviewer is a little more reserved than some; the only two that really stand out are "super suave" and "a scene of Kubrickian merits" (the latter of which pretty much says it all).

There's the obligatory acclaim for the iMac's design, of course, with the "brilliant widescreen LCD" coming together with the "brushed metal L-shaped stand" and the "familiar white sheen" to form a tableau of "sci-fi harmony." The computing power is described as "nice," which seems understated, but a net positive. There's a sort of awe when he discusses the new FireWire Target Disk upgrade script, which is as it should be, since that thing rocks harder than Skynyrd. And overall the author's happy that Apple is "inventing actual reasons for people to switch from Windows to Mac," which he prefers to the company "spending money on its silly 'Switch' campaign." What the--? "Silly"?! Of all the... Feiss! Cohick! Attack, my pretties, ATTACK!!

What's so neat about the new iMac is that you can practically feel most reviewers struggling to criticize it for being too expensive ("it is a Mac, after all, smug snigger, condescending chuckle"), but finding that they kindasorta can't. While the TIME reviewer doesn't seem to have any such axe to grind, he does emphasize that the iMac G5 isn't "cheap," but then concedes that it's "a pretty good deal" as a "'desktop replacement' replacement." Meaning, you'll pay loads less for an iMac than for a super-souped-up giganto-screen laptop that you're only going to lug from Stationary Point A to Stationary Point B and then plug into a wall socket anyway, so people shopping for such notebooks should just "save some money and put the rest into the iMac G5." (It's praise. Trust us.)

So yeah, it's all good. This is by no means the first time an Apple product has been named "Gadget of the Week" (it's apparently happened five or six times in the past couple of years-- Apple is on a roll), but with the holiday shopping season bearing down upon us like a big, black heavy thing on wheels, the more mainstream positive press the iMac gets, the fatter Apple's cash registers will become when people are proxy-shopping for Santa. Why do we get the feeling that there will be a lot of these things under the collective tree this year?

 
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Don't Spend It All At Once (9/22/04)
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Sure, we've all heard that Apple's iTunes Music Store only barely breaks even, and even if we were all living in the Land of Cotton Candy Trees and Rainbow Ponies and Apple were miraculously making a full dollar's worth of pure profit on every 99-cent song sold, that'd still "only" be maybe $35 million in profit this quarter, which isn't necessarily a lot in the grand scheme of Apple's usual revenues. And obviously Apple isn't making anywhere near a buck per track, so have you ever wondered exactly how much of that 99 cents you drop per song actually finds its way into Apple's pocket?

Well, according to The Independent, it may be even less than you ever expected: reportedly Apple "retains just 4 cents from each 99-cent track sale." About twice that goes to the song publisher, and a whopping "62 cents or more" goes to the record label, who is then expected to pass along a cut to the artists themselves. Most people wouldn't have much trouble with the labels taking such a big slice of the pie if they knew that the artists were getting paid well, but the number we've heard bandied about a lot is that the labels only pass about ten of those "62 cents or more" along to the folks who actually make the music. Do the math and you'll find that means that the record labels swallow up more than half of the cash coming in from each song sale, despite the fact that "the marginal cost of manufacturing has fallen to almost zero"; they have to pay to stamp out more CDs, but downloads, not so much. Worse yet, even though their cost is far lower with downloads, they make more money per song download than they do on CD sales. (If you're feeling a surge of righteous indignation, run with it-- you're entitled.)

Meanwhile, back to Apple's cut: four cents? We're going to have to assume that's after subtracting out the company's cost of bandwidth, credit card transactions, salaries for iTMS-related staff, booze, hookers, M&Ms and the hourly wage of the guy who picks out all the brown ones, and any other relevant expenses incurred, because otherwise Apple would be losing millions every quarter. Not that a loss-leader wouldn't necessarily still be a reasonable investment as long as the iTMS were driving sales of those nicely-profitable iPods, but Apple has gone on the record as saying that the store actually makes a teensy profit all on its lonesome-- and apparently this four cents per song is it. So why on earth do companies like Napster, who don't have iPods to sell, think that a downloadable music service in its current state is in any sense a viable way to make money? Expect lots of them to crumble to dust over the course of the next few years, kiddies, unless the labels suddenly get a lot less greedy.

It could happen. Sometimes it rains fish. Of course, the record labels becoming more willing to share their filthy lucre would be a probabilistic anomaly more on the order of it raining tractors, but hopes springs eternal.

Anyway, forget all that; the truly important bit is, how does all this relate to us? Well, perhaps most interesting of all is the fact that the iTunes Affiliate Program pays authorized iTMS Pimps such as ourselves five cents per song sold as a result of our referrals, which means a couple of things: first, we wind up getting paid about half as much as the actual artists do, if the widely-circulated "dime a song" reports hold any water. But even more striking, we wind up swallowing all of Apple's profit on the sale and then some, so Apple does accept the iTMS as an iPod-selling loss-leader when third parties bring in its business.

So when you buy a song via our iTunes link, you're actually costing Apple a penny-- but don't feel too bad, because the company's got half a trillion of them, so we think they can spare it. Unless you're buying a whole lot of songs.

 
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Anatomy Of A Design Change (9/22/04)
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Ladies and gentlemen, we here at AtAT are thrilled beyond pants to announce that our brilliant and unprecedented method of eavesdropping undetectably on high-level corporate strategy meetings (we can't go into details until the patent comes through, but suffice it to say that the key to the whole thing was equipping the dwarf with a firm-bristled toothbrush) is a success of formerly unimagined proportions. We can now obtain pristine three-camera video and audio recordings of all meetings-- every board meeting, every marketing strategy bull session, every coffee-fueled late-night brainstorming session, even every interstall bathroom conversation of the slightest corporate relevance (yes, we turns off the video for those; geez)-- in near-real-time. Every secret of the company will soon lay outstretched before us.

Too bad it only works on Sony.

Ah, well; at least we can offer you this translated excerpt from a transcript of a recent powwow between several Sony higher-ups discussing the sales performance of the company's portable digital music players, including the iPod-competing NW-HD1. It may provide a little enlightenment about the circumstances surrounding the news that future Sony players will incorporate MP3 compatibility instead of continuing to force users to transcode all their music into the proprietary ATRAC3 format:

Sony Biggest Wig: So how are sales of our Network Walkman line?

Sony Bigwig: Increasing steadily, sir; people are finally starting to accept that the time-consuming act of transcoding all of their MP3s to ATRAC3 is a privilege and not a chore.

Sony Biggest Wig: Excellent.

Sony Bigwig: But we still haven't sold quite as many as we'd hoped.

Sony Biggest Wig: No? Well, if I recall last quarter's sales projections, we expected to sell 300,000 NW-HD1s by the end of the third calendar quarter. How many have we actually sold?

Sony Bigwig: Six.

[A Littler Wig in attendance coughs slightly and everyone avoids eye contact.]

Sony Biggest Wig: ...Six?

Sony Bigwig: Six.

Sony Biggest Wig: Six. As in...

Sony Bigwig: ...Six, yes. But that represents a 200% improvement in unit sell-through since the product's first month of availability, which is a nearly unprecedented rate of increasing consumer uptake.

[Uncomfortably long pause]

Sony Biggest Wig: ...But it's still six.

Sony Bigwig: Well, yes.

Sony Biggest Wig: Does that include the one I bought?

Sony Bigwig: You bought one?

Sony Biggest Wig: Yeah.

Sony Bigwig: Like, at retail?

Sony Biggest Wig: Yeah. It was a show of corporate morale or support or something. My publicist said to do it. There were photographers.

Sony Bigwig: Do you have it on you?

Sony Biggest Wig: Good lord no. Why?

Sony Bigwig: I was just curious what it's like. I haven't seen one yet.

Sony Biggest Wig: Didn't we offer all the executives free ones?

Sony Bigwig: Well, yeah, but all my music is MP3, so I just bought an iPod instead. But anyway, yeah, yours would have been one of the six.

Sony Biggest Wig: I see. Well, did anyone else here buy one?

[Five hands go up.]

Sony Biggest Wig: Wait, why?

Sony Littler Wig A: We were with you for that photo op, remember?

Sony Bigwig: [to Little Wig A] Hey, can I see yours?

Sony Littler Wig A: I gave it to my niece. I've got MP3s.

Sony Bigwig: Well, does anyone here have theirs?

[Murmurs and general sounds of "no"]

Sony Littler Wig B: My dog uses mine for a chew toy.

Anyway, it kind of goes on like that for a while, until eventually they decide that adding MP3 support to Sony's players might not necessarily be such a bad idea after all. Reportedly only the company's flash-based players will be updated at first, but even the iPod knock-offs "might" get MP3 compatibility in the future. We're guessing that decision will come after the holiday sales numbers come out, which will show that Apple and Hewlett-Packard will have moved a combined total of over three million iPods in the fourth calendar quarter, whereas during the same time period, Sony will have sold an additional eleven units-- all to Sony employees brown-nosing for promotions. We can't wait to listen in on that meeting.

 
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