Wednesday, June 07, 2006

Apple Drags Creative Back to Court

A couple of articles about Apple (AAPL) filing another lawsuit accusing Creative Technology (CRTV.PK) of infringing on at least three of Apple's patents. "The technology in question deals with how data is displayed on a computer; how portable media devices can be used to edit data; and how icons are created to aid in organizing files on a computer."

In an E-Commerce Times article, Yankee Group analyst Mike Goodman said, "It's all about how the suits get settled. He thought "if Apple is forced to buy licenses or to agree to share its own technology, that could alter the MP3 player marketplace over time, but Apple's large lead on rivals will remain a major hurdle to overcome."

The Wall Street Journal (subscription required) writes about the various legal maneuverings and profiles Creative's past mistakes and missed opportunities. According to the article, "Creative states in its suit that Apple Chief Executive Steve Jobs approached Creative in early 2001 to propose that his company either license Creative's technology or that Creative spin off its portable digital-media-player business into a separate company in which Apple would invest. Creative claims it turned down those proposals."

The article then goes on to note Creative's inability to market its MP3 players and how un-Apple when it came to marketing savvy. Van Baker at Gartner said, "If that's how it happened, then Creative had an opportunity they probably shouldn't have passed up. Advertising and branding was a huge hole for [Creative]. As a marketing company, you're hard-pressed to come up with a company that does it better than Apple."

Baker pointed out that "Creative is typical of many technology companies that try to make the transition into mass consumer electronics. He said, "These companies are founded by engineers, or run by engineers. They think marketing doesn't matter."

The article cites data from NPD Group that finds in "the first four months of 2006, Apple had a 77% share of the U.S. portable MP3-player market in terms of unit sales. The remaining top four competitors, including Creative, have less than 10% each."

Ted Schadler at Forrester Research noted that "Creative wasn't the only MP3 maker that dropped the ball. Competitors such as Rio, iRiver, and even Sony Corp. did an equally poor job of marketing their music players to mass consumers. He said, "With Creative, Rio and the others, you just didn't have that same marketing savvy. It was kind of like amateur hour."

Harsh words indeed, but very true. If you market and cater to only the fanboys (and girls) then you miss out on the potential riches of the mainstream mass market. It's still early in the game for the digital music player market, but it might as well be game over for many of these vendors who still exhibit no clue in reaching a broader audience. Sony are you listening or do you have Beans blocking your ears....