Athletes recovering from a serious injury should take it slow and not overexert themselves. That's a lesson that's apparently being ignored by Dell, which is looking to compete with Apple's champion iTunes while struggling with a lousy rep for customer service.

Mitch Wagner, California Bureau Chief, Light Reading

July 31, 2008

6 Min Read

Athletes recovering from a serious injury should take it slow and not overexert themselves. That's a lesson that's apparently being ignored by Dell, which is looking to compete with Apple's champion iTunes while struggling with a lousy rep for customer service.Dell is testing a digital music player that could go on sale as early as September, according to a report in the Wall Street Journal. However, Dell told my colleague Antone Gonsalves that the plans go far beyond hardware. The real focus is on developing a service that could deliver entertainment across multiple products built by Dell, which could include notebooks, mobile Internet devices, and possibly an M3 player -- but only possibly.

However, it isn't easy to compete with iTunes. Apple has done such a great job making iTunes high-quality and easy to use that it's difficult to see where Dell has room to improve on Apple. Certainly, Dell's limited description isn't compelling.

Apple already delivers entertainment across multiple products: the iPhone, iPod, and desktop Macs. And, unlike the service Dell is currently describing, Apple also delivers its services on devices made by vendors other than itself, namely Windows PCs.

The Journal lays out other obstacles faced by Dell. The company launched a line of MP3 players in 2003, but sales were unsuccessful and it discontinued the line three years later.

Its new foray would put it into an Apple-led market that has defied assaults. Companies like Microsoft Corp. and Sony Corp. have tried -- and failed -- to make a dent in the market dominated by Apple's iPod players and iTunes store. Apple had 71% of the U.S. MP3 player market in the first quarter of 2008, according to industry analyst NPD Group. Apple's closest rival was SanDisk Corp., with 11%. Microsoft, which introduced its Zune music player in 2006, had just 4% of the market.

And Dell's track record isn't strong in expanding into other markets beyond PCs. In 2003, it started selling Dell-branded televisions; it abandoned its big-screen TV business last year after disappointing sales. Dell last year also discontinued its hand-held mobile device, called the Axim, which was introduced in 2002; again, sales were disappointing.

This is not to say that Apple is invincible. Apple is weak in a couple of major areas.

The iTunes movie rental service offered limited selection when it launched in January, and even in April it had just 604 movies available to rent. By comparison, Netflix offered 90,000 at the same time. So Dell -- or any other company -- could compete with Apple by offering a significantly broader selection.

Moreover, iTunes video rental requires people to finish watching video within 24 hours of starting, which makes the service less attractive than DVD rentals. That's particularly hard on parents, who only get an hour or so a night to watch videos without the kids, so they have to space out movies over at least two nights.

Another vulnerability for iTunes is the service's Digital Rights Management. If you want to switch to a non-Apple movie device, and you have a lot of copy-protected iTunes music, you have to export it to CDs and then rip the CDs, which is quite inconvenient. Sure, Apple offers music without DRM, but figuring out which music is un-DRMed is confusing.

However, Apple's DRM actually protects Apple, at least in the short term. It makes consumers less likely to switch from Apple devices. So Apple's DRM policies don't hurt Apple, at least not yet, not until enough consumers have been burned by them. And they don't help Dell, or any other competitor. But they do hurt the consumer.

Reputation is another problem for Dell. Its customer satisfaction rating lagged last year behind Apple, Hewlett-Packard, and Gateway, according to the American Customer Satisfaction Index.

That matches my own anecdotal experience. I recently had dinner with a small business owner who ranted about terrible experiences with two separate Dell devices -- a TV and laptop. The products were lousy and the customer service was worse; she says she'll never buy another Dell product again, after being a loyal Dell customer for many years.

I asked about Dell on my Twitter account and the responses were mixed:

- "I like Dell. I think they're crazy to think they can beat Apple at the iPod game though."

- "I'm certainly intrigued by their upcoming mini notebooks and their willingness to use Linux.""

- "We have a dell desktop for the past 3 years and it has been great. i have a laptop at work and i hate it. so i'm 50/50."

- "Dell is coming around (slowly, which you would expect). They are almost there. Need another year. But quality is coming back"

And even at its prime, Dell wasn't known for making cutting-edge products. Ars Technica explains:

In order to make these products a long-term success, Dell will have to leap the hurdle of its own reputation. Ironically, after decades of representing itself as a mass-production company with the cheapest prices, standardized systems, and direct ordering, Dell is trying to reinvent itself as a sort-of Apple for the broke, discerning customer. Pause for a moment, and try to imagine a Dell "culture," anchored by a core group of customers as excited about Dell products as the legion of Apple fanboys that kiss the ground Steve walks on.

I bet you smirked, and I know I did. If Dell wants to reinvent itself as a company with a distinct experience to offer, it will have to commit to tackling that issue one step -- and one smirk -- at a time. The costs of such an effort may run counter to the quarter-to-quarter short-term thinking that's so prevalent among shareholders, but there's no magic wand the company can wave to suddenly change consumer perceptions.

This is not to say Dell won't make money on this new Internet service. Dell might be able to squeeze a profit from nontechnical consumers by delivering a media service that's already built in to the hardware it sells -- no additional work required. However, it's difficult to see how that service would be an Apple-killer.

Dell appears to be cooking up a me-too service to compete with iTunes. I could be wrong, though. We don't have many details. I'm looking forward to seeing what Dell is planning, and I'm hoping they knock my socks off.

About the Author(s)

Mitch Wagner

California Bureau Chief, Light Reading

Mitch Wagner is California bureau chief for Light Reading.

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