According to the WSJ, Dell is exiting the MP3 player market. This is a move that absolutely makes sense from a business perspective. Dell's strengths lie primarily in delivering commodity products built around a standard platform cheaply by exploiting their excellence in supply chain management and just-in-time manufacturing. But the portable media player is a poor overlap for these strengths from the beginning because it is a market that is:
- Not commoditized. Consumers perceive a huge difference between the iPod and the iriver. The winning featureset is still being sorted out by the marketplace.
- Affected by fashion. Dell is not a "cool" brand. They make printers, for crying out loud. Nobody wants a Lexmark MP3 player either.
- Not organized around a standard platform. MP3 is the defacto standard for ripped music, but not for online music (where Apple leads). As music sales continue to migrate to online channels, MP3 will lose relevance. (Unless the labels decide to go DRM-free.)
Given this misalignment, I'm not sure why Dell decided to get into this market in the first place. It's clear that the winners in this space will continue to look like the current strong competitor: innovators with strong leverage over the online sales channel. Product innovation isn't really a part of Dell's DNA, and they exerted zero leverage over the Windows Media channel. This was destined to fail, and it shows maturity that Dell is dropping out before blowing even more money chasing Apple.
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