Mac Forum / General / Hardware / February 2006

New York Times
February 4, 2006

Good Luck With That Broken iPod

By JOE NOCERA
MY iPod died.

It happened right after Christmas - a Christmas, I hasten to add, in
which I gave my wife the new video iPod, making it the latest of the
half-dozen iPods my family has bought since Apple began selling them in
October 2001. We also own five Apple computers, and have become
pathetically loyal because of our reliance on the iPod. To the extent
that Apple is using the iPod to drive sales of other Apple products,
the Nocera family is proof that the strategy works; we've probably
spent more than $10,000 on Apple hardware since the iPod first came
out. Alas, at least three of the iPods were replacements for ones that
broke.

This time, though, I decided to get my iPod fixed. After all, it wasn't
even two years old and had cost around $300. Like all iPods, it came
with a one-year warranty. Although Apple sells an additional year of
protection for $59, I declined the extended warranty because the cost
struck me as awfully high - a fifth of the purchase price of the
device itself.

Anecdotal evidence - like chat boards filled with outraged howls from
owners of dead iPods - strongly suggests that you can write the rest
of this story yourself. You start by thinking: "I'll just call Apple!"
But it's so hard to find the customer support number on Apple's Web
site that you suspect the company has purposely hidden it.

Eventually, you find the number and make the call. Although the tech
support guy quickly diagnoses your problem - a hard drive gone bad
- he really has only one suggestion: buy a new iPod. "Since it is out
of warranty," he says, "there's nothing we can do." You're a little
stunned. But you're not ready to give up. On the Apple site, there's a
form you can fill out to send the iPod back to Apple and get it fixed.
But you do a double-take when you see the price. Apple is going to
charge you $250, plus tax, to fix your iPod. There is no mistaking the
message: Apple has zero interest in fixing a machine it was quite happy
to sell you not so long ago.

Now you're reeling. You're furious. But what choice do you have? You
can't turn to a competitor's product, not if you want to keep using
Apple's proprietary iTunes software, where you've stored all the music
you love, including songs purchased directly from the iTunes Music
Store, which you'll lose if you leave the iTunes environment. So you
grit your teeth and buy a new iPod. Of course since it's a newer
machine, it has that cool video capability. But you're still angry.

You've read recently that Apple has sold 42 million iPods in less than
four and a half years. Thanks to the iPod, Apple just reported its most
profitable quarter ever. But you wonder how many of those 42 million
units have gone to people who feel, as you do, that you've just been
taken to the cleaners by Apple? You also wonder why do iPods seem to
break so frequently? And why is Apple so willing to tick off people who
spend thousands of dollars on Apple products by refusing to deal with
broken iPods?

Or at least that's what I wondered as I went through the five stages of
iPod grief.

CUSTOMER support is the ugly stepchild of the consumer electronics
business. Companies like Dell and Palm and Apple have customer support
centers not because they want to but because they have to. Computers,
personal digital assistants and other digital devices are complicated
machines. They break down much more frequently than, say, old analog
televisions. And consumers expect the companies to deal with problems
when they arise.

But customer support is expensive for gadget makers. "A phone call
costs a company 75 cents a minute," said the writer and technology
investor Andrew Kessler. "An hour call is $45." As prices have dropped
sharply for computers and other digital devices, keeping those phone
calls to a minimum has become supremely important to consumer
electronics companies that want to maintain their margins and
profitability.

That's why all the big tech companies try to force customers to use
their Web sites to figure out problems themselves. It's why so many of
them bury the customer support phone number. And it's also why, when
you do call, companies like Dell teach its support staff to diagnose
computer problems over the phone, and then talk you through some fairly
complicated repairs. With its machines so inexpensive, Dell simply
can't afford to allow too many customers to ship the computer back to
the company to be fixed.

Consumers, though, don't really understand this. As much as they like
being able to buy computers for less than $1,000, they don't realize
that one of the trade-offs is minimal tech support. Nor do the
companies spell this out; instead, they pretend that their service is
terrific. Thus, there is a gap between what customers expect from
companies that sell them complicated digital machines, and what
companies feel they need do to ensure that those machines make money.

With the iPod, Apple has turned this gap into a chasm. On the one hand,
because the price of an iPod is far lower than the price of a computer,
Apple has even more incentive to keep people from calling; one long
phone call turns a profitable iPod into an unprofitable one. Nor does
it make economic sense to repair even the iPods under warranty.
Instead, Apple simply ships you a new one.

On the other hand, an iPod is a very fragile device. The basic iPods
are built around a hard drive, a device so sensitive that "if it takes
one shot, that will pretty much kill it," according to Rob Enderle of
the Enderle Group, a technology consulting firm. Its screen cracks
easily. Its battery can't be easily replaced because an iPod can't be
opened up by mere mortals. All of these were conscious design choices
Apple made, some of them having to do with keeping the cost down, while
others were done largely for aesthetic reasons. But given how much wear
and tear an iPod takes - the core market is teenagers, for crying out
loud - is it any wonder that they break? "If you get two or three
years out of a portable device," Mr. Enderle said, "you're probably
doing pretty well."

Which Apple doesn't tell you. Indeed, it doesn't say anything about how
long you should expect your iPod to last. And so consumers buy it with
the expectation that they'll put all their music on it and they'll
carry it around for a good long time. And when that doesn't happen,
they feel betrayed.

Steven Williams, a lawyer who brought a class-action suit against Apple
a few years ago over the failed battery problem, told me that he was
amazed to discover, as the litigation began, that Apple seemed to feel,
as he put it, "that everyone knew iPods were only good for a year or
two." Thanks in part to the lawsuit, the battery issue is one of the
few Apple will now deal with: if your iPod dies because of the battery
you can send it back and get a new one for a mere $65.95, plus tax. Of
course, you then lose all your music.

"Apple has been willing to alienate a certain percentage of its
customer base forever," said Chip Gliedman, a vice president with
Forrester Research, the technology research firm. Why? Because Apple is
an extraordinarily arrogant company. "Apple thinks it is special," is
how Mr. Gliedman put it.

At this particular moment, of course, Apple is special, and it can get
away with being arrogant. It has a product that everyone wants, and for
which there is no serious competition.

But it seems to me that Apple is on a dangerous course. Yes, it has
strong incentives to minimize tech support, but to say "Not Our
Problem" whenever an iPod dies is to run the serious risk of losing its
customers' loyalty. "I believe that the iPod is one of the most
brilliant platforms ever devised," said Larry Keeley, who runs Doblin
Inc., an innovation strategy firm. But, he added, he has long predicted
that the "maintenance issue," as he called it, would be the product's
Achilles' heel. "Consumers are just not conditioned to believe that a
$300 or $400 device is disposable." Mr. Keeley, whose daughters all
have iPods, has come to believe that their natural life "is just a hair
longer than the warranty," and that Apple's level of service is
"somewhere between sullen and insulting."

And, he warns, the day will come when the iPod has a major competitor.
"There will be competing platforms, and they'll get robust, and other
companies will figure out how to crack iTunes," he said. At which
point, Apple will reap what it is now sowing.

A final note: You may have noticed there is no Apple spokesman
defending the iPod or Apple's customer support in this column. When I
called Apple, wanting to know, among other things, how long Apple
believes an iPod should last, I got a nice young woman from the P.R.
department. She said she'd try to find someone at the company to talk
to me. That was on Wednesday.

I'm still waiting.

http://select.nytimes.com/2006/02/04/business/04nocera.html