In January 2004, HP’s CEO Carly Fiorina took to the stage at CES in Las Vegas to announce a rather intriguing personal media player that was the result of a most unlikely partnership. She held in her hand what was referred to as the * HP Digital Music Player*, a muted blue version of Apple’s iPod that would be known as the iPod + HP.
No, that’s not a typo.
HP had been wanting to break into the fast growing PMP (portable media player) market for some time, seeing it as a market they had to get into as early as possible. The company began working on their own media player, dubbed the HP Pavilion Personal Media Player, as part of their Digital Entertainment System strategy, a strategy designed to re-focus HP’s efforts towards the rise of digital media creation and consumption that even saw HP release a range of media centre PCs.
To bolster their upcoming PMP further as well as ensure that customers would have a way to fill it with music, in addition to ripping CDs, HP entered into a contract with Napster who were in the final stages of a huge relaunch as an online music store. Unfortunately, the PMP tested so poorly during focus group feedback that development was abruptly shut down and HP even pulled out of Napster’s relaunch event, returning their money and ending their rather short-lived tie with the music provider.
Worried that it would be too late to enter the market by starting over, HP looked towards licensing another company’s product that was already on the market. The company they partnered with was none other than Apple.
Apple, meanwhile, had already launched its iPod a few years prior at a special event in 2001 which had the company talk about its Digital Hub strategy, a strategy that preceded HP’s take on it by quite a few years.
The iPod was not the instant hit that we’ve since come to expect from the creator of the iPhone and iPad. The first generation model supported FireWire (no USB), was Mac-only (supported in both OS 9 and OS X) and rather expensive. As Apple’s computer market share at the time was less than 3% and the lukewarm reception it received, sales didn’t exactly take off1.
It wouldn’t be until 2003, after the introduction of the iTunes Music Store and iTunes for Windows, well as the opening of more retail stores, that iPod sales began to show signs of increasing. Considering how many potential buyers there were after the introduction of Windows compatibility, those increases weren’t seen as quite good enough. Apple was keen to build upon the momentum that iPod sales had started to gain.
With a combination of HP’s desperation to enter the PMP market with at least something, and Apple’s desire to get the iPod into as many people’s hands as possible, both companies, rather unexpectedly, entered into what appeared to be a mutually beneficial partnership.
As a result of the agreement negotiated between the two companies, HP would preinstall iTunes on all Pavilion and Presario PCs and, in return, Apple would manufacture a custom version of the iPod for HP called, rather unsurprisingly, iPod + HP. This was a custom iPod that HP could call its own and sell through its own distribution channels, allowing the iPod brand to be available in a wider number of retailers than Apple’s iPod had been at the time.
From Apple’s perspective, this was a unique way of offering their iPod and iTunes brands to consumers as they would be able to take advantage of HP’s large distribution, with HP supplying them to retailers such as Office Depot and Wal-Mart, retailers that weren’t already selling the iPod. Ultimately, it didn’t matter to Apple whether a consumer purchased either an Apple or HP iPod, it was still an iPod purchase and a potential iTunes Music Store customer.
It would, however, take several months from the announcement at CES to see the iPods on shelves, only being made available in August of the same year.
An iPod by Any Other Name…
In terms of the hardware, there was no difference between Apple’s iPod and the one HP licensed from them. They were all built in the same way, in the same factories. Cosmetically, HP’s logo was etched onto the rear housing, underneath the Apple and iPod branding. Even the packaging was the physically the same, apart from differences in the graphic design. Despite being debuted in “HP Blue”, the final version of HP’s iPod was not, in fact, uniquely coloured.
HP would go on to offer their own branded versions of the iPod mini and even the iPod shuffle, both emblazoned with the HP logo. Unlike the range of colours the iPod mini launched with, HP would only go on to provide it in silver, Apple keeping that option to themselves.
The agreement between both companies effectively turned Apple into somewhat of a pseudo-OEM, licensing a custom-branded iPod for HP to distribute and sell as an official HP product. Unlike a more traditional OEM, however, the iPod never lost Apple’s own branding.
…Does Not Smell as Sweet
Despite the differences being only skin deep, both companies made sure that this was not just a simple rebranding similar to what Apple would do later in the year with the U2 iPod. As far as both companies were concerned, this was a HP product. Apple specifically manufactured the HP iPod with different model, part and serial numbers, all of which were reflected both in the iPod’s firmware as well as etched on the rear.
Indeed, this rather blunt separation would go on to cause no small amount of confusion and frustration to both customers and AppleCare employees as time went by, especially as the HP iPod became available just as the iPod’s popularity started to show signs of serious growth.
So when owners of the HP iPod experienced a problem with it2, customers would naturally gravitate towards contacting Apple, whether it be through their AppleCare support service or via the Genius Bar. After all, it was an iPod, and Apple makes the iPod, right?
I started working at Apple as a Genius during the time the HP iPod was around, both for sale and during its aftermath, and Apple’s support procedure when dealing with customers reporting any problems with their HP iPod was extremely blunt, as the archived support article HT2345 shows:
HP, not Apple, provides support and service for Hewlett-Packard iPods.
Whenever a customer would visit the Genius Bar with one of these devices, you always knew you were going to be having a much longer discussion and, somehow, explain why their iPod can’t be serviced but the person sitting next to them can get their identical iPod replaced.
Pulling The Plug
Less than 18 months after the announcement, a year since being made available, and one CEO later, HP pulled the plug. Why the partnership failed so quickly is anyone’s guess but it’s not hard to see some of the issues HP likely had with it.
Strike 1: Firstly, by the time the HP iPod was available it would be just two months before Apple launches the iPod photo, the first iPod with a colour screen. This would have almost certainly caused some ire within HP which had likely purchased large quantities of the previous monochrome-screen model.
Not only would their offering look out of date after just two months but HP would need to sell their existing stock before offering a new model or risk dropping the prices in an effort to shift inventory and begin to make a loss. Apple isn’t a company that offers great margins to resellers and as far as it’s concerned, HP was merely a reseller.
Strike 2: It took some time for HP to get other iPod models such as the iPod mini and iPod shuffle. This was likely because those iPods sold like hot cakes since Apple’s retail presence, both with its own stores and resellers, meant they were much more readily available. If Apple was selling iPods as fast as it was manufacturing them then it probably saw no desire to funnel some off to HP, potentially losing direct sales.
Strike 3: HP’s sales of their iPod were extremely poor. According to Apple, it contributed between just 5% to 8% to total iPod sales per quarter. If we look at Q1 2005, the holiday quarter, Apple sold 4,580,000 iPods. If we assume HP were paying 85% unit cost of an iPod, for example, and that this was the quarter they contributed 8%, this would roughly work out to just 421,360 units sold through all of HP’s available distribution channels and retailers.
Was the HP iPod a failure? All signs point to yes. From HP’s perspective, they were merely reselling another company’s product as well as preinstalling music software in the hopes of hastily entering a market that they just weren’t ready for.
As for Apple, I’d argue that the HP iPod actually tarnished the iPod brand somewhat. This was Apple’s first foray into a new market after coming back from the brink, yet they were prepared to allow another company to call it their own, all in the hopes that they could be more aggressive in getting it to Windows users.
HP iPod rear photo courtesy of Ray Dehler.
HP iPod mini photo courtesy of Keegan Berry.