Why the iPod is doomedWhy the iPod is doomedThe more a company succeeds with a business model, the harder it is to anticipate its successor. And Apple has been reluctant to move its digital music franchise to 'the cloud.' By Portfolio.comTake a deep breath, Macaholics. Think different. Apple (AAPL, news, msgs) might be the envy of the technology world, yet in its core business of music -- iTunes and those beloved iPods -- the company is veering toward trouble.Sooner than you think, the iPod as we know it will seem as nutty as a no-down-payment balloon mortgage.For generations, consumers have wanted to own their music -- vinyl, cassettes, CDs and 99-cent downloads. But today, the economy seems stuck in a death spiral, just in time for a sure-to-be-dismal holiday shopping season, and that malaise will nudge consumers toward a massive shift in mind-set.Hauling around thousands of songs on a handheld device or computer hard drive just so you can listen to your favorites will soon feel overly extravagant and cumbersome, like keeping a cow so you can eat your favorite cheese.Instead, we'll get music from "the cloud" -- technically, "somewhere on the Internet, but who cares where, as long as it shows up when I press this button."We'll have access to a service that holds every song ever recorded, letting us listen to anything, anytime, from any device. Pocket-size gadgets will connect to high-speed cellular, WiFi and satellites linking to the cloud -- to your music -- at home, at work, on overseas flights. Want to hear that Bread album you used to have on vinyl? Just tap into the cloud and listen. Maybe you'll pay a subscription fee, or maybe you'll put up with ads in order to listen for free. When that happens, Apple's model will be toast.The cloud is already forming. In September, MySpace began offering free, unlimited, ad-supported music. Microsoft's (MSFT, news, msgs) Zune player connects to WiFi, and its $14.99 monthly subscription service allows access to 3 million songs. (Microsoft owns and publishes MSN Money.)In Britain this fall, Nokia (NOK, news, msgs) is testing Comes With Music, a combination phone and music player that features a free subscription to Nokia's new wireless music service. And next year, Sprint Nextel (S, news, msgs) will switch on its Wi-Max system -- a high-speed wireless service covering large areas and easily delivering music to gadgets -- in a handful of cities.Walter Price of the Allianz RCM Technology Fund discusses subscription-based 'cloud computing' and its effect on Apple and some of the other stocks he likes.Fortunately for Apple, these emerging pieces don't work together. On their own, they can't challenge Apple's hegemony. The iPod commands 72% of the music-player market, while Zune holds only 2%.The most successful music-subscription service, Rhapsody, owned by RealNetworks (RNWK, news, msgs), has never put a dent in iTunes.But as Intel's (INTC, news, msgs) Andy Grove likes to say, if technology can make something happen, it will happen. And technology will knit the pieces together. Wireless internet will blanket the earth, and someone will marry that with just the right kind of device and just the right cloud-music service. A true challenger will be born."Someone will get this right," says Ali Partovi, chief executive of the music-sharing service iLike, but he's not sure Apple can do it: "Apple would be cannibalizing its existing strategy."Certainly Apple could do it by flipping iTunes into a subscription service that plays over wireless networks on iPhones."I don't see anyone really making subscription a blowout success for portables until Apple gets into it," saysJohn MacFarlane, chief executive of Sonos, maker of a high-end digital home stereo that taps into cloud music. Apple hasn't hinted at any such plan, though.- MSN Shopping: Alternatives to iPodsAnyway, the more a company succeeds with one business model, the harder it is to, well, think different. (See newspapers, travel agencies, IBM (IBM, news, msgs) in the 1980s, Microsoft today.)At the same time, whenever anyone leads the tech market, rivals swarm to out-invent and out-innovate. That's why tech superstars inevitably fall. Remember when AOL was king of the Internet? Apple introduced iPod and iTunes in late October 2001. In tech years, they're older than Henry Kissinger. But while its products have evolved, Apple shows no signs of embracing the cloud model. In September, Apple's "major" iPod announcement turned out to be iPods in new colors, plus an iTunes function, Genius, that finds music you might like -- just as several Web sites already do."What Apple does best is make beautiful hardware," says Dalton Caldwell, chief of internet music service Imeem. "If we live in this universe where hardware matters less, Apple will be in a poor position in the market." As for personally owning music: Still not sure you'll give that up? Just think of what you go through to do that. We find, buy and download files. We wind up with a jumble of thousands of songs. Some play on some devices, some on
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