Hmm, I may have to take back all the berating I’ve done (you can search for it yourself) here of Paul Thurrott. He’s turning out to have some clues. In Fixing a critical mistake: HP finally cancels iPod deal with Apple (read the Yahoo news story here) he gives his backgrounder to why he claimed that HP’s version of the iPod would support Windows Media Audio (WMA format). Basically, HP’s engineers were sure it would, but Carly Fiorina was such a dreadful negotiator, at least in comparison with Steve Jobs, that she sold the farm for a mess of pottage. Or whatever the phrase is.

I spoke to HP representatives at CES, who told me and another representative of Connected Home Media that HP planned to add WMA compatibility to the iPod. My report about that development was met with doubts [more like hoots of derision – CA] from the Mac community, and of course the planned WMA compatibility never happened. That’s because Steve Jobs had engineered a deal that precluded HP from adding back the WMA compatibilty, a fact that was then-unknown to the HP engineers who would be working to integrate the portable media player with HP’s other products.


How bad was the deal? According to the AP, part of the agreement states that HP can’t sell a competing MP3 player until August 2006. It was virtually impossible for HP to make any money on iPod sales, because of the deal structure that Fiorina agreed to. And HP was (and still is) responsible for honoring the warranties of those iPods it sold … even though it never made any money on them. The net result is that HP will lose money on the iPod deal.

Ah, Carly Fiorina, super-saleswoman.. didn’t she buy Compaq for zillions, thus almost strangling HP’s PC business? And miss out on the purchase of a services company that might have helped HP (though given her record, probably wouldn’t have)?

The interesting point that’s not made, but which really needs to be considered, is that the Windows Media Center strategy (which HP embraced-ish) and the iPod’s success are in opposition to each other. iTunes doesn’t integrate with the Media Center concept (or software), though you can run it on a MC PC.

Here’s the point. If more people own iPods than own Media Centers, does that mean that Media Centers will never gain the traction they need? Or will people buy Media Centers regardless and then install iTunes and then get annoyed about the lack of integration, and if so who will they blame? Somehow if the iPod side of things works, I think people will not blame Apple. Not saying if that’s the “right” or “wrong” attitude; just trying to follow how people will think.

Anyone got Media Center experience who’d care to venture on this?