Apple, HP Ink Landmark iPod Deal

(AP)  From snowboarding companies to soda conglomerates, marketing-savvy multinationals that worship at the altar of hip are fixated on wooing the iPod generation.

PepsiCo, Burton Snowboards, Volkswagen and America Online have all struck branding deals with Apple Computer in a quest to capitalize on the gadget's massive popularity.

Now, with a freshly inked deal with Hewlett-Packard, the world's No. 2 computer maker, Apple may have scored its most significant marketing coup yet. It also gets a crucial boost onto Windows-based computer desktops.

HP's decision to scrap its own development plans for a portable music player and online music store in favor of the shiny iPod and its iTunes pay-per-song Internet store paints another coat of luster on the consumer electronics' sensation of the moment.

In less than a year, iPod and its iTunes support sheath have broken open the world of digital music, drawing dozens of rivals into the market as the music industry surrendered its Internet inhibitions.

Apple has now sold more than 2 million iPods, making it the top seller of hard-disk portable audio players with more than 50 percent market share. ITunes has dispensed more than 30 million songs at 99 cents a pop.

Coated in HP's signature blue hue, the iPod will get a new name under the Hewlett-Packard brand. But everyone will know it's an iPod.

"We looked at the music space and said, `There's a great digital music player and a great music store out there, so it's logical for us to partner,"' HP CEO Carly Fiorina said in an interview at the Consumer Electronics Show in Las Vegas.

The drawing board for an HP-developed portable player and online music store was shelved after Apple called about a possible deal - and the game plan changed hastily just as attendees converged on Las Vegas, Fiorina said.

The deal means the iTunes music jukebox program will be pre-installed on all of HP desktops and laptops beginning this summer, a plus for Apple, whose computers are limited to a niche of less than 5 percent of the worldwide PC market share.

"The second largest manufacturer of Windows computers, for digital music at least, is standardizing on the Apple platform, and that has never happened before," said Phil Leigh, an analyst with Inside Digital Media.

HP's pricing has not been announced, but Apple's iPods start at $299. Apple's new, cheaper, compact model is not part of the HP deal.

"This is a big step for Apple," said Phil Schiller, Apple's senior vice president of worldwide product marketing. "We're trying to grow the market for iPods and iTunes and to reach more Windows users, and HP brings a lot of Windows customers."

Other executives say Apple wields tremendous influence when it goes to the bargaining table with other companies.

Cupertino, Calif.-based Apple has a record of product and marketing innovation, a top-tier brand and a charismatic chief executive in Steve Jobs who last year persuaded record label executives to get over their copy-protection worries and make more of their music available on the Internet with fewer restrictions.

In October, Pepsi signed a deal with Apple to give away 100 million songs from the iTunes Music Store, making one of every three Pepsi customers a winner.

The marketing campaign begins Feb. 1 with a Super Bowl commercial - a rare instance of the soda giant promoting another's company's product, said Katie Lacey, Pepsi's vice president of colas and media.

Others are also trying to capitalize on the iPod juggernaut.

Burton Snowboards announced this week that it would make the first wearable electronic jacket with a built-in iPod control system, allowing users to control their music from right on the sleeve without fumbling with zippers, gloves or pockets.

In December, America Online added a direct link to the iTunes Music Store from its AOL music Web page, and Griffin Technology developed an adapter designed specifically to mount onto the iPod and turn the player into a portable FM radio station.

Back in July, it was iPod on wheels.

Volkswagen and Apple launched a marketing campaign dubbed "Pods Unite." During the three-month promotion, iPods were shown in VW showrooms, and VW sold an iPod connectivity wiring and cradle tailored for the New Beetle.