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  • The Apple Music Report: Debunking the Conventional Wisdom

    September 21st, 2006

    When Apple’s iPod and iTunes ecosystem was first established, some analysts decreed that Apple was making a huge mistake, the same one it made when it originally decided not to license the Mac operating system.

    On the surface, having a unified standard might seem like a pretty good idea. This way, you can mix and match your music players and music services, and be assured of full compatibility. It would work the same way as a DVD; well, except for those competing high definition DVD formats, of course. Isn’t that the best way to serve your customers?

    I suppose I tended to agree with the conventional wisdom as well, but as the market has shaken out, it doesn’t seem to have quite worked that way, and the music player and legal download market has turned upside down — towards Apple’s direction. In other words, towards a closed system; not one, but many.

    The initial casualty, although the gravestone hasn’t been engraved, is Microsoft’s “PlaysForSure” digital rights management scheme. Officially, it’s still functioning, and probably will remain active, just to keep the antitrust regulators at bay, but we all know the truth. Yes, players will probably continue to be made and marketed to work with music stores that use the system, but it’s a huge question just how long that’s going to last.

    Microsoft’s Zune player and its forthcoming music store was only the beginning in the realization that going it alone is the better idea. Although the response to the first player has been a collective yawn so far, I suppose with enough marketing muscle, and regular product updates, I suppose it’s possible it’ll gain some market share, although it may be mostly at the expense of the company’s partners, such as Creative.

    In the wake of this upheaval, music stores and player makers are apt to seek new alignments to accomplish the same ends as Apple, more or less.

    Take that deal with RealNetworks and SanDisk involving the “Rhapsody DNA,” which is supposed to be some sort of offline “cache” of the Rhapsody music store. Although the platform, apparently a software overlay, is supposed to be compatible with “PlaysForSure” products, it supposedly doesn’t use Microsoft technology.

    Does it sound confusing to you? You have company. This system sounds, well, a little confusing, and I wonder just how Real is going to convey the message to its customers about what it’s doing and the impact.

    At the same time, Napster, once a name notorious for illegal downloads, hasn’t done all that well as a legal music subscription service. Memberships are down, and published reports indicate that the “for sale” line has already been posted, but I think it’s a huge question mark whether anyone would want to buy it considering the state of the market.

    Unfortunately, this desperate drive to rain on Apple’s parade will probably only muddy the waters even further. Instead of having Apple against “PlaysForSure,” it’ll be Apple against several digital media fiefdoms that may or may not be compatible with each other. Imagine how that’s going to shake out in the marketplace.

    In the end, Apple may benefit, of course, and come to dominate the digital media market more than ever. At the same time, without meaningful competition, enhancements to the iPod and iTunes may stagnate, and that’s not a good thing.

    Apple may end up seeing its worst enemy facing it in a mirror.



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    11 Responses to “The Apple Music Report: Debunking the Conventional Wisdom”

    1. Faye says:

      Apple did make a mistake at first (no iTunes for Windows). That was a totally enclosed ecosystem. Apple tried to get users to switch to Macs, but it didnt work. iPods became a huge hit when iTunes for Windows was released. This is fine and dandy… until you decide to try another music player.

      I suppose, eventually the iPod / iTunes ecosystem will take 99% of the market share and then be declared a monopoly. If Microsoft did the same thing, you’d call them a monopoly right?

    2. Apple did make a mistake at first (no iTunes for Windows). That was a totally enclosed ecosystem. Apple tried to get users to switch to Macs, but it didnt work. iPods became a huge hit when iTunes for Windows was released. This is fine and dandy… until you decide to try another music player.

      I suppose, eventually the iPod / iTunes ecosystem will take 99% of the market share and then be declared a monopoly. If Microsoft did the same thing, you’d call them a monopoly right?

      Well, Microsoft came close 🙂

      In any case, yes, Apple is pretty much a monopoly now with its music share.

      Peace,
      Gene

    3. Giro says:

      The current situation is painful for consumers. This is like the VHS/Beta wars all over again. Apple should at least open up and license it’s DRM to others. What an oxymoron… Apple’s “FairPlay” DRM is unfair.

    4. swissfondue says:

      A monopoly is not illegal in itself. The crime would be in abusing that monopoly position.

    5. Tedious says:

      Yep, 12 copies of a song (7 burns, 5 computers, and unlimited iPods) for 99 cents is *so* unfair.

      I want the artists to PAY ME to listen to their music, and I want them to come to my house to perform live, and clean up after their show.

    6. Apple is not a monopoly when it comes to downloaded music. I’m sorry, but that’s simply a lie. Itunes has 70%, according to this article. That’s not a monopoly. Etunes is next up, followed by Real, Yahoo, and the others — based on the articles that I’ve read.

      Furthermore, most people don’t download music from ITMS. They rip their own CDs. An ITMS monopoly would be achievable only if Apple forbade people from getting their music on to the device except through purchases!

      The iPod itself has 82% share of the market (though the article doesn’t mention how “the market” is defined). Is that a monopoly? I don’t think so.

      Plus, look at the way that a monopolist behaves. He keeps other products unavailable by hook or by crook. Has Apple done that to Sansa, Creative, Zune, or the rest? No way. You can go to Best Buy and see them up and down the shelves.

      So Apple fails the monopoly test in at least several different ways.

    7. The iPod itself has 82% share of the market (though the article doesn’t mention how “the market” is defined). Is that a monopoly? I don’t think so.

      I speak strictly on a percentage basis of the market, not with regard to behavior.

      As to whether Apple is abusing that position, that’s another question that I see being debated here 🙂

      Peace,
      Gene

    8. Steve says:

      Not having iTunes for Windows at the start wasn’t a mistake. It gave them time to get their act together and set up the bandwidth for a larger onslought. Once they were ready to go wide, they added the Windows version.

      The iPod and the ITMS were reasonably successful even when they were Mac-only. If they hadn’t been, the Windows versions would never had been released.

      In the pre-USB2 days, the iPod’s Firewire connection made it much more usable than other players, an early advantage. Maybe that was a factor in creating some pent-up demand from Windows folk before their versions were released.

    9. Steve says:

      As for the monopoly issue, Roughly Drafted has a good article.

    10. As for the monopoly issue, Roughly Drafted has a good article.

      I do not disagree with Daniel about the monopoly matter. Apple is clearly not being abusive in the sense that Microsoft has been. However, I can see where they might be tempted.

      Peace,
      Gene

    11. Tero says:

      For some time now music has been going into mobile phones. Some reports say in Europe more phones are bought to play back music than stand alone music players. This has been true for Japan and China for even longer. In all these markets such devices are readily available, and the mobile phone culture is very different to that of USA’s, for example, where people use iPods as portable music players, since the phones in that market are cheap, of low quality, old fashioned, and generally boring.

      Now the next step is to move music purchases into these (phone) devices. So there is absolutely no fear of Apple having monopoly in this business in the future, at least not globally, since I can’t see Apple being able to monopolize the global mobile phone/phone content business… and that’s exactly where the future markets are. Ipods and similar “dumb” players won’t be going away or anything, since they’ll sport higher capacity, and things like that, but within few years their share of portable music players will start shrinking. It has already happened.

      And to be a monopoly Apple would have to be able to control this whole business–something that cannot happen, because the likes of Nokia, Sony Ericsson etc. rather take it to themselves.

      Apple may be a local-market monopoly in the USA, but that’s it.

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