11.30.2006

Jobs' Strategy is No Bad Apple


by Tate Strickland

The rumblings of dissent are sounding from the tenuous union between Apple and record labels. What about? A mere 99 cents, it would seem.

Record companies are angry with Apple’s Steve Jobs over his refusal to introduce a variable pricing model in the iTunes Store to replace the current 99-cent flat rate. Under such a system, popular songs would cost, say, $1.49 or $1.99 while (to use one of my favorite euphemisms) a “golden oldie” would cost 60 cents or less.

This constitutes nothing more than another example of the record industry’s characteristic stubbornness with regards to change and new technology — an attitude that caused the illegal music downloading epidemic in the first place.

The à la carte approach to music that iTunes employs allows users to “cut the crap,” to put it bluntly. Everybody knows that the vast majority of albums contain one or two duds. With iTunes, users can streamline the amount of money they spend on music by cutting out those songs that they're never going to listen to — and if this happens en masse, the record companies will make significantly less revenue on these songs than they would if they were bundled with the good ones. As a result, record companies want to charge more for the hit song to make up for the bad song they didn’t sell.

This motion by the record company is shockingly anti-consumer and blatantly pro-industry. The music industry needs to be flexible. Forcing an old business model on a new medium is not going to work this time around.

Apple is winning out for now, because record companies have essentially no choice but to follow Jobs’ lead; with more than 80 percent of the legal music downloading market, iTunes is a force to be reckoned with. But the recording industry has surely been looking for options and alternatives. Microsoft’s Zune, launched just two weeks ago as the “iPod killer,” could have been one such alternative. In brief, the Zune Marketplace requires users to buy chunks of 400 arbitrarily defined “points” for five dollars. 79 points buy a song, which equates to about 99 cents per song. (Do the math. At 79 points per song and 400 point blocks, users will pretty much never be able to use all of their points.) But using a point system instead of a simple money system makes it almost inevitable that the Zune will start charging more for more popular songs.

That is, if the Zune can survive that long. Andy Ihnatko writes in the Chicago Sun-Times that the Zune is "so obviously immune to success that it evokes something akin to a sense of pity." If his predictions are right, it won't be long before the Zune goes extinct — and with it, record companies’ hopes for a more industry-friendly internet marketplace.

What will it take to take down the iPod and iTunes? A lot more than the Zune, that’s for sure. But for now, chalk one up for Apple… again.

(The iTunes logo courtesy of Apple.)






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4 comments:

James said...

not a big Itune fan, but the record companies drive me nuts with their blind eye toward the future.

alilbit said...

i just downloaded itunes today and haven't tried it yet.like the fact that it also loaded quiktime -nice blog

Anonymous said...

You wrote, "Forcing an old business model on a new medium is not going to work this time around." Where have we heard that before? Newspapers are starting to get that idea (maybe). Perhaps the recording industry will be next?

Tate Strickland said...

One would hope so. I'll concede that it's tough to change an industry, but record companies have been given ample warning and plenty of time to ponder the thin ice they're walking on.

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