Four Pillars all-at-once: The iPod/iTunes business model: a minority report

Today’s Economist carries comment and analysis of the iTunes business model following the recent attempts by France to prise open iTunes. You can find the entire article here, thankfully weedless i.e. not DRMed to submission.

I’ve never bought anything from the iTunes store; my children have, by the clickload. I am different from them; I’d already invested considerable sums in acquiring more than a thousand CDs, and what iTunes gave me was a simple, convenient way of unlocking the physical assets I’d already paid for and making them available for mobile use.

And an excuse to buy another Mac (or three) and pretty much every iPod ever released. As if I needed an excuse.
So, for people like me, ITunes represents something quite different. It represents freeing up music I already had. It represents a powerful way of managing the music I already had, in terms of finding tracks, creating playlists, transferring them to mobile devices, listening to the music, sharing it all with my kids.

Think of it as Four Pillars all at once. In ITunes I have syndication, I can publish the music to devices and people around my household. In ITunes I have search, for tracks, artists, albums, whatever, however. In ITunes I have fulfilment, in terms of the capacity to acquire the music and videos. And via iTunes ecosystem pieces like, I can sustain conversation about all of this. Soon I expect to see presence and IM and videochat more seamlessly integrated into the iTunes experience, either directly by Apple or via and pandora and members of that ilk. Soon I expect to see more seamless mashing capabilities as well.

And for the present, I’m prepared to pay the price of lock-in, where I can only listen to these tracks via an iPod. Yes it is a jail, but at least it’s an elegant one.

And I have the belief, possibly benighted, that Apple will do the right thing on FairPlay. Within the next two years. And guess what? I’ll probably go buy another iPod to celebrate. It’s about freedom to choose; you don’t have to exercise the freedom, you just need to have it. And if the product is good enough, you will keep buying it.

The Economist article asserts that the music store is a “loss leader” that serves only to boost sales of the iPod. I would make one more assertion. That there is a high correlation between tracks sold via iTunes and physical CD sales. Maybe the music industry needs to understand this as well, that, for certain market segments, iTunes extends and augments hard CD sales rather than substitute and depress such sales.

A related topic. I read what Malc had to say today, about the framing problem with taking Apple head-on in this space. He’s absolutely right. His stance reminded me of this article on The Transition Away from Microsoftness, from the Linux Journal.

Nobody in his right mind will try and compete with Microsoft Office head-on, it has a dominant position in the market, its users swear by it the same way drug users swear by their drugs, they don’t care about the lock-in, etc etc. What Nicholas Petreley has to say makes complete sense. If the opensource world wants to take Microsoft Office on, it will not be by making a cheaper/faster/better Office, but by providing something completely different. Something so different that people will buy it for new reasons, and land up reducing their commitment to Office almost as a byproduct.

I see the syndication/search/fulfilment/conversation tools doing just that. Today. Office is more likely to die by a million small cuts than by a NetScape/Internet Explorer war.

If nobody in his right mind will take on Microsoft Office, it begs the question why people think iTunes can be taken on that way.

Not within their frame of reference. Not around their anchor-points. Not on their battlegrounds and playing by their rules. iTunes cannot be beaten by jTunes or MTunes, that is madness. Breaking wind in the face of rolling thunder.
Spot on, Malc. Hope you enjoy the Linux Journal analogy.

4 thoughts on “Four Pillars all-at-once: The iPod/iTunes business model: a minority report”

  1. On the related front thought you might like : this article from the WSJ today – Free, Legal and Ignored – Colleges Offer Music Downloads,
    But Their Students Just Say No; Too Many Strings Attached. Just going to show how hard it is too compete with the iTunes-iPod combination.

    (Not sure how long this link will be around (as they disappear into subscription land after a few days ))

  2. The Microsoft Office argument is rather more complex, since it’s ignoring Microsoft’s actions. What will appeal to the addicted Office user when MS changes the file formats, user interface, and hardware and software cost?

    There’s a good chance that the OpenOffice points of almost identical features, user interface, file formats coupled with an unbeatable price might win the battle with Office 2007, even without innovative features.

    Nicholas Petreley’s article isn’t as strong as it could be. He’s taken one item that means a lot to him (live links) and generalised it. Now live links doesn’t bother *me* much. I have my own set of killer advantages of – namely multi-OS support, probable long life of data files, ability to give legal copies to friends, and PDF creation. And it meets the minimum set of functions so that I don’t need a second office product for the more complex requirements (whether Microsoft Office or something else) – some of the other office suites have been too basic to be worth migrating to.

    Yes, it would be nice if OO.o had some extra incontrovertably better features than other office suites, if only to be able to provide most anyone with their own personal killer features. But I think OO.o can be successful without them, given that Microsoft is changing the product again.

  3. Apple have used the opportunities presented to them post Napster to present the customers an option to purchase which aids to Apple’s hardware sale. Most sensible thing for any hardware vendor to do. Years back I bought a assembled PC and the vendor offered me a maintenance contract, it was an addon income for him.

    As I have pointed in this article it is really fascinating to know how did they executed it all.

Let me know what you think

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