Why Apple Doesn’t Need the iTunes Store
Does Apple really need the iTunes Store? That is a question many fans of the company have probably asked themselves at some point in time. I say Apple does not. Why? Because, as always, Apple is making money off the hardware, ie., the iPod. And though music, movies, and TV shows cannot be considered software, it’s the same old story. Apple is first a hardware company, and then a software and content vendor.
After the millennium had passed, and it turned out that Macs weren’t the only computers unaffected by the dreaded Millennium Bug, a feared computer glitch that inspired numerous articles, studies, and even books, Apple secretly bought out a popular Mac OS MP3 player called SoundJam MP. The reasons for this were, at the time, unknown, as was the deal itself. We all know now that it was part of Steve Jobs’ plan to dominate the world create an ecosystem the upcoming iPod music player would become a part of. SoundJam MP went on to become iTunes, the wonderful music organization and playback tool that millions of Windows and Mac users (and even some Linux ones!) utilize on a daily basis.
As we all know, the digital music craze really started with Napster (Macster, on the Mac). Jobs clearly wanted Apple to cash in on the phenomenon, and created two products that would become integral pieces of the puzzle, whether or not the music itself was something the company would be able to profit from. Even today with Napster gone and Grokster, WinMX, and Kazaa either shut down or “converted,” legal music downloads make up only a fraction of the music on the average iPod. Jobs recently stated in his letter titled “Thought on Music” that “only 22 out of 1000 songs, or under 3% of the music on the average iPod, is purchased from the iTunes store and protected with a DRM.” So, it’s a known and widely accepted fact that we all have some amount of music that’s either been “pirated” or imported from CDs.
Apple was smart and from the beginning focused on constantly improving iTunes, its music playback application, and marketing the iPod, its portable media player, and making sure it was always ahead of the game for features, portability, and usability. Both the iPod and iTunes are things that can’t be “pirated,” simply because they don’t need to be. iTunes is a freely downloadable application, and Apple is the only company that makes a portable music player that is remarkably easy to use and sync entire music libraries quickly with. So, that was one less, and very formidable, competitor for Apple: piracy. Having only to strive against large, stagnated corporations is something I am sure the executives at Apple were joyed by.
Why did Apple set up the iTunes Store at all, then? To offer its customers an easy and legal way to acquire music online, of course. And what an amazing job the company has done with it! I bet every one of the five big music companies would have loved to become the number one online music retailer in the United States. If you think about it, that is an impossible task. To achieve that, a company would have to be able to offer music from all five of the record companies, and a number of independent labels. Which one of the music houses would let another sell its artists’ music online, let alone sell music from independent artists? A third party was needed, and Apple was the perfect entity to launch a music store, considering it was about to release a Windows version of iTunes. Until then, Windows users were forced to use MusicMatch Jukebox to sync their music libraries with their iPods. But giving consumers an easy way to purchase music online wasn’t the only reason Apple launched the iTunes Store. It also knew that building in a legal alternative to the many peer-to-peer networks where people got their fix of copyrighted music illegally would potentially save Apple and its customers from the RIAA’s hounds.
Last month, a number of European countries, including France, Germany, and Norway, demanded that Apple open up Fairplay to its competitors, so that songs purchased from the iTunes Store aren’t locked into a single portable media player (iPod). European consumer groups say that people should be able to play their music on a device of their choice. Steve Jobs made it clear in his letter that there was no chance of Apple opening up Fairplay to other vendors, but at the same time urged record companies to give up on DRM altogether. I believe Apple has nothing to lose if it opens up Fairplay. As long as iTunes and the iPod remain the easiest to use and most appealing music application and portable media player, Apple has little to worry about. And though I have my doubts about iTunes 7, I see no alternative. iTunes’ only (possible) competitor is Songbird, an open source application that is still too buggy and complicated to make any self-respecting iPod owner even consider it.
When it comes to Europe, there are two possible scenarios.
The first: Record companies agree to sell their music without any DRM on the iTunes Store, and Apple continues business in Europe and probably sees a surge in revenue; a lot of people don’t want to invest in DRM’d music.
The second: Record companies don’t budge, and Apple gracefully bows out of Europe, but retains its grip on the portable media player market. Europe becomes just another Asia.
Despite the fact that Japan is the only Asian country with an iTunes Store, the iPod is still one of the, if not the most, popular MP3 players in all of Asia, if you exclude mobile phones. So my question is, does Apple really need the iTunes Store? I don’t think so. Apple makes its money off the hardware, in this case, the iPod. It always has. Despite being urged on various occasions to license Mac OS X to computer hardware vendors like Dell, Apple has stuck to selling its software, and content, only to support its own hardware products. Apple does not need the iTunes Store to succeed in Europe; it’s the record companies that do. If there’s a legal alternative that’s actually given piracy some competition, it’s the iTunes Store. Imagine what would happen if content bought from the store was DRM-free. We would undoubtedly see an increase in sales. If Fairplay goes away, Apple has nothing to lose, and consumers have everything to gain, as do content producers.
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I can’t speak for Europe but what makes you think that
“the iPod is still one of the, if not the most, popular MP3 players in all of Asia”? All of Asia?!! Other than a 50+% share in the Japanese & Australian markets, the iPod is considered just one of thousands of generic MP3 players in the rest of Asia. In important (& huge) markets like China & South Korea, Apple’s market share is so small it would be listed under “Others” in a pie-chart. Not dissing Apple here but facts are facts.
Well, the iPod is in fact one of the most popular MP3 players in Asia. According to Forbes, it has an international market share of 25%. And in my country, India, it officially accounts for about 20% of the MP3 players sold.
The problem with official statistics is that most iPods are not bought legally here. According to this Wired article, almost 90% of the iPods sold in India are sold on the grey market.
That, and the fact that I live in Asia and see a large number of iPods on the street (even some Rickshaw drivers have iPods!), leads me to believe that it is one of the most popular MP3 players here. I cannot provide official statistics, because Apple itself does not release them.
From the Wired article:
Apple spokesman Steve Dowling declined to comment on Indian gray markets. He said Apple only provides worldwide sales figures, and “doesn’t break out data by country.”
I believe Apple has nothing to lose if it opens up Fairplay.
I wholeheartedly agree and have been saying so against the arguments of Mac fanatics for a couple of years now. And I think Jobs’s comments on the issue are disingenuous at best.
That said, I don’t think the iPod NEEDS the iTunes store, but it’s a nice and easy-to-use accessory for iPod content. If the iPod were interoperable with other stores, there would be even more opportunities for content on the iPod and drive sales even more.
I can’t speak for the whole of Europe neither, but iPod is considered THE mp3 player as far as I know, and people put music on it, cd, downloads, iTunes. Never ever have I heard some user complain about drm, except when I read the newspaper and the IT-guy gets all excited about the Norwegians, even more excited than he got about Vista. His evaluation of the iPhone was, that apple was silly to produce yet another mobile phone, since there are so many models on the market. I honestly fail to see the problem as every form of download has its drawbacks. Quality, legality, subscription. A lot of iPod-owners don’t use iTunes, some people proud themselves in never playing illegal music, others in never pay for it, like in ‘stealing from the mafia is no crime’. Some musicians here oppose illegal downloading as stealing, other musicians claim the opposite. The Norwegian action is based on a fundamental principle and does not come from the users it seems. I think they are closer to animal activists than musicians.
Musicians think more in the line of, if I pay for the song, I would like to get the uncompressed version. But then again, they go out to buy the cd anyway, so whatever. iTunes is a good music database. It’s a good shop. I fail to see why you would want to buy in that shop if you don’t like how they handle the product. Only if I put myself in a “Animal activist”-state of mind, I can see it. The We have the Moral right to … usually such ideas end by KABOOM.
Why on earth would they open up Fairplay? So the store they have spent millions creating can have competition on the platform they have built?
I would love to see them simply abandon DRM, but until that time, I’m fine with things the way they are.
So the store they have spent millions creating can have competition on the platform they have built?
Yes. Competition is good for consumers.
I would love to see them simply abandon DRM, but until that time, I’m fine with things the way they are.
Oh lordy.
Let me ask you this. If you’re SO opposed to Apple opening up Fairplay because, as you claim, it would mean competition to the iTunes Store, then why on earth would you hope that they abandon DRM, which would have the same result?
Is it any coincidence that your position is exactly the same as Jobs, even though what Jobs says contradicts himself and his company’s policies and prior arguments?
“Having only to strive against large, stagnated corporations is something I am sure the executives at Apple were joyed by.”
I don’t even know where to start.
“So, it’s a known and widely accepted fact that we all have some amount of music that’s either been “pirated” or imported from CDs.”
I don’t even know what that means. Those two categories are so completely different that they don’t deserve to be in the same sentence.
Beeblebrox wrote:
“So the store they have spent millions creating can have competition on the platform they have built?
Yes. Competition is good for consumers.”
And that’s an inducement for Apple? Perhaps you can offer a reason why…
OK, last point:
“Apple is first a hardware company, and then a software and content vendor.”
This has never been true, nor is it likely to become true - Apple’s philosophy has always been, as Jobs so famously put it, “We make the whole widget.”
The Apple philosophy has always been to create both the hardware and the software. Now they appear intent on controlling the means of content distribution and the hardware required to enjoy that content. If you haven’t been able to figure that out yet, it might help to sit back and actually take a look at their corporate strategy.
And no, concern for their consumers is not a matter of particular concern in that strategy.
And that’s an inducement for Apple?
I didn’t say it was an inducement for Apple, although it should be if Apple fans are to be believed.
I said they should open up Fairplay because it’s better for consumers if they do. I don’t give two shits about this being an inducement for Apple or good for their bottom line. If they can’t survive in a genuinely competitive environment, screw them. And if they disagree with doing what’s best for the consumers (and undoubtedly they do), then they should be forced to open it up.
And no, concern for their consumers is not a matter of particular concern in that strategy.
I would say that, given the polarisation in the DAP industry, consumers are suprisingly well served by Apple’s offerings, given that most people believe consumer friendliness is taken by “some” to be anathema to Apple’s content delivery system.
I started out thinking that Apple’s lock-in was heinous and unethical, and to some extent I still think that although it is an academic, ideological position. Most people though seem to agree now with this article’s point, that the iTS, and so DRM on iTS-sold tracks, contributes negligibly or very little indeed to Apple’s leadership. Indeed, things I’ve read recently actually make it appear that iPod’s marketshare lead internationally has rather been inflated, and so the “monopoly” proclaimed by Some is factually less secure than we suppose.
It’s interesting to realise that those who choose to make the most of Apple’s market dominance, to the point of bringing out the “monopoly” and “anti-competitive” labels, when they cannot credibly inflate the importance of the iTS & its DRM, and therefore will fall back to exaggerating the actual iPod marketshare. It’s a bending-over-backwards position, to have to maintain that Apple is more of dominant than it actually is, to prove that they’re anticompetitive.
There is little doubt in my mind that Steve Jobs meant every word of his recent advocation for interoperability. The question of whether they can “survive in a genuinely competitive environment” is laughably idiotic when you compare rival players and their content management systems (note - management systems, not delivery systems. Library mangement is ultimately more important.) The only hope for such rhetoric is to maintain that the iTS’s monovalency is inflicting such total paralysis on the entire digital music industry that it is impossible for other market players effectively to attempt a decent system of their own. That is incontrovertible bollocks to anyone with anyone not uncontrollably foaming at the mouth.
I absolutely and wholeheartedly advocate iPod interoperability. But those who are so keen to use the DRM issue to bash Apple in the gonads that they are willing to sacrifice their rationality do more to hinder the uptake of this agenda than anything.
Anyone who knows anything and whose opinion isn’t marred by vested interest* knows that the only solution to the music industry’s many current irritations and iniquities is the abandonment of DRM. This is the only way to achieve interoperability.
In the spirit of showing some intellectual cocones then, I make a prediction. We, or Apple, or rationality, will convince the studios to abandon DRM in the iTS. And there shall be much rejoicing. And it shall impact piracy not even in the slightest. And it shall be the start of many good things.
Because I still maintain that selling songs with DRM that locks them into one brand of player is unethical. And I always will, for ever and ever, amen to that Mrs Mulch.
*also ignoring those who do know something but not quite enough, or by chance come to bad conclusions
Sorry for all the grammatical mistakes there. It’s late, and we needs us an edit button.
There is little doubt in my mind that Steve Jobs meant every word of his recent advocation for interoperability.
What kind of Mac fanatic would you be if there were any actual doubt about Steve Jobs’s proclamations, Ben? You mean you’ve been persuaded that Apple’s DRM truly is totally benign and in no way has any detrimental effect on consumers?! Shocking!
If you have any actual evidence to suggest that Steve Jobs doesn’t mean what he says, and is indeed sure that the labels will never let DRM be removed from the iTunes store and so will never have to “survive in a genuinely competitive environment”, then I suggest you let us hear it because man it’s going to be funny.