Dear CMO:
There comes a time in many a successful business when one makes the leap from "us versus them" to "we are the world." When one stops competing against competitors and starts competing against apathy and unrelated share of wallet. I'm not sure we just didn't see this happen in the music retailing business. Did Apple just declare victory in the music retailing industry?
Apple's announcement that they will begin selling DRM-free music from EMI -- with a hope that others will follow -- seems to suggest that they have. By opening up their iTunes to work with any device from any manufacturer, they not only outflank European lawmakers crying protectionism (ironic, isn't it?) but more importantly declared themselves the music download content provider for all. However, to paraphrase the former Vice President, it may be premature to declare that "the debate is over"; to be honest, online downloads account for roughly 10% of all music purchases worldwide. But I wouldn't expect to see too many people lining up to buy stock in dedicated record stores at this point. Growth is doubling and shouldn't be expected to start declining any time soon, in all honesty.
Is this a good thing? I'd say yes, it is. iTunes is the heart and soul of the iPod experience. Assuming the other labels follow suit and we see a ubiquitous DRM-free music industry in the coming months, opening up this experience to other music players would increase the size of the pie. Will they sell fewer iPods as a result? Yes, because without the closed system, the iPod is a very overpriced product regardless of its beautiful IP and design. What percent will they lose? Who knows. But with a 30% upcharge on the songs themselves -- from $0.99 to $1.29, in the EMI case -- they likely stand to gain more than they lose.
What are the first hundred or so questions that come to mind at this point?
There comes a time in many a successful business when one makes the leap from "us versus them" to "we are the world." When one stops competing against competitors and starts competing against apathy and unrelated share of wallet. I'm not sure we just didn't see this happen in the music retailing business. Did Apple just declare victory in the music retailing industry?
Apple's announcement that they will begin selling DRM-free music from EMI -- with a hope that others will follow -- seems to suggest that they have. By opening up their iTunes to work with any device from any manufacturer, they not only outflank European lawmakers crying protectionism (ironic, isn't it?) but more importantly declared themselves the music download content provider for all. However, to paraphrase the former Vice President, it may be premature to declare that "the debate is over"; to be honest, online downloads account for roughly 10% of all music purchases worldwide. But I wouldn't expect to see too many people lining up to buy stock in dedicated record stores at this point. Growth is doubling and shouldn't be expected to start declining any time soon, in all honesty.
Is this a good thing? I'd say yes, it is. iTunes is the heart and soul of the iPod experience. Assuming the other labels follow suit and we see a ubiquitous DRM-free music industry in the coming months, opening up this experience to other music players would increase the size of the pie. Will they sell fewer iPods as a result? Yes, because without the closed system, the iPod is a very overpriced product regardless of its beautiful IP and design. What percent will they lose? Who knows. But with a 30% upcharge on the songs themselves -- from $0.99 to $1.29, in the EMI case -- they likely stand to gain more than they lose.
What are the first hundred or so questions that come to mind at this point?
- Will the other major labels quickly follow suit, as Jobs (and Mack) believe they will or will they wait to see how this next act plays out?
- Will the other major labels quickly follow suit -- with all the other download services currently using Microsoft's DRM and not iTunes, as Forbes thinks?
- Will other music devices promote iTunes availability when it becomes prevalent enough?
- Will the labels work exclusively through iTunes, will they cut deals across the board, or do they have any idea at this point what they want to do? What about click & mortar players in the channel?
- Will Apple license its iTunes DRM to other vendors so iTunes boosts its primacy in share above its already 60%+ level?
It appears that content is starting to move more freely all of a sudden, doesn't it?
Regards.
Copyright (c) 2007 Stephen Denny
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