Wednesday, September 05, 2007

Stacking Chips

Not to start this down the road of the Mac/Win wars, the Sunni/Shia thing is bad enough – but Apple announced some new products and it started me thinking.

It seems that only ones really winning in the new music marketplace are at opposite ends of the (perceived) quality spectrum. On the “low” end is Koch Records – a record label that was once the 99-Cent Store of labels, but now seems to have a new hit every couple of weeks.

On the high-end is Apple and their own 99 centavo mercado – iTunes. They make a cut for every song (and video and ringtone) they sell – all without having to spend the kind of promo dollars that labels do. Would you rather pay for four (seven?) expensive videos for 50 Cent and then hope he beats out Kanye (and Kenny Chesney) for enough soundscans to pay back the dough spent up front or run a website that cranks out the same profit no matter if people buy a song on Sony or Warners?

Sure Apple pays a lot to advertise their iWorld. And they use music videos to do it. The Feist clip I like turns up on the ads to the new ChunkyNano. Watch the commercial and see that at the end there are links to buy the song and to buy the video. Anything that helps the artist sell music (at least via iTunes) is good for Apple. And all the things that don’t help the artist, are of no concern to Apple. The Cupertinians get much of the reward with none of the risk. Is it my imagination or does that seem to be Steve Job's God-like fingers pinching the whole music industry in that photo?

Apple has almost no challengers in the mobile music market. They seem to have a monopoly on the way music is played, Apple's desire for memory is THE thing that drives the computer chip market and other giants of commerce are teaming up to form a company (that will probably get its ass kicked) to try and get in on the business that Apple is dominating – just because the business is so damn profitable.

The new Apple devices will allow users to download songs directly to iPhones and TouchPods using wifi. Users will pay once for the song and then again for the ringtone of the same song. The videos on the glossy iPhone and iPod screens look better than they do on YouToogle – and the iPhone has its own YouTube which even looks better than the regular one. Seen through Mac-colored glasses the music industry (and video especially) looks pretty damn sunny. But that is just from the Steve Jobs POV.

As the music industry takes on water and tries to act like there aren’t pieces of iceberg all over the deck, Apple is still riding the wave of the one thing the music industry has in excess – cool. Music and music videos are cool. That used to make us rich. Now videos make Apple rich while the rest of us work hard to turn a profit creating videos and wonder why we didn’t buy more shares of Apple before the latest announcement.

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I think you oversimplify Apple's end of the business. If all it took was running a website that sells songs, they wouldn't be dominating the industry like they do. Clearly, there is a lot more involved than meets the eye of the iPod purchaser/iTunes Store music buyer. Developing and running the technology behind it all is far from cheap. It's easy to belittle something when you take a high level view. Witness:

Would you rather throw some advertising dollars at a bunch of artists or pay programmers and designers to implement new technology in order to develop both ends (player and store) of a totally new and unproven marketplace?
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