March 19, 2008
The once haughty recorded music industry has finally collapsed under the weight of its own greed and inefficiency. We can officially call the industry dead, not when the companies are shuttered (because a number of them will survive), but when their main business model is radically different. According to an article in todays Financial Times the music industry is edging ever closer to signing a deal with Apple Computers which may do just that.
The article discusses a deal the two sides are trying to hammer out to shift the labels economics from collecting money based on the number of songs/CD’s that are sold to collecting money based on the number of iPod’s or iPhone’s thats are sold. Its a complex deal that the article emphasizes may not get done, however for the labels to even consider it highlights how very desperate they’ve become. This deal would certainly spell the end of the traditional record labels as their status as added value intermediaries (ie important middlemen) fades even further. Also read a related article which is a bit of a counter-point to the first article albeit with little new information.
July 2, 2007
Yesterday Big JG, the soup eater, posted a note about Universals Music’s mad dash to ends its tortured existence as the worlds largest purveyor of little plastics discs. In an act of classic Seppuku, Universal Music is reported to have told Apple that it was not going to renew its contract to sell music through iTunes. The move comes as a bit of a shock given that the Universal is reported to net somewhere in the $200 million dollar range through iTunes sales. Apple’s steadfast refusal to allow the labels to “wet their beaks” from iPod sales is widely believe to be the main reason behind the move by Universal.
There are two huge problems with Universal’s withdrawal from iTunes. First, they are the only ones doing it. Both Sony/BMG and EMI are on board with Apple and Warner Music is bleeding money and employees so fast it wouldnt dare walk away from any source of income. Second, by refusing to sell its music through iTunes, universal will not effect the consumption of its music, iPod sales or iTunes popularity. People will just get the content that isnt on iTunes they way they get 70-80% of the content on their iPod, from CD’s and P2P networks. The big loser therefore can only be Universal Music, which stands to loose a couple hundred million dollars along with a couple million paying customers. In these lean times for the music industry turning away either is the fastest way to quick death I can think of.
Here is a simple law of survival economics that all digital entertainment business MUST LEARN! “A little money is better then NO money.”
February 9, 2007
While exploring GooTube I came across this humorous blueprint of how a company can be its own worse enemy. companies erase innovation through . Taken as a metaphor for the innovation process, it highlights a bunch of steps that get in the way of a great product. Even more amazing is this video was made by the good folks in Redmond.
Innovation is the hard to achieve because ultimately it requires a leap of faith. An emotional connection to an idea or ideal that is so strong it transcends the available information and may in fact contradict it. Its this leap of faith that management cant make, especially when their 401k’s, titles, and careers are on the line.
Business management is a pseudo-science that attempts to establish and maintaining order by institutionalizing processes that allow for control. Innovation is a pseudo-religion that resists control and requires the same faith in its existence that all gods have, since humans started creating them.
February 6, 2007
People have been belly-aching about Apple’s iTunes DRM for months, complaining that it’s somehow more restrictive then says Microsoft’s brown brick, the Zune. Steve (El Capitain) Job’s has been largely silent. Until now. Today Apple’s CEO came out swinging. In a letter posted on the Apple site, not only does he lay-the-smack-down on the “free iTunes” contingent but he steals my math to do it. A large part of his argument virtually mirrors the analysis I did way back in April of last year. Namely that most of the music on iPods is not from iTunes. Should I expect a check?
My five sentence summary of Steve’s 1800 word rant is:
iPods rock, DRM sucks. The labels made me put DRM on iPods before they’d license any music to me. If I open Apple’s DRM to every joe-blow company that comes asking Apple’s products would suck as much as Microsoft’s Zune. Only 3% of the songs on most iPods is from the iTunes music store the rest is from other sources.
My favorite quote:
“The third alternative is to abolish DRMs entirely. Imagine a world where every online store sells DRM-free music encoded in open licensable formats. In such a world, any player can play music purchased from any store, and any store can sell music which is playable on all players. This is clearly the best alternative for consumers, and Apple would embrace it in a heartbeat.”
Read the full letter here, to find the first two alternatives.
Thanks to Jake Walker for the news via Pho.
December 12, 2006
Sensation headlines are great, El Reg’s mocking coverage is even better and Forrester Research is the best (for sensation headlines anyway). The Register is running a story with the somewhat overstated headline “iTunes Sales Collapsing“, based on some research put out by Forrester that seems to show that iTunes music is flat or even falling a bit.
While the iTunes service saw healthy growth for much of the period, since January the monthly revenue has fallen by 65 per cent, with the average transaction size falling 17 per cent. The previous spring’s rebound wasn’t repeated this year.
And it isn’t just Apple’s problem. Nielsen Soundscan has grimmer news for prospective digital download services, indicating three consecutive quarters of flat or declining revenues for the sector as a whole.
The article goes on to point out that despite the fall in iTunes sales iPod player shipments are way up.
The ominous trend comes despite healthy growth for digital music players – iPod sales quadrupled in the period monitored by Forrester – and Apple’s growing inventory – the company has added videos and movies to its established inventory of music downloads and audiobooks.
Of course if your a regular reader of this blog you already knew this. Apprently fewer and rfewer people are being sucked into buying the DRM crippled songs on iTunes for .99 cents a pop, but folks are still flocking to the iPods. The good folks at the Reg pin the blame for iTunes stumbling on Apple’s use of DRM in the music store. Andrew Orlowski goes so far as to say that we have entered the “final days” of DRM’d music.
November 15, 2006
PaidContent has a post on the Apple teaming up with a number of airlines to have the iPod integrated into their in-flight entertainment options. The article points out that the timing matched the retail launch of MS’s Zune player and serve’s as a reminder of just how far MS will have to go before it can dislodge Apple from its dominant DMP position.
November 14, 2006
Today the Zune player from Windows will explode from the shelves of 30,000 stores around the country, to what I anticipate will be the collective yawn of a “me-to” device weary public.
Will Microsoft spend billions pushing the Zune player on the market? Yes.
Will they make a huge splash in the press? Yes.
Will they put out a press release within a week and tout how many Zune’s they’ve foisted off on unsuspecting luddites sold? Yes.
Will it fail get any real traction and have a minimal impact on the market for digital players? Yes!
Now some might say I’m simply playa hatin’ (excuse the pun and the misappropriated vernacular) the on the Zune, so I’ve put together this list of the top 10 reasons the Zune will fail in the market.
Read the rest of this entry »