Apple Not Universal-ly Liked
In particular, Mr. Jobs’s stance on song pricing and the iPod’s lack of compatibility with music services other than iTunes have become points of contention.Sony has recently renewed a one-year agreement, but this shows some significant resistance to Apple's insistence on not letting the iPod work with any service other than iTunes as well as on pricing issues.
It seems that lots of music industry insiders are warning the labels against antagonizing Apple, as it has such a huge market share. But I'd point out that the danger ultimately faces Apple. Should Universal walk, that would still leave other large labels, but they'd all be paying attention. Without content, iTunes is unimportant from a business view. People will go where they can find the music, and that's up to the labels, not to stores, whether online or real-world. Then there was this other point:
Mr. Jobs, in February, noted that less than 3 percent of the music on the average iPod was bought from iTunes, leading music executives to speculate that the devices in many instances are used to store pirated songs. (Of course, users can also fill their players with songs copied from their own CD collections.)If less than 3 percent comes from iTunes, and since iTunes has overwhelming market share, you have to wonder whether music executives are wondering whether Apple is necessary at all. There is this factor:
The iTunes service accounts for 76 percent of digital music sales, and the contract talks come as it is on the rise — Apple recently surpassed Amazon.com to become the third-biggest seller of music over all, behind Wal-Mart and Best Buy, according to data from the market research firm NPD.But there's something incongruous here. If Apple is so big in selling music, why do iPods have relatively so little? And do these figures count CD sales from people who want more than a few cuts of a given release?
If the labels walk, though, I think it would be bad judgment on their part - not becuase they make that much on digital music, but because when it comes to marketing, Steve Jobs is way smarter than any of the music companies. He is the one who insisted on low flat pricing to get people to start buying. That was smart. Unfortunately, the music companies want to be able to charge more for popular tunes. I can see the rationale - get what you can when the properties are hot. But consumers are already ticked at all the ways music companies have gouged them over the years. Jobs wants to build long-term relationships. That's smart marketnig.
Where Jobs misses the boat, I think, is that he also refuses to license the digital rights management scheme to other companies, which harkens back to how Apple has always approached business: be the sole supplier. Yes, it's built a viable company, and yet, at the same time, Apple's market capitalization is far lower than any of the PC-centric hardware companies, let alone Microsoft and its Windows juggernaut. Jobs and company never learned the lesson that sometimes letting go is the only way to get more, even though that's what he ironically urges the record companies to do - sell unrestricted music. His argument is that spreading the use of the DRM code would make it more likely that someone could crack the system. Please. People have been able to break virtually any digital protection scheme they've wanted to. Not putting it on other machines won't offer significant protection - other than market protection.
Hmm. Maybe even Steve Jobs could do well to listen to Steve Jobs.