Taking a Bite Out of Apple

3 07 2007

Apple

by Derek Beres

I’m not sure what’s more disturbing about this recent article on Reuters: that Apple has a stronghold on the digital music industry, or that Universal is accountable for one in every three sales of CDs in America. As the article opens with: “Universal Music Group, the world’s largest music company, has declined to sign a long-term deal with Apple Inc.’s iTunes music store, leaving open the possibility for exclusive deals with other services, an industry source said on Sunday.”

When seeking out music online, I inevitably open up my iTunes store first. There’s a sense of convenience and quality that I’ve grown to depend on with them. If I’m seeking out new tracks for dance floors, that is not my first stop, however; that would be Stompy or Dance Tracks Digital. If I’m looking for something in international music, Calabash would be my weapon of choice. In general, though, iTunes is the first – and for some, only – point of reference in digital downloads.

It’s easy to understand why Universal is pissed. Apple is essentially creating the same corner that UM’s parent company, Vivendi, has built. When you own some 33% of the market, and suddenly you become dependent on someone else and still lose money, you’re not going to be happy. It makes you look frail, and in terms of business, that means death. And even with their foray into communications via large share holdings in SFR and Maroc Telecom, they refuse to have any part of their grip slip. It’s a shame when you can no longer cash in on somebody else’s talent.

As Six Degrees co-founder Bob Duskis told me in a recent interview, “There is something very democratizing about the Internet. It hasn’t happened yet where Universal Records gets more exposure than Six Degrees Records on the world or electronica pages of iTunes. The consumer is moving towards a digital-purchasing model. We can sit and whine about it, as the majors have been doing for years, and fight our own consumers and engage in a ridiculous losing battle. Consumers don’t want DRM sound files. If you don’t embrace your buying base, you’re going to go out of business.”

Totalitarians do not really want a democracy, however. The playing field is too wide open. While Apple has, in many ways, cornered a market, they did it because they offered consumers something they wanted, and did it well. (Well, mostly, given the delicate nature of the iPod – I’m on my fourth.) Where else are we really going to go? Zune? Be serious. Yes, with smaller download services the artists and labels can get better deals – with much less exposure. Many indies have done extremely well because of iTunes. It’s the fact that Universal’s expectations (read: bottom line) is so high that they’re in a tizzy.

While this Reuters article has created some stir, the reality is: who cares? When too much of the power goes to one entity, then choices become decisions made by a select few. It happens often; another name for it is: industry. Branding involves a degree of specialization, or else everything will fall into an unrecognizable mess. The little guys are going to proser from this, unless, of course, our government keeps using the RIAA as the only voice in music that they’ll listen to. Regardless of the odds, I’m with Steve Jobs on this one. It’s not that he doesn’t have his own blinding traits to his service, but he does it with a smile. Most of all, he serves the interest of his consumer base; he doesn’t go around making it harder for us to get what we want. At this stage of the game, that’s why he’ll stay one step ahead.

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