Why the music industry doesn’t have a prayer against iTunes
It is a fact that the music industry is flat on the mat. CD Sales have been in near free fall for the last 4-5 years. Exactly why this is happening is the subject of a good bit of back and forth by industry pundits, music executives and a raging herd of music industry lawyers. From media accounts one would think that this massive decline in sales (translate revenue) started with Napster and has reached a perigee with iTunes….ah, yes iTunes. To hear a typical music industry executive talk about iTunes is to understand the true definition of the “Death Star”.
The current rant against iTunes by the few surviving music industry executives is a wide-ranging complaint about Apple’s near complete control of the distribution of recording companies’ content. This outcry is based on Apple’s refusal to allow flexible pricing and Apple’s demand for elimination of copyright protection schemes (DRM) from songs sold on iTunes. As the music industry views it, this pitched battle evidently reached a high point in the last two months as Apple gave into flexible pricing but held fast to DRM removal. The whining by music companies could be heard from Hollywood to Madison Avenue. Much of this dialogue is focused on finding a distribution model competitive with iTunes. Apparently such a model would allow the music industry to return to days of yore where a million tons of plastic discs were dumped into the retail distribution channels and out sprang eye-popping profits.
At the very least, music companies are looking to new channels for music distribution outside of Apple’s domination. Currently this is seen mostly in the form of monthly subscription services provided through mobile operators like Nokia, Verizon and other famously out-of-touch telcos. With iTunes pulling in $1.5 billion in 2008, compared to $70 million in wireless music sales, this tactic is clearly an uphill battle. Unfortunately for the music business, this strategy is likely to have a surprisingly short life-span, since Apple’s iPhone and iPod Touch are rapidly outpacing the competition and setting the bar in terms of wireless music purchasing and cross-platform syncing, managed, of course, through the iTunes franchise. The result is a practical version of “two steps forward..three steps back” for the music industry.
It is also a rather surprising fact that the music business is no longer about music. It is simply about creating the lowest friction method for allowing customers access to their artist of choice, recommended NOT by music industry PR firms or marketing departments, but by customers’ friends on Twitter, Facebook or MySpace. This whole idea that the music industry can develop an alternative to iTunes is pure fantasy and the reasons why this is true are somewhat counter-intuitive.
For example, in the same way that music is no longer about music, it is also profoundly true that iTunes is not about “selling” music. iTunes is about selling a “process” for selling music. Apple couldn’t care less about the packets of digital data that reside on its servers that form the gruel for billions of micro transactions. This new process model (call it what you may) has only one primary business objective, to make the user experience as simple and error-resistant as possible. Apple cares not what the number one hit is on iTunes this week. Apple cares only about completely controlling the entire series of customer touch points that connect the dots between purchasing music and playing it. It is the seamless integration of Apple iTunes/iPod/iPhone hardware and software that determine success. This level of refinement and objective control of the music distribution and consumption value chain requires fanatical levels of control and selfless matching of business goals for the good of the process overall.
In order to actually compete with iTunes, the music industry would have to morph into a new “process” model where those who create music, store it, promote it, sell it, and create devices that allow users to consume music would all have to work seamlessly together with one goal in mind: to create a lower friction consumer experience than Apple iTunes. One needs only to lunch with a typical music industry executive to know that this is absolutely not going to happen. Apple has already dictated the end game. Although there are moves left on the board, the outcome is nearly certain…checkmate. Fold the King (BB or otherwise) and let it go. To do otherwise is a vast and complex user experience design problem which the music industry does not have either the skills or knowledge to address in a manner that will threaten (or even deflect) iTunes.
Famously at odds industries like music production, web content distribution, and music player manufacturers cannot begin to conceptualize the complexity and selfless decision-making they would need to endure in order to create a user experience even remotely as compelling as iTunes. This is not to say that iTunes is a paragon of ultimate usability for all functions. It is not, but overall iTunes will continue to trump anything the music industry, web music services, or MP3 player manufacturers can throw at it.
Steven Jobs has no reason to negotiate away any advantage to the music industry. He (Apple) had the discipline and patience to understand that iTunes is not about music any more than the iPhone is about phone calls. There are those who understand this way of thinking and then there are music industry executives who do not. A warning to all those music industry executives plotting the demise of iTunes: Beware, the Death Star is upon you!
Charles L. Mauro CHFP