“If you’re Apple computers [sic], you’ll make more money by selling the iPods expensive and the music cheap. But if you’re (say) Vivendi Universal, you don’t get a slice of Apple’s hardware sales. So you want the iPod to be cheap enough that the punter buys into the technology but then spends the bulk of his money on downloading the music itself at a decent price,” Adam Livingstone writes for BBC Newsnight. “Now if you make either hardware or software you have the same two choices here. In a small controllable market you can sit down with your opposite number and work out a system that lets both of you make a profit. That might be illegal sometimes, but I’m sorry to say it has been known to happen anyway. Or you can let capitalism, red in tooth and claw, find a winner out in the jungle.”
“Which brings us back to iTunes. Apple’s fantastically successful music download service has been selling tracks by the billion to the public for three years now at low prices. The chaps from Silicon Valley have been making a pile of cash selling their iPods off the back of this while the poor music execs have had to cut down on the white powder deliveries by some margin. And for that they have the Internet and themselves to blame,” Livingstone writes.
“The billion dollar music download industry was spawned in the garage of a teenager called Shawn Fanning, just six years ago, when he dreamed up Napster, the very first mass peer to peer file sharing system,” Livingstone writes. “Napster had millions of people downloading music even before broadband got here, and because in those days it relied on piracy, the music was free and easy to download in the universally available format we now know as MP3. This was great news for Apple. They made a portable MP3 player, and the queues of customers in Apple stores with peg legs, parrots on their shoulders and who said ‘auuurgh Jim lad’ rather a lot soon stretched around the block. But if sales were built on the back of their customers’ piracy, that was hardly Apple’s fault. The fact that there were few strictly legal ways of filling an iPod with MP3 music was embarrassing but ultimately beside the point. The record companies were bleeding money to the pirates and Apple was cashing in. So when Apple finally offered to sell music online themselves, the befuddled record companies had no option but to try and claw back a few millions into the bank instead of the nothing they were currently making online.”
“How do Apple keep their competitive advantage? Their best answer is something called Digital Rights Management. They sell music online, but it isn’t sold in that universal MP3 format so beloved of pirates. iTunes music is only playable on an iPod, and then only by the person who pays for it. In other words iTunes is 80 per cent of the legal download market but you need an iPod to use it. But iPods don’t play the digitally protected formats used by other legal download services, so if you have an iPod and you’re law abiding then you’re locked into iTunes.”
Full article that’s centered on the proposed French copyright law here.
Livingstone’s piece would be a much more interesting and delightful work if based upon fact instead of fiction.
• iPod owners are “substantially less likely to download using filesharing software with only 7% of iPod people downloading illegally compared to 25% on average. And they’re more likely to be buying CDs with your everyday iPodder buying 2.3 albums a month compared to the average of 1.8,” XTN Data reported in January 2006. XTN Data surveyed over 1,000 UK and US music buyers to arrive at the data. XTN Data also found that 50% of iPod owners regularly download music from Apple iTunes Music Store.
• Music purchased from Apple’s iTunes Music store (iTMS) is playable on Mac and Windows personal computers and Motorola phones, not “only playable on an iPod.” In fact, you don’t “need an iPod to use it [iTMS]” at all.
• iPods can play music transferred from regular audio CDs and accommodates the following formats: AAC, Protected AAC (from iTunes Music Store), MP3, MP3 VBR, Audible, Apple Lossless, WAV, and AIFF. Law abiding iPod users are not “locked into iTunes.”
• Livingstone needs to attend a class in basic journalism before he tries to report on anything again.
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iPod owners significantly less likely to steal music than the average person – January 13, 2006
Microsoft CEO Ballmer: ‘Apple iPod users are music thieves’ – October 04, 2004