Blaming Steve

May you live in interesting times. Naughty Steve tells the pop execes what’s wrong, and some are steaming. The probleme is. Steve Job’s arguments are rather flawless. And his contrarians sometime have to hide their real feelings behind the officialy rigid copororate points of view.

Jobs argument goes like this:
– The iPod plays music. The majors only want them to sell restricted music. They have a rather convincing 70% market share. So Apple offers DRM.
– Consumers don’t like restricted music that much. So they want to rip their CDs (In 2006, under 2 billion DRM-protected songs were sold worldwide by online stores, while over 20 billion songs were sold completely DRM-free and unprotected on CDs by the music companies themselves) and put them on their iPods. So Apples offers MP3.
By popular vote, consumers are filling up their iPods with unrestricted stuff (just 3% of the music listened to on iPods is bought at iTunes). Voilá: Forget about the DRM-thingy as the phantastic lock-in of the Apple iPod customer.

So why is Apple the undisputed leader in music download sales. And making gazillions with their shiny little iPods? Other people are selling downloads, too. As other companies built cutesy music players.
Music has always been a software/hardware business. That’s why Sony still owns a major part of a major label. The old thinking went like this: Own the software (A.K.A. music), push your hardware (your real money maker). Unfortunately, the walls of this fortress made out of love, money and eternal happiness crumbled a couple of years ago. The dematerialization of music (ooops, there goes the CD) lowers the barriers of entry into the music player market. Step into any electronics discounter, and you’ll find USB-sticks with head phones attached. Because technically speaking, all you need for a music player is storage and some cheapo computing power.
But now comes to the tricky part. The user interfaces. Yes, interfaces. Because you need two. One for the player (if it’s not just a sub standard iPod shuffle-like music stick). And one for the PC, which feeds/syncs with your player.
Ever tried Sony Connect? Do you think Windows Media Player is a masterpiece of usability? Here we go. iTunes is far from perfect. But it’s holy trinity of player, PC and managing software seems refined enough to make consumers stay. Of course, the brand isn’t that bad, either.

But is this a lock in? Probably not. Let’s have a look at the German market. The download market leader seems to be Deutsche Telekom’s musicload. Well, tons of tv advertising should have at least some effect. Now let’s look at the portable music player market. In 2006, 22% of all households now do own a portable MP3 player (up from 14% in 2005). High penetration you’ll find in the higher income bracket. Lower income brackets are finally slowly taking on.
This means: the early adopters are in Apple’s core market. The downscaling already starts. And with virtually all mobile handsets becoming equipped with removable storage and MP3 players, the scene will change dramatically anyway (Hello iPhone).
But let’s come back to the Jobesian argumentation. His point is clear and simple: we don’t want or need no steenkin’ DRM. And you guys just think you do. And why is this all coming up? It happened at Midem. Some industry execs couldn’t get stopped talking about DRM. Some people couldn’t get stopped talking about execs talking about DRM.
And with <a href="Midem“>The NY Times / Herald Tribune jumping in, the whole thing started to become really public. Because, as stated before: the public doesn’t like DRM either.

Why Steve is the better Bill

The music industry is an entertaining place. As honorary buffoons of the traveling trade show circuit, we were allowed to poke fun at their musty business models (“still trying to protect our flailing horse carriage factories since 1875”). Paint their potential saviours in gruesome colors (“some mobile network providers have higher earnings than the revenues of all you guys combined”). Or tried to scare the #%@! out of them by explaining some tech basics (“in 2010, a top of the line hard disk will be able to contain every piece of music which has ever been recorded – preferably preinstalled”).

It has been fun. But now it’s gone. The industry execs took over. They slaughter their holy cow DRM (well, almost). Make fun of their business models. Come on, it’s just not fair.

But why does this make Steve the better Bill? Read this: Apple – Thoughts on Music. And the we can talk about it a bit more.

PS The music industry is really an entertaining place. But people working in the industry tend to suffer from a very specific occupational hazard. They become a little bit hard of hearing.