The Downloadable Music Business Shuffle

from the everyone-adjust-a-bit dept

As Microsoft gets ready to launch their own music download store, Apple has a carefully timed announcement adding an affiliate program to iTunes, so that individuals and organizations can get a tiny piece of the pie for every paid download they push on people. The end result, of course, will be to make iTunes’ already miniscule margins even smaller. This, obviously, is of little concern to Apple, since they still view the iTunes store (properly) as a promotion for selling iPods. Meanwhile, Napster, fresh from shedding their core Roxio software business appears to be in complete denial about the marketplace. In an interview, Napster’s CEO brushes off all of the competitive questions by pretending the real competition isn’t competition, and then pointing out how badly they trash the non-competition. Obviously, Apple’s iTunes is their main competition. However, he brushes this aside, pointing out that Apple only does pay-per-download, whereas Napster does pay-per-download and subscriptions. Since iTunes has no subscription offer, apparently, they’re nothing. No customer anywhere would ever think of replacing one with the other, apparently. Of course, he seems to be forgetting two things: customers define what the competition is by deciding what products are substitutes, and it’s pretty clear they consider iTunes and Napster substitutes. He also seems to completely ignore file sharing systems, which while much of the sharing may be in violation of copyrights, is still competition. So, with those in his blind spot, the competition he does bring up is Wal-Mart and Sony, two companies who everyone knew did a dreadful job creating music download stores. Any time you have your CEO defining away your biggest competition on a technicality and then bragging about how you beat the competition who had already beat themselves, you should be worried.

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Comments on “The Downloadable Music Business Shuffle”

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RJD says:

No Subject Given

VERY worried. I believe, he, like others, incorrectly associated iTunes with ‘apple users only’ and therefore it’s such a small part of the market AND once the market matures (ie microsoft embraces digitial music fully) that apple will be a niche player at best. Maybe that’s true but with his current view, Napster may not be around to see that day.

Rajesh (user link) says:

Re: No Subject Given

I love this quote:
For example, at a major U.S. retailer, I was told by the head of merchandising that they expect Apple’s market share to be less than 10 percent within 24 months. I’d be very interested in which retailer thinks that (Tower? Musicland? Wherehouse? Sam Goody?) and on what basis (because they’ll come out with an iPod killer?). Also, calls this chutzpah, I call it being a chump: We’re no more concerned about the entry of MSN than we were about the entry of Wal-Mart or the entry of Sony. I am sure I’ll be able to refer to Roxio/Napster one day in the Internet Archive.

Scott says:

He's an idiot

Chris Gorog is a complete idiot. Since the day Roxio was formed he was closing offices and laying off all of the talent at the company. He sabatoged our ability to write software by letting the engineers go – among the few people who did some actual WORK at the company. (It was already had enough to put out halfway decent code when they insisted on shipping the day before meeting with the investors, leaving us with short development times which in turn cut into the already way too short testing time) If you think the stuff we wrote was crap, don’t blame the software developers.

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