The Apple Advantage
Apple is and remains excellently positioned in video as it is in audio for two reasons.
1. Customer focus. This is a synthesis of factors, branding, styling , user interface, and behavioral integration (fitting into how people normally live and work). Apple nailed it with music with an iTunes/iPod combo that included painless iPod downloads and podcasting subscriptions.
Can Apple synthesize the same magic and take over the living room? Probably. Its video offerings aren't there yet for the mass market. But they do show the beginning of a successful digital living room vision.
2. Business model. The razor blade model has worked with many products. It works with media too, though the studios and labels will fight to the death over it.
I've written about that in this column. Robert X. Cringely quantifies it in "Swimming With Sharks." Apple had $1.5 billion in sales in iTunes and $12 billion from iPods. As data becomes cheaper, and it will for entertainment bits, the razor blade business model will only get stronger when there is a physical component.
The sheer size of HD video, which Cringely notes and I covered in "Cuban Is Back to the Future", makes hard drive distribution very attractive, another boon to Apple.
Apple can price iTunes low, knowing that it can make its profit on its portable media players. The same applies for movies. All the movie download sites better find a way to change the playing field and get out of Apple's way.
Good luck. Because the retail music sites haven't figured it out. The answer is imagination and marketing and technological innovation, which they haven't shown.
Apple's business model puts it above the fray in the fight for the movie buyer. Now Apple is a good customer-oriented company. The optimal consumer pricepoint to maximize revenues is clearly far lower than current pricing. While Apple fights for lower pricing, it is not critical.
The media player subsidizes the media cost. Apple is ahead by simply being competitive. It forces competitors into a lose-lose choice. Match pricing with Apple and be steamrollered by Apple's existing brand and customer focus. Or price it lower and lose money.
Place your comment