Monday, April 03, 2006

There's an article in the Australian press that I think is interesting. The gist of the article is that Apple's dominance in the iPod market is about to take a severe beating, because cell phones are starting to become as capable as data storage devices as iPods, and when this happens, the desire to have less crap in our pockets will drive people away from iTMS.

I think the author is half right. His point is that Apple has a stranglehold on the market, but what he's missing is that the big cell phone providers are trying to get a lock on the market themselves. And we all know that the tighter you squeeze your market, the more star systems slip through your fingers... Er, the more customers.

Anyway, Apple's lock on the market is a weakness, just as the wireless phone companies' lock on their market is a weakness. The question is really who blinks first: Apple, the wireless companies, or us. I guess the smart money right now is on us - we seem thus far to have accepted whatever the market hands us. But the cell phone/iPod split is interesting.

Consider this: I have a Samsung t809 phone from t-mobile. This little baby has a transmedia flash card, which holds up to a gigabyte. And t-mobile seems to be pretty smart about not crippling their phones. I spent several weeks dithering over the fancier phones and networks that Verizon and Sprint offer, but finally just got disgusted with their attempts to squeeze the maximum amount of blood out of me and went with t-mobile, who bent over backwards to make me happy.

So now I've got this cute little phone, and guess what? It doubles as an iPod killer. Granted, 1g isn't very much storage, but it's early days. Wait for it. When t-mobile starts shipping 30g phones, things could change suddenly.

The bad news for Verizon, Sprint and their ilk? I don't have to pay t-mobile to listen to tunes on my phone, but I do have to pay Verizon and Sprint. This is a no-brainer to me - the cost of being with the big providers is too much. (Don't talk to me about Cingular - they're even *more* expensive). So now t-mobile, which arguably has a worse network, has a competitive advantage: they aren't jerks. So what if I'm a little bit harder to reach? I don't really like being interrupted anyway.

What does this mean for Apple? Simple: I can't use iTMS music on my phone. It's not an Apple product, it doesn't support fairplay, and so I am shut out. My solution: buy CDs, rip them, load them into the phone. Sure, the CDs cost a little extra, but it's worth it to escape the fairplay DRM.

Oh, right, you're running Windows, so the CD installs a rootkit on your machine. Consider a different operating system. Ubuntu is nice. No CD-based rootkits, no autorun at all. Your favorite artist uses too much DRM? Well, either buy the music from iTMS and burn it to CD and then rip it, or consider whether or not you really like that artist as much as you thought you did. There are a lot of other fish in the sea.

I was fairly enthusiastic about iTMS to begin with, but when the DRM started seriously getting in my way, I stopped buying iTMS music.

So I think the author is right that Apple's clock is about to get cleaned, and he's right that cell phones will be the vector for the cleaning. But I think he's wrong about how it will actually happen. I think what will really happen is that nobody will blink, we the listeners will leave Apple, Verizon and Sprint in droves, t-mobile will take over the world, and I'll happily listen to music on my phone.

And yes, the lesson here really is: the tighter you squeeze your market, the more customers will slip through your fingers. Sometimes a little generosity of spirit can produce a much better cash flow picture. Trying to monetize every last use of your product doesn't just reach a point of diminishing returns: it costs you market share. Of course, before we can take this lesson, we have to wait and see who blinks. I hope it's not us.

That reminds me: it's time for me to burn and rip all my iTMS music, so I can load it on my phone...

By the way, in writing this up, I originally added a sentence to the end of the message stating that copying the contents of my music CDs onto my cell phone was fair use. Arguably, this is true, under the Betamax decision. However, the case where this was really decided was probably the one where the RIAA sued Diamond Multimedia over their Rio MP3 player. It is a battle that is far from being finally decided, however. I don't think anybody's going to get in trouble for format-shifting their music, but my original proud cry of fair use really isn't substantiated by the research I subsequently did to make sure I wasn't just talking through my hat.


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