Did Apple Pivot on Media Pricing with Glee?
Cast your eyes back in time, to the early days of the iTunes Music Store. Apple’s DRM concession, some say, was part of a bargain to get music labels on board to assure a large library of music for the iPod. Part of Apple’s strategy was to avoid variable pricing, keeping all songs the same price, $0.99. Given how hard Apple fought for single pricing, it is interesting that they eventually gave up, first as the “iTunes Music Plus” DRM-free tracks, then just bagging it completely and going to a 3-tier model.
Why the change? Why did Apple pivot on this issue when they are notoriously unbending when they really believe in what they want?
Go back and look at the Apple earnings graph again. Look how small the iTunes revenue is. That suggest to me that Apple long ago realized that for them, the money is not in content, but in the appliances used to view such content.
Content isn’t king, widgets are. Or, as Apple would likely say, Design is king.
If Apple did make this observation, and essentially give up on making big money by selling content, it would have informed the iPhone and iPad design just a bit, don’t you think? Apple, after ensuring they make a nice profit on the sale of the devices themselves, was happy to roll over to the content providers on price.
Hence the variable pricing on books.
And a stab in the eye for Amazon and its Kindle.
Look, I do not suggest that this was Apple’s main intention, but I have to believe they were happy with the collateral damage. Amazon had built a nice little business model, based on absorbing a bunch of the existing bookseller supply chain, cheap books, and a grab at an ebook monopoly. Customers (including me) sorta liked the $9.99 cap on pricing and a fair number were probably rooting for Amazon, despite what various genre authors felt about it.
But that has passed, as Amazon has been forced to cave on their desired pricing model. Ship sailed. Hard to worry to much; Amazon has proven they can sell anything to anyone anywhere and make money. My beloved Amazon Prime isn’t going anywhere. And the Kindle is still fabulous for book reading; in the end, Amazon is likely to still end up with a big, profitable chunk of the ebook market.
But I am left wondering, waaaay back when the iTunes Music Store debuted, did Apple plan on not really making money off of media, or was it a grand experiment, ultimately abandoned in favor of selling widgets? Was there a faction in Apple that saw big money in music and video rentals and sales? Is there a group, nomatter how small, inside Apple, dealing with bitter disappointment over media revenues?
And at what point does Jeff Bezos stop fooling around and just buy a major publisher of his own?