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MP3 Market Approaching Critical Mass
Posted by
Zonk
on Fri Apr 15, 2005 11:36 AM
from the i-canna-contain-it-sir dept.
from the i-canna-contain-it-sir dept.
An anonymous reader writes "Led by the Apple iPod, Jupiter Research says that sales of DAPs are reaching a point where it will ignite an industry of support products and services. According to Jupiter analyst David Card
'Historically, any new device or medium that reaches a U.S. household penetration of 15 percent to 20 percent creates a critical mass of customers for other products and services.' The iPod already has a slew of peripherals out there and this is particularly good news for the paid download services like iTunes, especially with Apple announcing Wednesday they sold another 5.3 million iPods last quarter."
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And, more interestingly... (Score:5, Interesting)
Music moguls trumped by Steve Jobs?
When Apple Computer CEO Steve Jobs walked into the suites of top record label executives in 2002, iTunes software in hand, he was welcomed as a trailblazer to a digital music future.
Now, nearly two years after Apple's iTunes launch, record executives have become worried that they have inadvertently ceded too much power over their industry to this charismatic computer executive.
Frustrated at what they see as Jobs' intransigence on song pricing and other issues, some record executives are now turning their hopes toward other partners, particularly mobile phone carriers eager to get into the business of selling music. They see this new focus as a way to broaden the digital music business, and lessen Apple's dominance over their market in the process.
[...]
For example, Apple wants to sell all its songs for 99 cents each, a single price point that's easy for consumers to understand. But the record labels have pressed for the ability to vary prices to maximize their own sales. They want to sell older titles at a discount--like the $9.99 CDs available in most record stores--and charge more for popular songs to take advantage of market demand.
Full story [com.com]
Those who fail to learn from history... (Score:5, Insightful)
Now, nearly two years after Apple's iTunes launch, record executives have become worried that they have inadvertently ceded too much power over their industry to this charismatic computer executive.
Frustrated at what they see as Jobs' intransigence on song pricing and other issues, some record executives are now turning their hopes toward other partners...
Cripes, this is so damn typical of the entertainment industry. They're so interested in screwing everyone they can for a buck that the minute someone is successful using their property, they feel they need to bite back. It's rather like watching a bunch of cavemen around the first fire. One gets burned so they all put the fire out with their clubs, then thump their chests and hoot in victory before sitting around in the dark and cold again.
I think RIAA deserves the Duh! Prize (if there was one.) Next year or so it'll be the MPAA doing the same thing.
Parent
... keep on failing to learn from it. (Score:4, Insightful)
Yep, these are the guys who proclaimed that "home taping is killing music" back in the 1980, and killed off DAT in the 1990s. The MPAA cried bloody murder when VHS hit the market, but amazingly the global film industry is still quite robust [factbook.net].
What really cracks me up is that the RIAA had their heads so far up their asses that they had *no strategy* whatsoever for online music sales until Jobs came along and offered them a way out. Now that they have a path away from stupidity, they're trying to jack prices up again, the same way they did with CDs [cdfreaks.com].
It's like they're fundamentally unprepared to realize that the landscape is changing and that they can't make the same margins they used to make per song. They have to shift their entire way of doing business, but they're so fat and happy that it's like Jabba the Hut doing the long jump.
Parent
How about "learn from the grocery"? (Score:4, Insightful)
Errr.... no. In many industries, having a range of prices, especially that vary with time, allows not only for greater profits, but for larger numbers of satisfied customers. The math is a bit more involuted than a simple supply/demand scissors curve, because you also have to factor in substitutibility, price elasticity, and information costs, and time value of money, but in many situations this allows for a good thing all around.
This is one reason why grocery stores have sales; people who would not ordinarily buy a product at price X will consider buying it at price 0.9X. Furthermore, it's one reason why grocery stores accept manufacturers coupons; the customer gets a lower price, the grocery store gets slightly more money (for slightly more hassle), and the increased sales (and potentially increased regular customers) result in net higher profits for the manufacturer.
In this case, the RIAA is wishing that they could run the backcatalog at a discount, while charging a premium for newest releases. And if they were willing to, say, knock $0.24 off their current $0.65 share of the price for releases over 10 years old, while adding $0.01 to the recent releases and $0.25 to items released within the last year, I'd consider it likely to be a net benefit for consumers overall.
Someone with more background in economics and without a head cold might explain it better, but it comes down to: the ability for suppliers to have prices that vary is a good thing for the consumer. Unnaturally fixed prices (such as, say, when fixed by a cartel [riaa.com]) are bad.
Parent
Re:How about "learn from the grocery"? (Score:4, Interesting)
Sure, but Apple and Steve also realize when it's time to change strategy, and it's not clear that they're being unneccessarily stubborn on this.
In it's infancy, you don't want a service to be overly complicated to scare off potential users. Once that critical mass takes hold and the service begins to displace others, it can then afford to offer more choices.
Apple in its rebuilding phases under Steve has always been about simplification - 4 product lines, Mac-only, what have you. Once those reach a given point, you expand and differentiate.
I can't imagine that the $.99 only policy is a forever deal with Apple, but consider when this started, the up-front costs of buliding the iTMS, aiming for 1M songs in the library, with NO customers, nor a sense of what could realistically be expected looked like a huge money sink for Apple. So it was kept as simple as possible - one format, one bitrate, one pricing model, no pay-for-play, take it or leave it. It minimizes Apple's expense exposure and keeps the system from being overwhelming to customers.
Roll ahead a few years to when iTMS is pushing 100M songs every other month (right about now) and you have a situation where enough revenue is coming through to support variable pricing, volume discount, frequent buyer programs, or whatever.
Of course, the labels aren't going to report if Apple is planning these things, they want to jack prices up to $1.49 per song for the hot singles and recover Apple's $.09 in the process. After all, Apple's already spent the money to create the market which they don't need to reinvest.
So I don't buy for a minute that Apple isn't planning for that day that songs are variably priced, but I think the labels are downplaying the challenges of offering $0.49 singles and still having enough money left over to cover the transaction costs. Of course, for old songs, they're not paying the artists any more, so they *could* lower their price to Apple, but I doubt they'll volunteer that.
Parent
Re:WE GET THAT, OKAY? (Score:3, Insightful)
First of all, the RIAA is an organization which includes labels, artists, engineers, and many others who are connected in one way or another to the recording industry. That little set of preamp-adjusted ports in your dad's stereo that he plugs his turntable into? That is an example of an RIAA standard.
Secondly, the labels have been using "RIAA" as the plaintiff in several unpopular lawsuits for the specific pu
Well (Score:5, Interesting)
Re:Well (Score:5, Insightful)
Parent
Re:Well (Score:5, Interesting)
Parent
Re:Well (Score:4, Insightful)
Because they've probably determined that it's not their core competency, and is in fact an example of di-worse-ification.
Chuck
Parent
Re:Well (Score:4, Insightful)
Support costs for accessories can be substantial, and a consistent level of quality in product and customer service are key to the Apple brand. Extending the business is inevitable, but must be made in step with the brand's "promise."
Also, a strong third-party market only helps Apple (lots of choice, innovation, good pricing, etc.). Why enter and compete in a market when the existing competition is helping you? Any effective step by Apple into the accessory market would either cause furious competition (cutting into the profitability) or discourage new competitors (level it out).
As of now, Apple is getting the best of both worlds - iPod accesories make the iPod more attractive, "cool", and reinforce the brand. Meanwhile Apple can operate independent of this market. The company is reaping the market rewards from a successful product. Soon, however, the brand will mature and there will need to be an injection of marketing, innovation, and features. The third-party market will only accelerate the effectiveness of Apple's brand.
Parent
Re:Well (Score:3)
Re:Well (Score:5, Insightful)
Where do live that you have this bizarro-radio?
Parent
Re:Well (Score:3, Informative)
A tape deck. [thinkgeek.com]
5.3 Million? (Score:4, Funny)
Re:5.3 Million? (Score:5, Funny)
Anyone tried breeding the little bastards? You could make a fortune selling the offspring on Ebay!
Parent
Critical Mass (Score:5, Funny)
Re:Critical Mass (Score:5, Interesting)
Parent
bread, circuses, low apr credit cards (Score:3, Funny)
Gotta have priorities.
Re:bread, circuses, low apr credit cards (Score:3, Funny)
Gotta have priorities.
That's terrible! Everyone knows that unemployment checks are for cigarettes and lottery tickets.
Re:Critical Mass (Score:3, Insightful)
CNet Reports Otherwise... (Score:3, Informative)
Re:CNet Reports Otherwise... (Score:3, Interesting)
Re:CNet Reports Otherwise... (Score:3, Interesting)
Cameras are no biggie to most people one way or the other, but otherwise it's a parade of dissatisfaction:
- Ringtones and wallpapers are way too expensive.
- Phone internet access is a pain in the ass, and also overpriced.
- Text messaging should be damn near free, often costs a bundle.
- Voice mail services are often a hassle to navigate.
- Speakerphones can sometimes only be turned on after the call has begun, making it slightly less usef
Not quite yet. (Score:4, Interesting)
MP3 hardware = commodity (Score:3, Insightful)
Why is this even news? Maybe interesting to get a real article about this topic, but hardly news.
Don't be surpised to get a free "made in china" portable MP3 player with your next CD purchase.
critical mass eh? (Score:5, Funny)
Foresight? (Score:5, Interesting)
Considering the cost of including one versus the cost of replacing the deck so that you can plug your MP3 player in, why wouldn't more manufacturers be doing this? I know a few are, but I'm in the market for a new car and the deck that comes with it figures into the real cost. Replacing the stock stereo with one that will take input from my MP3 player should be unneccessary if these things are really at critical mass.
Re:Foresight? (Score:3, Interesting)
Doing this kills two birds with one stone. When you're in the car, you get your whole music collection with you, and when you leave the car, you can take it all with you, leaving nothing of value in the car.
But as Sony has repeatedly shown, they haven't
"Critical Mass" not good for apple (Score:5, Interesting)
Thats why Apple's stock took a dump yesterday [msn.com]
Problem for apple is that everyone already has an ipod and it will be tough to find new people to sell to.
Re:"Critical Mass" not good for apple (Score:3, Insightful)
Re:"Critical Mass" not good for apple (Score:3, Interesting)
Re:"Critical Mass" not good for apple (Score:3, Interesting)
You're welcome, enjoy your new iPod.
Re:"Critical Mass" not good for apple (Score:4, Insightful)
Parent
Re:"Critical Mass" not good for apple (Score:3, Interesting)
Well I think that was the point to sell iPods to everyone possible... It's like how Nintendo, MS, and Sony sell all their gaming consoles at a loss and make their money from games. That is what Apple seems to intend to do with iTunes (even though the iPods are kind of overpriced).
If they were to loose the lock out of being the only ones able to sell music that plays on the iPods then it's like if Ni
Re:"Critical Mass" not good for apple (Score:4, Insightful)
And while it will be tough to find new people to sell to, that's not the only factor. Everybody also has a car. And yet, man, look at all the cars that get bought every single day. Everybody also has a computer, and a TV. So how the hell are those computer and TV makers staying in business? It's not a problem. It's a fact of the market. There may be less growth in iPods in years to come, but Apple will still sell plenty.
Parent
Re:"Critical Mass" not good for apple (Score:3, Insightful)
Not when you sell a product that expires. Non replaceable batteries that expire every 18-36 months means people have to buy new ones. Also, there are constant feature upgrades -- even if they are only stylistic. I have an older iPod, and I can't wait for the battery to die so I can justify getting a new one with that awesome jog wheel... [drool]
Similarly, the auto industry seems to be doing just fi
Re:"Critical Mass" not good for apple (Score:3, Insightful)
There are new markets left to tap, and new generations of the product that will offer compelling reasons to upgrade. The availability of iPods in the retail channel is amazing. People know what an iPod is.
If 10% of the people that bought an iPod buy a Mac in the future, that is a huge impact on apple! The
Jupiter Research?? (Score:4, Insightful)
It's over. (Score:3, Funny)
These are guys who hyped "New Economy" companies until the dot-com bubble burst. With their razor scooters and their afros, they literally destroyed billions of dollars in market capitalization. There is no Earthly trend so massive, no business plan so potent, that Jupiter Research cannot destroy it.
That's why they are called Jupiter. They are big. They have a lot of destructive gravity. And they are made ENTIRELY of gas.
Further indicators (Score:3, Informative)
- In car support for the media (3rd party manufacturers like Alpine are supporting iPod as well as luxury brands like BMW. GM is supporting all DAP's by making a front panel line in standard)
- In home support for the media (Apple Airport Express allows for music streaming)
- Portable support (just like the Walkman, we have the iPod)
- As seen on TV (plenty of Movies and TV shows with characters using the devices like a recent Law & Order that opened with two teens discussing how many songs can fit on an iPod)
- Major industry backing (from Microsoft to HP to Virgin Records, Digital Audio is supported by the Fortune 500 globally)
- Small business using the format in their name (don't we all miss "Tower Records" records? Or "CD Warehouse"? I am sure there are plenty of Web properties with iPod in the name. "iPodlounge.com" comes to mind.
MP3 Players at Critical Mass (Score:3, Funny)
Want audiobooks in MP3 CD format (Score:3, Insightful)
Doesn't everybody already have some kind of hardware or software these days that can play the MP3 format?
What I want to see is audiobooks sold in MP3 CD format. Currently, audiobooks take a huge number of tapes (or conventional CD's) to hold audio, and because it's spoken word, it would compress very easily while still remaining high quality.
I've converted the Harry Potter books to MP3 CD's, and they sound great. The first two books even fit together on a single CD! All this was from a large stack of grossly inefficient standard audio CD's. No need to store spoken word at 44100x16x2 uncompressed!
I'm hoping the makers of audiobooks will realize that MP3 has already hit critical mass for years now....
Re:Interesting to see this report (Score:3, Funny)
The idea of a critical mass has a beautiful ring to it, but it is the fundamentals and the continued approach to success which will continue Apple's ascension. It doesn't reall
Re:Interesting to see this report (Score:3, Insightful)
Uh... but this article clearly states that the Music Industry is scared of Apple's potential stranglehold with online music sales (iTunes). I *seriously* doubt that a paid-for puff piece (even a one that was engineered to look neutral) would put the Apple-Music Industry relationship in doubt. That, as an investor, would get me worried about Apple's stoc
Re:Interesting to see this report (Score:3, Interesting)
If you don't want to be modded into oblivion, try posting something factual and interesting, insightful or funny. Perhaps this [slashdot.org] would help.
And for the record, your comment is incomplete:
Apple's stock got hammered by the Street because there are widespread concerns about what Apple does "next". i.e., is the Ipod a one-hit wonder?
Analysts reported they are concerned that the average price per sale has gone down, noting the introduction of Apple's low
"Mix, Burn, Rip" (Score:3, Informative)
You make a 74 minute long playlist of DRMed AACs, WMAs, and RMs and save them to an audio CD. Then you click on "Import as MP3". Yeh, you lose a miniscule amount of audio quality that you MAY be able to hear if you listen to it, but when you're walking down the street or sitting on a train with earbuds connected to your MP3 player... you'll never notice it.
Re:No thanks for me.... (Score:3, Informative)
Apple's iPod has been able to play/hold non-compressed non lossy songs since day 1.
Take your $20 discman and throw it into the trash
Take your rack of CDs and import them as WAV, or if you want, lossless compressed ALE, into iTunes
Plug in an iPod and you have your 'rack of CDs' in the palm of your hand.
can/will (Score:3, Insightful)
Re:You have no idea what you are talking about (Score:3, Insightful)
Every major religion recognizes that there was a man Jesus of Nazareth who lived about 2000 years ago in the land now known as Israel.
I think you might have a lot of trouble backing this up. Some major religious are not hierarchical and do not have a authoritative figure or body to make such declarations on their behalf. Even in religious organizations that do have such a structure, I doubt anything other than christianity recognizes your fact in the religion itself (which was how your statement was wo