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I would like to start by noting that I was also considering the following titles for this missive:
Steve Jobs to Suppliers: I Buried the Competition! Steve Jobs to Phone Companies: Can you see my Middle Finger now? Steve Jobs: Welcome to my Monopsony.
In principle, Steve Jobs’ keynote today introduced the iPod nano and iTunes phone.
But the real message was directed at his current and potential suppliers (music, movies, components), partners (Sony, Nokia et al), and competitors (Sony, Microsoft et al).
What was his message to these colleagues?
I buried the competition. iTunes + iPod is the only digital content distribution platform that consumers are actually using (globally too). I have a monopsony on digital content distribution. Now quit fucking around and supply me with content, components, and serious partnerships at a reasonable cost because I am the only game in town. And I may bury you next if you don’t join my team for the big win.
Let’s see what Mr. Jobs revealed in the keynote:
“This next statistic we have never shared with anybody before… We have just crossed 10 million accounts on iTunes and they come with credit cards.” Subtext: It is a 1-click experience for 10 million customers to give us their money for pure digital content.
“With ten million acccounts that makes iTunes one of the largest Internet stores around… as far as we can tell, iTunes may be the second largest Internet store behind only Amazon.” Subtext: There is no competition for distributing purely digital content.
“The average account has purchased around 60 songs… most of these accounts have been added in the last year.” Subtext: We have successfully taught customers to buy pure digital content and they know how to buy it from us not you.
“Let me compare [the iPod] to another very successful comsumer product, the Sony PSP, the iPod sold over 6 million last quarter, the Sony [PSP] worldwide sold 2 [million].” Subtext: Even the Godfather of consumer electronics can’t touch us (and Sony is probably selling their hardware as a loss leader).
Jobs showed how the iPod nano crushed competitive products from iRiver, Creative, Samsung, and Sony, one by one. He went out of his way to mention each of his competitor’s products by name which he rarely does. Subtext: These guys are so dead that I can give them a little free advertising. And yes, I am talking about Sony too.
Jobs pointed out that there is a massive ecosystem built around the iPod. Paraphrasing him: “There are over 1000 accessories for the iPod and 30% of all cars sold in the U.S. in 2006 will have iPod docks.” The iPod nano went out of its way to maintain compatibility with the 30-pin dock connector that is used by existing iPod accessories. Subtext: A competitive hardware product would disrupt the accessories that consumers have already invested in. It’s not going to happen.
So Jobs is making the case that he has a monopsony. But who is he talking to specifically?
Nokia and Sony with whom he wants to partner? Nokia is integrating Apple’s web browser into their phones and Sony’s CEO(?) came on stage with Jobs in a keynote earlier this year to announce that 2005 is the “Year of HD”.
Is he talking to studios from whom he wants music videos, tv shows, and movies (and books)? iTunes already has the infrastructure to distribute video, videocasts, and books. And the new iTunes search bar has tabs for “Videos” and “Booklets”.
(I really haven’t thought through in detail whom Jobs may be talking to and why. Your thoughts are welcome.)
Again, the subtext of Jobs’ pitch today was to tell his suppliers that today was Victory-Digital day for iTunes + iPod as the only end-to-end digital content distribution platform that customers are actually using.
Or you could restate it in Cory Doctory fashion: Steve Jobs to the competition: “eat shit and die.”
I am concerned that Apple shot itself in the foot with getting rid of the multicolored iPod mini. Girls dig pink ipods.
Justin,
Since Apple has a monopoly, they can afford to segment their market via obsolescence. Its a strategy that Intel followed for years until AMD came along a ruined the party. Essentially apple will introduce products with the widest appeal to the widest general public first. Wait still the market for the product saturates, THAN introduce a more “segmented/niche” product. In the process, he will gain upgraders from the previously generic product as well as people who held out until later when the new product fit their needs. As a result, Jobs gains the incremental revenue of the upgrader who would have chosen the “pink mini” if it came out the same time as the “white mini.” After the market penetration of his entire product line reaches some sort of saturation, he will go back and try to upgrade the original product buyers to “newer/better” generic product. Than repeat the cycle again. . . As long as there are no viable competition (buyers will wait for the perfect product from apple and not buy something else), this strategy will work to perfection. . .
Apple is like Jack Nicholson. When they say something you listen and follow. They have pondus. I love the fact that Apple is damn proud to have released, say the Shuffle. Only Apple could have turned a player without a display to something exciting.
Apple the monopsony
Further to Is the iPod nano price too low?! How did Apple get a good deal on flash memory from Samsung? In a word, volume. As Nivi suggests, Apple is approaching monopsony status. The market dominance of iPod + iTunes…
Steve Jobs Has The Power
Does Steve Jobs have the power? His recent keynote might have introduced the iPod Nano and the iTunes phone but there was a subtext that most folks might not have realised, which Nivi points out so eloquently. A very interesting and compelling read.
…
They sell iPods in Australia, but currently there is no legal way to populate it with music. This is one area Apple need to deal with. Take for instance the recent legal action against Kazaa in Australia; basically holding them to account for providing people with the means to break the law. Apple are doing that with the iPod, and so far people are turning a blind eye. No iTMS in Australia. No “fair use clause” in Australia (you can’t rip your own CDs. It’s illegal). Only Windows Media DRM’d music download services …. so unless there are hundreds of thousands of Australian musicians writing and recording their own music, Apple are aiding and abetting the largest mass disregard for law in the country’s history. It’s an interesting thought.
I think Steve Job’s main point is to the sellers of digital content. Steve wants to renegogiate the deals with two aims in mind: improving the iTunes margin and to reduce the price of digital music. At the moment digital music subsidises CD sales at 99c.
You pointed out the amount of control that Apple already has and the artists know this as well. Look at how artists in Japan bypassed their labels. I’m sure that given the opportunity many other artists outside of Japan would do the same if they could get away with it.
This raises the interesting subtext to his speech that if you don’t play ball I’ll bypass you completely and go straight to the artists. Even if I have to create my own label. Remember this is the man that beat Disney at their own game while their partner.
Steve Jobs to Studios: I Got the Power!
“They sell iPods in Australia, but currently there is no legal way to populate it with music.”
You can’t buy CDs, convert them in iTunes and upload to your iPod in Australia? Wow, what a repressive gov’t y’all have. Next they’ll mandate the killing of kuala bears. And I thought US copyright law was messed up…
One step to challenging Apple’s dominance in the portable music player market
The problem with “other” portable music players on the market was that they were up against the market leader. They needed to do something else to challenge the iPod other than bring out yet another audio player.
Instead, Apple continued on its wa…
b, yes, that’s right.
In Australia it’s not legal in the law sense to convert CDs you own and upload them to your iPod. I don’t think it’s even legal to tape shows using a VCR.
.. Then again, Australia doesn’t act on the archiac copyright laws and according to reports Australia is #2 for BitTorrent downloads (http://www.zdnet.com.au/news/communications/0,2000061791,39186748,00.htm). It makes Australia #1 per capita by a long margin.
.. And you can’t kill koala’s (their marsupials not bears). They’re an endangered species.
How does 80% of the US and UK markets constitute a global monopsony? This is just more boring “The US is the whole World” crap.
Stuff You Should Read
Forget the Motorola ROKR or the iPod nano; was Apple’s big message last week that they’ve obliterated all their competitors?
Justin: did you notice the “nano tubes” come in the iPod mini colors? You can get the armband in pink, too.
I Love Steve Jobs
Steve Jobs kicks ass, always has, always will.
Ian Eiloart wrote: “How does 80% of the US and UK markets constitute a global monopsony? This is just more boring “The US is the whole World” crap.”
Relax. iPod is the best-selling DAP product line in the world. Period.
iTunes Music Store is open in 20 countries. More than any other legal download service.
iTunes Music Store has sold over 1/2 Billion songs worldwide. No competitor is close.
iTunes Music store sells an average 1.8 million songs a day worldwide. No competitor is close.
iTMS is now the worlwide leader in Podcasts, offering podcasts worldwide in 21 languages. No competitor comes close.
In Japan, which last time I checked, was *not* in “the US and UK markets,” iTMS became the number one online digital music vendor in just four days.
What part of “global leader” is so hard to understand?
The most important thing about the iPod and iTMS, is iTunes.
MSFT got to be MSFT by forcing it’s standards on the world. When it came to portble digital music, MSFT naturally thought (and so did the world) that dozens of player manufacturers and online providers would establish WMA as the de facto content media standard.
Wrong. This battle was nothing like CPUs, which required a heavy investment by content (aka software) providers. This was about taking raw music and processing it into any number of recognized digital formats. Takes minutes, not months/years.
MSFT couldn’t control the content and released its usual crap software into a buzz saw.
The importance of this battle is that Apple prevented MSFT from establishing another digital standard, and did it so convincingly, that there is no argument on what the standard is.
Ordinarily, the world would have expected MSFT’s technology to become the defacto standard for the next big thing, VIDEO. Now the world has seen that MSFT is not omnipotent, and that someone else CAN produce better technology.
When the time is right for digital video, the firm people are going to look to first won’t be MSFT.
Interesting take. Maybe Bill Gates can buy himself a K.C.B.E. by giving away a bunch of the money his company earned via a whole litany of illegal and shady business practices, but he still cannot buy legitimacy. Steve Jobs is a visionary and a catalyst for others to be creative- something Micro$oftopoly will never be or be able to buy.
For all his money and his ‘King Ludwig’ castle on Lake Washington, Bill Gates really wants to BE Steve Jobs. King Jobs has the goods, more money than he can spend, the C.V. and more mindshare than Gates could buy with all of his money. Wonder who sleeps better at night?
links for 2005-09-17
ad lib games 24/48 hour focused game design (tags: game design focus iteration) Nivi : Steve Jobs to Studios: I Got the Power! one take on Steve Jobs and the nano launch, the iPod is the means of hand held digital…
Briefly: Baidu sued, Steve Jobs’ message to studios, Sony’s marketing, Bluetooth chips for iPod, Nano Wiki, ROKR E1 wishlist
Baidu sued over music downloads (the highly popular chinese search engine that allows you to search for MP3 files hosted on websites and FTP servers, making the labels sad; by the way, a few test searches I’ve run today show that the feature still …
Gregg, I have worked on a client working on distributing movies via the net in Europe. It was all WMV. QT and Apple’s formats didn’t even get a look in. Apple may have got the audio market currently, but as codecs go everyone else is using WMV and Microsoft. Apple needs to be wary of this, and IMHO needs to start licensing other people to make players that play M4A, M4P, ALE and the rest of Apples codecs AND allowing other players to be linked into iTunes and IMS.
They’ll still beat the competition on the fact the iPOD is the best player, but they’ll increase dominance over the online music market and position them better to ward of Microsoft on the video market, and it would be a fool who would dismiss Microsoft too quickly.