It’s not as far fetched as it may seem. Say Apple gave away 1 billion songs a year to its customers and paid the labels (and artists) 65 cents per song. That’s $650 mill. – only 3.7 % of Apple’s annual revenues. Assuming a gross margin of 60% on a $400 iPod it would only take incremental sales of 2.7 million iPods to break-even, about 5% of all iPods sold so far…

Even if the assumptions are off by a factor of 10, the potential for Steve Jobs to corner the market for recorded music is a commercially attractive possibility. Anyone at One Infinite Loop read this blog?

Where do you stand on the narcotics industry?

The one point I believe is that content providers do see a value in embracing Microsoft’s Janus/DRM 10 standard for protecting their music. A lot of value, I would think. If we look at the parallel ecosystem that is developing around the mobile handset becoming a music player, we increasingly find DRM 10 a dominant choice among content providers. Likewise if you look at alternatives such as a mobile satellite radio player from Sirius or XM which actually do a nice job of integrating the live radio and time-shifted music download experiences, DRM 10 again is dominant.

IMHO, Apple’s victory, as you rightly put it in your posting is primarily grounded in superb design and intense focus on the customer experience for the “hands on” music listener, coupled with a brand image that resonates well with consumers who pay for the brand.

At the end of the day, the digital, mobile music consumption life-cycle is still quite a bit hands-on in the effort involved to move music from a CD to a player…not as easy as “put the tape/CD in and hit play” that the Walkman experience stood for. For those of us for whom storing music on the PC, organizing music as play lists etc. is fun, the iPOD makes things a breeze. However, my hypothesis is that there is a much bigger segment of music listeners who don’t want to take the effort of moving music from their CD to a mobile music player. I believe that a product that can, with limited user intervention and not explicitly involving the PC, move “interesting” content to a mobile device while keeping the Man-machine interface of the player itself simple has a reasonable chance at competing with current players. Play lists, sorting by album etc. are all great…but for a lot of music lovers the term “mp3″ itself is geek enough !

Jim, I did not mean to imply that every mp3 on your player is illegal, all I am saying is that if you do have illegal copies of anything, or even legal copies not recognized by WMA (of which there seem to be many things) I could not figure out how to play them on my Dell DJ. They would simply not transfer. (Of course, that may just be operator error…)

Jayanth, even if the others are as facile — which I don’t think they are — at incorporating non-standard, non-rights protected materials, the ecosystem is now established with iTunes as the leader, so there is no reason for any content creator to want to go to another platform — just as everyone builds now for windows first — unless a participant in the market gives huge, new incentives to content creators.

All best,

j

How different is the battle for MP3 players from the battle for the pocket tape player where Walkman was the leader? How long did Sony retain its leadership in that product category (was it for as long as it mattered?)? What drove that position?

I do agree that I prefer to keep the vast majority of my music collection as mp3s and go out of my way to avoid purchasing from the iTunes music store. On the gray areas of legality front, I have been looking into ways to remove the digital restrictions management from the music that I have bought from Apple. It’s not hard, but finding time is.