The dinosaur pigopolistsPosted: November 7, 2003
Just read a rant on Steve Jobs saving the RIAA’s ass by building a technical platform and model for digital distribution – – nothing the pea brains of the RIAA could have figured out themselves. The interesting news in the article, which came from an analyst meeting yesterday with Apple, was that the music store is really a loss leader for Apple. It’s a feature who’s main mission in life is to sell iPods.
It isn’t surprising that the goal of the store is to sell iPods. The surprising news is that Apple makes no money. All the fees go to the record companies. Any remaining to the credit card companies. The article rants on how Apple is getting taken advantage of.
Trouble with this rant, is we really don’t know what revenue model Apple signed with the record companies. My guess, is that there is some graduated model where the more titles Apple sells, the more money it keeps. Volume is key. If the iTunes music store becomes the destination to buy digital music, then I’m certain Apple will make money.
Any similar model? How about Amazon with books. The book publishers would have never been able to set up a viable online book selling business. In fact they seem mostly to be about blocking new feature releases from Amazon (customer reviews, selling used titles, look inside the book, search inside the book) rather than helping grow a great new distribution channel. With a crowded field of competitors, Amazon is on it’s way to GAAP profitability. Volume has been key for Amazon. The same will likely need to be true for Apple.