The Worm in the Apple

This week RealNetworks announced they were going to start selling digital music files for 49 cents each, nearly half what Napster and iTunes currently sell for. This means consumers can now buy an album of digital music (does it make sense to use the word 'album' any more?) for about $5.

It is only a temporary promotion, to be held through Labor Day. The purpose of the promotion is to sneak their way onto iPod players. Currently, Apple's iPod holds the lion's share of the portable digital music player market and, therefore, their iTunes music store gets a commensurate share of digital music file sales. RealNetworks wants to make a play for some of that digital music file market and it is doing it through the traditional means of selling product at a loss to lure customers.

Of course, Apple's got their stem in a bunch because, as is ever the case with Apple, they want to be the only purveyor of music files that can be played on their player, because they want to be the only purveyors of portable digital music players.



In order to ensure that Apple controls digital music's near-hegemony, Apple has assured us that future iterations of the iPod software will be rendered incompatible with Harmony, the software RealNetworks implemented to make their music files playable on the iPod.

Does anything about this sound tinny to you? Apple, the erstwhile advocates of creativity and flexibility is suddenly sounding very much like the much larger, many magnitudes more successful peer in the computer marketplace, Microsoft.

Apple is talking like a bitter adolescent whose older teenage sibling got away with bad behavior and so they feel entitled to do the same thing.

They are also acting, in part, like the Apple of old; the company that severely restricted licensing their products and software, that did everything they could to be incompatible with other platforms. The are beahving in the same manner that led them to become the company that, for a decade, the business community doubted was capable of surviving.

Now, I love iTunes and my iPod, even if the iPod's ubiquity in New York City is driving me to drink... more. Even though Apple lowered the price of the iPod by as much as $100 two months after I bought one, I still love what Apple has done for the online music business (though will always think fondly on those days of downloading music through the old Napster). But what's to be gained by making your product less flexible for consumers to use? What if Sony CD players only played CDs that are produced by Columbia Records?

Some day people other than hipster, early adopters in New York City and San Francisco who dress like members of the Neptunes are going to take to the idea of portable digital music. And for them, Apple's design and Steve Jobs black turtlenecks aren't going to be the deciding factor when making the purchase. It is going to be cost of device, reliability, and the flexibility of the consumer's control over that device that will motivate the buyer.

What is it that Apple is protecting, their enormous market share? It is estimated that only 5 percent of all U.S. households have a portable digital music player. A majority share of 5 percent isn't all that much in the grand scheme of things. There is ample time and space for someone else to come along and be the top banana, regardless of Apple's regressive market strategy.

Apple has done great things for the culture of business and technology (and the business of technology). They have demonstrated their drive to innovate with iTunes and the iPod.

But their insistence upon being a proprietary system is the one apple that will spoil the whole barrel.

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