Tuesday, July 18, 2006
If you read bubblegen a lot, we've been arguing for ages that it's only a matter of time before Steve Jobs', well, Jobsian-ness, causes iTunes to implode catastrophically into an event horizon from which no profit shall escape (just like it did in the 80s).
Gratifyingly, this is an argument which has become more and more obvious even to analysts on the Street who usually refuse absolutely to think beyond the next earnings call, and so it's becoming a part of the new zeitgeist, at least amongst the kool kidz.
So here's what's likely the first chink in the armor - the first strategic error. Imho, rentals are deeply out of sync with the dynamics of consumption at the edge - not to mention the economics of movies via the www.
Umair, you say iTunes , I think you mean Apple; you say 80s, I think you mean 90s; you say it's Jobsian-ness, I think you mean the record companies' lack of edge competancy ... not Steve.
First, I think Apple/Jobs will license iTunes/iPod/iTMS before it goes the way of the Mac.
With respect to movies, I think download-to-own is silly. People watch most movies once. Favorite movies can be bought on DVD with all the extras and without having to burn, a lame-o exercise for sure.
However, I'm a bit uncomfortable with movies going in to iTMS. I wold have liked to have seen a new client or perhaps QuickTime Video Store.
I'm not sure rentals are such a bad idea.. it really depends on the price and the amount of effort I need to expend to actually get it playing.
but then I've never been a big fan of owning a DVD library, and hardly watch the same movie twice.
my brother in law on the other hand has a huge library and regularly watches them over and over, and I still remember the DivX failure.
Maybe they have projects where the download time will soon be inconsequential.
The download time usually isn't much of an issue. In MovieLink, you can start watching 2 minutes after you start downloading.
I think anyone would agree that nearly everyone watches far more movies than they own.
Umair, Apple's actually filled their portfolio with strategic errors. Among them include the Apple I, the Lisa, the Newton, and the more recent: the Cube.
Companies don't become great because of strategic errors; rather, companies become great because of their resiliency. They can and will bounce back.
If this thing fails, they'll learn from it. People predicted the PC would be a catastrophic flop; the markets proved otherwise. Countless other examples exist.
That's why I'm not the biggest fan of "strategy." Yeah, something may sound stupid, but it could very well create a billion dollar industry.
The key -- then -- is to test out your ideas in the "real world," and see how the market responds.
Besides, Apple will bounce back regardless of what happens -- as they always do.
Umair - it should be a warning sign, not a gratuity when the mainstream pundits turn to your POV.
Sorry to join the cacophony on this but you're wrong about both the market for and the risk in this move.
The market is there - Jobs' new product combines the best of pay-per-view (big in the US) with the best of video rentals - both are strong products with established demand across a (very) wide consumer base -- if some of these folk can be converted to itunes, the impact of growing apples media buying audience will be huge.
Where you're mostly wrong however is that there is NO risk here for apple - dude, they can do this at zero cost - for apple, executing on this is just adding another layer on their media distribution platform.
Apple are perfectly positioned to be the sole $$$ winner in the explosion of grass-roots web-video. This move builds on that momentum and exends the increasingly compelling reason for consumers to rush out and buy video ipods. There is no other portable, storage and playback devivce for this new media - IMHO, 2006 is shaping up to be another perfect storm for Jobs due to the explosion in web video - this is just a little catalyst he's decided to throw in the mix to speed that up.
I think most of you are missing my point.
Apple's had lots of failed products, sure. But those aren't really strategic errors. Strategic errors are entire product families that went wrong (90s), or failing to capitalize on a hugely valuable resource (Mac platform in the 80s).
As for video rentals, sure, consumers will certainly flock to it.
But that's got little to do with profitability - just look at iTMS profitability today. If Jobs wanted to expand the pie for everyone - the best strategy here - he would reshape the value chain, and unbundle movies from revenue models based on obsolete economics - like the idea of "rentals".
As it is now, "rentals" force everybody back into the same hole that got the media industry where it is today - players squibbling over a smaller and smaller pie, because margins ultimately don't move upwards in the long term for anyone - not even Apple.
Much of this depends on getting Last.fm/Myspace on iTMS - something Jobs will never let happen.
That he won't do so - despite near total market power - is a testament to the fact that while he's a marketing genius, he's less of a strategic thinker.
Thx for the comments.
... so, Jobs is creative, not strategic ... mmmmmmm ... Umair, you're starting to contradict yourself if you're still saying that that is a bad thing ... ;-)
Hehe. Not quite - I think Jobs is creative, but in a very limited way.
Here, he has an example to literally mold an entire industry in his image - and he's basically worried about how cool stuff looks.
He's not creative when it comes to strategy, in other words - instead of inventing a new game, he keeps playing the old one. And that's why Jobsian-ness is Apple's biggest problem.
Ah, marketing genius...
Marketing is the meat and potatoes. Strategy is the gravy (light, watery, somewhat tasteless gravy). You can sell anybody anything if you market it properly...and the only reason Apple survives today is exactly because Jobs is a marketing genius. If he spent most of his time strategizing about potential margins of this or hyper this of that, Apple wouldn't be relevant.
It's like in science, you have your hypothesis...which is nice and all but not worth the paper it's written on until you prove it in experiment.
Marketing = profit may certainly have been true in the 1.0verse, it certainly won't be true in the post-network economy - just ask anyone between 18-35.
This is just the same old blockbuster vs snowball debate which is very over, snowballs won.
As for hypotheses being proven, I think the vast majority of hypotheses we've made here have been more than borne out (snowballs, attention, markets/networks/communities, social, etc).
Thx for the comment.
hehehe. Irking your ire I see.
Snowball or blockbuster...it's still marketing under a different guise.
Don't get defensive BA.
Ah, one more shot for you (as I couldn't resist)...
I think we have to appreciate the difference between true hypothesis and the 're-marketing' of established economics principles.
If I'm following...peer produced content and coodination capabilities are the new leveragble position and his Jobsianess is actually making the same mistake twice. He's betting on the hardware which will be knocked off making the iPod the proverbial first mover that ends up with an arrow in the back. He's playing the IBM role in the Microsoft / IBM partnership with DOS back in the day.
Yeah, I can see that. But, why does everyone knock commodities? Cargill has done just fine at what it does for 100 years. If Apple just keeps prices low, they'll make up for the margins in volume. They are a hardware company anyway, right?