Strategies for a discontinuous future.

Consulting & advisory, research notes, in the press, about bubblegen,
next wednesdays.

Tuesday, May 24, 2005

Phones as iPod Killers

No way. A great example of how not to analyse strategy.

Look, the game here is simple. Apple's dominance is due to the iTunes/iPod combo. Let's put this platform in perspective vis a vis the competition.

All over the world, network operators have proven themselves to be utterly inept at educating customers about new ("value-added") services, and actually making money from them. We could go down the list - MMS, wap, etc.

In fact, all over the world customers, consumers have fought back, and engaged in "tariff arbitrage" - ie, getting the best deals on the cheapest services.

Given this history, the chances of any network operator offering a decent download service are fairly low. The one counterargument I think is possible is that ringtones sell well. But the point there is that they don't cannibalize the music industry's primary revenue streams - whereas downloads to phones obviously do.

Now, at the same time, iTunes is where Apple's strategy is - in the software, the distribution, the control of the value chain and putting the eventual squeeze on publishers - not in hardware. Apple's been very good at doing exactly what the network operators have failed at, time and time again: educating customers about whya a new service should be attractive to them.

That's why Apple is not, by any stretch of imagination, even gonna be threatened by MNO download services - even though the record labels will do their best to make it happen, the network operators will build a house of cards.

Note, I'm no rabid Apple fanboy - I've been extremely critical of Apple's closed platform approach to digital music, which I still think is a (huge) mistake.

-- umair // 8:52 PM //


O2 - successful telco based music download service....LP
// Anonymous Anonymous // 1:06 AM

YMMV, but I don't think I would call 02's music d/l service successful - certainly not relative to either growth or the absolute value of it's other revenue streams (at least last time I checked).

Maybe the examples you could cite would be i-Mode or KDDI - but those are vastly different markets.

Not sure what LP means.
// Blogger umair // 4:32 PM

Apple's new competition is Cingular and Verizon. Once phones have sufficient memory, and networks that can handle the traffic are built, sitting at a PC to download will be quiant.

Cingular and Verizon are too slow to react on this one. They should be heavily investing in a network that can handle downloads on a massive scale. Why give iTunes .99 cents for a song when it's only 1.25 and I can get it now. (Give the .25 to the content owner, and Cingular is now making .99 per download)

The business model and technology are there, its the vision and investment that are slow to react.
// Blogger J Andrew Morrison // 12:55 AM
Post a Comment


Recent & upcoming sessions:

Supernova 2007 (video)




due diligence
a vc
tj's weblog
venture chronicles
the big picture
bill burnham
babak nivi
n-c thoughts
london gsb

chicago fed
dallas fed
ny fed
world bank
nouriel roubini


uhaque (dot) mba2003 (at) london (dot) edu


atom feed

technorati profile

blog archives