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Real Apple? April 15, 2004

Posted by David Card in Digital Home & Personal Tech.

Ah, Joe, I think not. My colleague and much of the punditocracy thinks Apple should license its DRM technology, especially via a deal with RealNetworks. I don’t. At least not now.

(Why the Times – seemingly manipulated by Apple – thinks this a big story is a mystery to me. I mean, of course Real would try to do a deal with Apple. Real has been trying to position itself as the mythical Switzerland of digital music since Day One.)

Apple’s music software and the iTunes store exist to sell iPods and Macs. Apple can meet all the demand for iPod legal downloads for the next 12-24 months all by itself, thank you very much. There isn’t that much, for one thing. I’d bet 99% of the songs on iPods are MP3, and will be for some time.

Apple isn’t promoting Fairplay as a platform or even a component of one. It’s not Quicktime. It only exists because the labels wouldn’t license to Apple otherwise. Jobs doesn’t believe in DRM; he believes in aggressive pricing. (I’m beginning to lean that way myself, but that’s for another discussion.)

Real is to-date a marginal player in online music stores and subscription services. That’s not a snub. Everybody is a marginal player right now. Except Apple’s store is way ahead of everybody else’s, just like the iPod is way ahead of any other disk-based MP3 player.

Jobs doesn’t believe in subscription services. He’s wrong, but being wrong isn’t hurting iPod sales right now, and won’t for a year. Apple won’t lose any share for a year, in iPods or in downloads. Apple sold more iPods than Macs last quarter; Dell just had to cut prices.

But what about unity versus Redmond, you say? Well, songs bought at one Microsoft technology-based store often don’t run on someone else’s Microsoft-based jukebox. Microsoft’s store (no service this year), probably launching this fall, is not a sure winner. MSN Shopping is a non-event, and its music channel is weak. Last I checked, WIMP ran on the Mac okay.

Standards, shmandards. Who ships, wins.

Companies Jobs might entertain:
– Amazon? Oh, yes, I think so.
– Sony? Nah. Remember, it’s devices Apple cares about.
– Yahoo/Launch? Maybe.
– AOL Music already promotes the iTunes store, even though its MusicNet service is Real-powered.

And try this idea I’m borrowing from Mark Mulligan on for size:

Yes, Virginia, there are entertainment businesses – even industries – that do not have cross-platform compatibility. Tried to use your Scientific Atlanta set-top in a Motorola market lately? Or even in another SA-based MSO’s market? Or how about videogames? Ask a game software company whether it makes more money in the console segment or in the compatible-PC market. You’ll see they usually like the console ecosystem better.

Maybe, just maybe, digital music will have a few closed-looped systems, too.

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