I was just listening to a news story on the radio talking about Microsoft entering the MP3 / Video player market to compete with Apple. They plan to create a hardware device of their own. The story talked about how Apple makes virtually no money on their songs on iTunes and makes most of it with the hardware (iPods). The comment was that MS intent is the opposite. They don't care about how much they make on their hardware but want their DRM to become the standard. I suppose to charge for licensing. The final comment was that Apple has about 70% of the music download market and that it was just a matter of time before they would have to give some of that up. Why is it that the same logic is not used on MS for computer operating systems. You never hear that it is just a matter of time before MS loses some of its 90% share of the OS market.
Although it will be interesting to see if MS biz model will work. Since profits on their players are not critical, they could sell their player for less than Apple. Of course this does not account for economies of scale, which allows Apple to get parts for less cost. MS used a similar model with the Xbox market. Where they practically gave away the hardware, to make it up with fees from the software developers. And it worked there. Would the songs be the equavalent of the software for the Xbox. Where they have cheaper players but the real money is made for fees on songs. Would the more expensive songs scare too many people away from this. True a lot of speculation, but this is what this blog is for.
2 comments:
One correction: I just read that the Xbox, although it highly popular is not very profitable for Microsoft. So maybe this isn't the model they want to follow.
Stitch, this topic is the very thing this blog was meant to expore!
I would say the reason nobody says that Microsoft is in danger of losing their 90% monpoly is because they have achieved it through the corporate world as opposed to the consumer world. Big business is tethered to Microsoft for the forseeable future, and the argument "I use a PC at work and am used to it, therefore I need a PC at home" will continue to dominate. On the other hand, Apple and the iPod ecosystem is tethered to the consumer market directly, and consumers don't have the "iPod at work, so iPod at home" argument. It's much easier for the consumer to simply change music players.
Of course, depending on how much music the consumer has purchased through the iTunes music store, some may sway back to iPod to keep their music investment alive. (I know they can convert their music, but many consumers won't go to the trouble). But I believe this is a small percentage of iPod owners. (What do you think?)
I definitely don't believe consumers are willing to pay higher prices for music and ditch their iPod as well. Consumers will in general stick with the lower price point, especially if it's easy for them to purchase as the iTunes music store certainly make it.
Finally, I'm not sure if the gaming console market and music download/MP3 player markets are analagous. The gaming market consists of an extremely fickle crowd that demands the best graphics, game play, etc, and puts out good chunks of change to play at high levels. Contrast that with the typical music listener that spans a wide range of personality types, etc. Clearly the iPod has appealed to a huge crowd with its ease of use and good looks. Apple has found a way to draw in a lot of typical music listeners on features that appeal to almost everyone. Whether Microsoft can do this is yet to be seen in my opinion.
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