Find tour dates and live music events for all your favorite bands and artists in your city! Get concert tickets, news and more!

  • Analytics
  • Tour Dates

LEFSETZ LETTER: The New iPods – It's Over Apple Has Won The War

If you listen to the hype, soon all you're going to have is a cell phone.

Don't believe them. The marketplace doesn't gravitate to what the SEERS say they should have, people consume that which is the standard, that which is easy to use, that which gets the job done. That's the iPod.

It's over. Apple has won the war.

You think Apple just introduced some new iPods today. They did this, but the most important part of the announcement was the PRICING!

Now an iPod Mini costs $199. Yup, for the price of the OLD Mini, $249, you now get a new model with 6 gigs of storage instead of 4.

Sure, the 20 gig regular iPod "Classic" is still $299. But, if you're willing to part with an extra fifty bucks, you get another 10 gigs, a color screen and photo capability. And, for $100 more than that, a whopping $150 cheaper than before, you can buy a 60 gig iPod Photo.

As Crazy Eddie was so fond of saying, these prices are INSANE! SO insane, that they've essentially leveled the competition. Creative, iRiver, Sony, Dell, it's over. Done. You're toast.

Oh, what a fascinating business case study. Apple perches itself at the TOP of the marketplace. Making an exotic product considered by the pundits to be OVERPRICED! But even a CASUAL viewer of rap videos will tell you the proletariat has an INSATIABLE desire for luxury. AND, combine luxury with functionality, and you've got an UNBEATABLE product.

And once this product gets a toehold, achieving economies of scale, you lower the price, eviscerating all competitors.

I mean why buy a Hyundai when you can have a BMW for the same price! Yes, now, in ALL categories, the Apple product is comparatively CHEAPER! What is a salesman to DO? Buy this OTHER product which doesn't look as cool, doesn't work as well and has less storage for MORE MONEY??

But, BUT you say. We've SEEN this movie. Apple can't stay dominant FOREVER!

Oh, how wrong can you be. You see you don't understand the landscape. The iPod is just a FRONT! The MAGIC in the iPod experience is the SOFTWARE! God, I've NEVER gotten a phone call asking how to use an iPod. Oh, someone might call with an arcane question, and in the initial days I received e-mail about freezes, but it seems EVERYBODY can put the CD into their computer, load the software, rip their discs and plug in their iPod and transfer tunes to it.

Yes, it's just that easy. And it's this EASE OF USE that keeps Apple dominant.

Sony doesn't understand ease of use. Otherwise, they never would have insisted on using their ATRAC standard, never mind their arcane encoding/transfer software. Dell is dumbfounded. This isn't how the game works. Microsoft writes the software, we just construct hardware out of standardized parts. But Microsoft was ASLEEP! And, when the Redmond giant finally came to the party, with Windows Media 10, they executed according to their classic paradigm. Ugly software that can get the job done if you're a techie, but which is unintuitive and frustrating if you're anything but a computer genius.

Creative and iRiver feel they can win via design and marketing!

Only one problem. These Asian products have the design elan of Korean cars. And they've got the same damn software problem.

So it's an Apple world. End of story. It's VHS versus Beta, and VHS has won. The iPod/iTunes is the standard.

And the major labels haven't quite realized this. They think THEY'RE in power. But, they've already LOST power. Just sit down with a head of distribution. He'll rail how his hands are tied by RETAIL! Well, what if retail was controlled by ONE PARTY?? Suddenly, you've got Wal-Mart to the power of 10.

Yup, last year labels wanted to RAISE the price of tracks at the iTunes Music Store. Apple refused. They allowed ALBUMS to be priced higher than $9.99, and agreed not to sell all the tracks on certain records individually, but no individual cut could retail for more than 99 cents. Do you expect the boys in Cupertino will be this accommodating in the future???

No, Apple now controls pricing. You don't want to sell the album for $9.99? Fine. Go make a deal with Napster.

But who wants to make a deal with Napster. Hell, the labels only want to deal with the big boys, the Best Buys, not the indies.

And Napster is an indie. Nobody wants to go there. And this will be INSURED soon, because the vast majority of players will be INCOMPATIBLE!

Oh, that's why everybody's railing for Apple to license Fairplay. So they can COMPETE! But they lost the competition YEARS ago. When Steve Jobs OUTSMARTED THEM! By creating the best device and the best software. To the point where if competitors now EQUALED Apple, they'd STILL lose out, since Apple is DOMINANT!

All that talk about music on cell phones?

Until there's delivery on demand at a flat fee subscription price, it's a non-starter. Do you really want your phone to do everything? Maybe sometime YEARS from now, but not today. I mean how large do you want your phone to BE? It's got to have a hard drive, a big enough battery and STILL function like a phone.

And, if the phone isn't iTunes compatible, it's dead in the water.

How dumb is Nokia. Making a deal with Microsoft. Maybe that's why Motorola is eating their lunch in the U.S. They made a deal with Apple. You've GOT to make a deal with Apple to survive in hand-held music. People are not going to want to re-rip their discs or fathom how to transfer their files from one elegant software program into an inelegant one in order to get their tracks on their phones. And, as stated previously, why do you want your songs on your phone when you've already GOT an iPod?

As for selling individual tracks via cell phones…

Only purveyors as dumb as the major labels could come up with this one. You want a copy protected file that presently you can't get off your phone for a buck? When you can get the same track for free P2P and listen to it on your computer, send it to a friend, put it on your iPod?

Yes, in addition to giving Apple a distribution monopoly, the majors are driving their business right off a cliff. Selling by track is DEATH! It's good for Apple and the customer, but HORRIBLE for the label. The label goes from selling TEN TRACKS to ONE! Or a COUPLE! If you've ever worked at a label, you know the economics are based on selling the BUNDLE, THE COMPILATION, THE ALBUM! TEN TRACKS! Hell, can you buy ONE plastic razor??? (And at least you're gonna need razors in the future, you might not need ANY more music by this particular act.)

As CD sales start to fizzle, the major labels are going to wake up. And realize they need a new paradigm. And who are they going to have to go to? STEVE JOBS!!!! ANYTHING they do will have to be compatible with the iPOD!!! If it involves a new format, and Steve Jobs says no, the majors are dead in the water.

It's almost like the majors HAVE to give up on copy protection and embrace MP3 to break Apple's MONOPOLY!

Yes, at least the iPod is compatible with both AAC AND MP3. (Unlike the original Sony units.)

So, either the majors are going to have to open the playing field to all by using the equivalent of an open format or agree to WHATEVER DISTRIBUTION SCHEME STEVE JOBS WANTS! Only CDs play in CD players. And just like everybody's got a CD player now, in MOMENTS everybody's gonna have an iPod.

So, Steve Jobs gets to dictate the subscription format. Because we've GOT to go to subscription in order to make the economics work.

Unless, of course, as stated above, the majors are savvy enough to break his monopoly by going to an open standard.

Really. Today's product introduction did not make front page news. But it SHOULD have. Because as of today, Apple OWNS online/computer music. THEY'RE the 800 pound gorilla. And their competitors' hands are tied behind their backs. They waited too long to come up with equivalent products, now the iPod is the STANDARD! And the majors, in a completely ignorant move, GAVE Mr. Jobs all his power, under the aegis of moving into the future.

Not that you can be mad at Mr. Jobs. He did what the record companies refuse to do. He delivered an insanely great product the public could not stop talking about, refreshed it when the marketplace was satisfied with the present iterations and KEPT LOWERING THE PRICE!

This would be like major labels signing people who could actually write and play, not interfering with them, and allowing them to make the music in their hearts. And then, instead of making them tour the world for two years behind the same damn album in the name of artist development, releasing a new album eight months after the first. And then DROPPING the price of the still selling initial record and offering EXTRAS on the new one for the same damn price the original USED to cost.

Contact Bob Lefsetz | View Lefsetz Letter Archives

NOTE: The views expressed in this editorial do not necessarily reflect the opinion of CelebrityAccess, Encore or its employees.