Monday, January 07, 2008

Apple Gets Their Dominoes in Place

I've been thinking more about the odds of whether Apple will decide 2008 is the year they launch a subscription music service (of some sort) and been asking others what they think the likelihood is.

The consensus (or lack thereof) is that people either lover or hate the subscription model. And I thought (once again) I would wax (un)poetically about what I'm currently thinking...

As someone that worked on subscription service, I can say without hesitation that the biggest consumer question (and hurdle to trial - and therefore adoption) was "does it work with my iPod"? In response, all of us in that business would do a little tap dance and reply with something akin to..."Uh, no... but check out these cool devices from Creative and iRiver. You should just get rid of your shiny new iPod (and Mac if you have one of those too) and buy one of these instead so you can try this really cool service that your not sure you understand the value of yet".

As subscription services suffer from the "TiVo problem" (where users don't fully appreciate the value until they try it), getting trial is key. If the the addressable market that can actually try it (aka the iPod installed base) is then in the hundreds of millions, the wall comes tumbling down and subscription takes off - albeit at the expense of Rhapsody, Napster and others (sell, sell, sell!).

A 3G (or maybe even WiMax?) WiFiPod/Phone with all-you-can-eat streaming/mobile downloads for $10/month? Done. Trials spike into the tens of millions virtually overnight and conversion rates give Apple a subscription base larger then all other competitors. Offer movie rentals for a couple more bucks a month and now Apple kills Netflix and Blockbuster too. Oh yeah, while they are at it Apple can throw a Skype client onto the device and begin to marginalize the carriers while they are at it by offering voice services for a fraction of consumers current voice plans.

All of this pervasive "Apple-Ready" content then drives adoption of AppleTV (and Mac Mini's) - or at least next generation ones that also support CableCard. People start forsaking their rented Cable Set-Top boxes for Apple boxes they own outright (and also allow them to do more then just watch videos). These boxes bring them broadcast and IP content delivered seamlessly to their living room and the public starts to wonder... "why am I paying Comcast $100/month for TV when everything I'm watching is on-demand content being delivered over the web"?

Apple then controls the devices and the delivery pipe for all your content ("you" pertaining both to the labels/studios and consumers) - and communication. The dominoes are in place... do you dare topple the first one?

If you listen closely you can hear Steve Jobs in the background.... "BWA HA HA HA HA!".


charlie gower said...

Very nice post.
It's funny, Apple seemed to have jumped sideways so many times, they'll have to move forwards at some point or they will loose too much ground.

Anonymous said...


unfortunately, i think you are quite correct....

btw - what is Y! up to ?