After a Decade of iTunes Dominance, Apple Has a Tough Choice (guest post for Billboard)

My most recent guest post for Billboard... this time on iTunes.

Barrels of ink have been spilt hypothesizing Apple’s next move in music given the mass market transition to streaming and subscription music services has finally begun. I am responsible for a least one barrel of that ink, and am on the record as of 5 1/2 years ago speculating that Apple’s entrance into the subscription music market was imminent. In my defense, that was back in a time when there was only one music device in the market that mattered... the iPod. Back then, Apple could have flipped on a subscription music service and secured their place as the dominant force in music for decades more. Of course they didn’t do this, as this would have instantly cannibalized their still very large and important music download sales revenue. Those of us that were still happily shelling out several hundreds of dollars a year would instantly convert to only playing $10/month. The revenue loss from the hardcore music buyer wouldn’t (yet) make up for the slight increase in annual spend from the rest of the iTunes customers. Instead, Apple has been playing the financially prudent game where they can watch the revenue curves... when the projected subscription revenue line crosses the music download revenue line launch the full on-demand streaming service (that they inevitably have had working in the basement of Cupertino headquarters for years).

The wrench in this strategy many years later is, of course, Android. Now instead of owning the entire mobile music device market, Android has come along and turned iOS into a minority share player. While Apple could still launch a successful subscription music service now, they are faced with a “sophie’s choice” - play to win at streaming music (and maintain their leverage over the rest of the market) or dig their heels in deeper on an ever weakening iOS lock-in strategy. For the record, I am no fan of lock-in tactics, and generally think they are all doomed to fail - but given Apple’s choices I think this is likely the path they will take.

The interesting historical context for all of this is that it was Apple’s abandonment of a lock-in strategy that helped them secure such success in the mobile market. When the iTunes Music Store was first launched, it was Mac only... the tight ecosystem between iPods and iTunes (on Macs) were used to lure the Windows consumers to switch to Macs. Given their minority share (< 10%) in the PC market, this strategy did not bear much fruit. Apple then made the somewhat decision to bring their software to Windows - one of the few times they have done this (along with the likes of Safari & QuickTime). Bringing the iTunes Music Store to the mass majority of the market thereabout fueled massive iPod sales, which begat the iPhone, which begat a new massive revenue stream for Apple in iOS apps.

So, I’d argue that if Apple brought an iTunes subscription music service to iOS and Android they can “win” again. BUT, given the notoriously high-complexity/low-margin business that subscription music is... I think they will continue to cede subscription music to the other players. Apple execs have said that music is multi-billion dollar business for them that “is run at breakeven”. By continuing to focus on the other aspects of the iOS platform, they can get a much higher return on that investment while still generating low-complexity/high-margin revenue from music by taking their 30% vig on all music subscriptions that come in through their App Store.

Where in 2007 I’d have bet big money that Apple would enter subscription on-demand music, I’d now bet bigger money today that they won’t. My caveat is the much rumored “iRadio”... I believe the reports postulating that they will compete with Pandora on a “non-interactive” radio service. In my opinion, this has much less to do about being in music as it is about improving their iAD platform. They can use radio as a loss-leader to both create additional inventory for the ad platform while simultaneously gathering very valuable user taste and behavioral data that they can then leverage and offer to all of the other iOS app developers.

In a perfect world, a streaming radio service is an all-around win for Apple... they build a better advertising platform, they offer a programmed streaming experience that has proven both more popular and more cost-efficient than on-demand subscription services, they increase sales and extend the life of downloads, their incremental download sales help drive the sales of higher storage capacity iOS devices, all the while avoiding competing directly with the subscription streaming services (of which they take a nice profitable cut of the revenue on sign-ups through their platform).

There will certainly be a huge number of people that will try, and like, iRadio. For many having that experience only on their iOS devices will serve their needs just fine. A minority share of music listeners is probably “good enough” for Apple to help move their advertising and OS platforms further down the road. But, as the device market continues to fragment - with people enjoying their music on their iPads, Androids, Rokus, car stereos, Sonoses, and more - a platform/OS lock-in strategy will prove to be a short-lived advantage in music.

All of the above is a very long-winded way of saying, don’t count out the other players - both on-demand subscription and non-interactive radio services.. Apple’s entrance into streaming music will ultimately help build the awareness and userbases of those services that are dedicated to being fully-cross platform and being everywhere their listeners are.

Hey, who tripped over that cord?

The Record Industry’s TotalMusic Experiment Is Sinking Fast: "TotalMusic, the digital music distribution initiative created by Sony BMG and Universal Music Group, appears to be on life support - or worse."

And so it goes. And, so do I. I know what you are thinking... "Hey Herskowitz, you were only there 3 months, how did you manage to screw it up so quickly?!". Heh... all I can say is that in that short time I had the privilege of working with some great people on something that I *know* was going to be extremely compelling. I regret that we didn't get to show you guys more about what we built - but in these extremely hard economic times (particularly for those in the music industry) it's hard to blame them from pulling the plug on a still-highly-speculative offering .

I only hope that someone else figures out how to crack this music-on-the-web nut in a way that is a win for everyone in the value chain. The problem is that to make a music service a win for everyone, then they all of the famished participants have to sit at the table - and be content to let all the others have a little bit to eat, even though they are still hungry themselves.

I, first and foremost, am a music consumer - so I'm always compelled by the innovation happening down at the consumer-level and then try to follow it back up the chain to the content creators. This gives me a decidedly different perspective than the artists and labels that are trying to solve this from the other direction. But, from where I sit at least, I see all of the innovation in digital music services coming out of bootstrapped companies and passionate tinkerers. Hell, there are very few private investors or venture capitalists that want to get anywhere near this space right now... and rightfully so considering no one has really figured out how to make any money out of this industry (and its products) that so many people love.

It should therefore come as no surprise that these small sites and services don't have the resources, or desire, to deal with licensing content directly. And for that matter, nor do the content owners - imagine the legal and contractual management overhead. So, where is the middleman? The platform? The catalog? The APIs? The no/low-involvement licenses? These are all required to not only stoke innovation, but to ensure people get paid. Without this we find ourselves in the same place repeatedly. Virtually all of the small "music 2.0" services go one of 4 routes for their content. 1) MP3 search engines like Seeqpod and Skreemr, 2) YouTube music videos (either with or without actually rendering the video frames), 3) Remote access offerings like Simplify and Orb, 4) User-generated uploads.

What I truly believe is that the market needs an alternative to #1/#2 that lets innovation be built quickly and painlessly upon open APIs - where people are paid, costs are covered, streaming is free and drm-free commerce is to be had. Simple, right? Well, maybe not so much...

In the meantime, yesterday I started to experiment with a couple of things that simply leverage what is available to me... MP3 search APIs, playlists, community charts and play data. I was able to quickly mash together some of this freely available and flowing data and stood up "friendP3" . It's simple really, it aggregates your (and your friends' if you desire) play data/favorites from the APIs and feeds of Last.fm, iLike, Pandora, Rhapsody, Hype Machine and others. For every track/artist name it sees, it hits some search APIs to see if it can find a MP3 version of the track out in the wild. If it finds one, it then automatically embeds a flash player with the track loaded (along with the link to the MP3). This is all done from afar... the mashup was all done in Yahoo Pipes, the MP3s sit on other sites from around the web, the front end is just a hosted microblogging platform, and the recirculation and sharing back across multiple social networks and services is a simple "AddThis" implementation.

Currently, what is on www.friendmp3.com is stuff that is being automatically generated from *my* friends on Last.fm. But when one of them listen to a song in iTunes, or on Last.fm radio, or bookmark a song they hear on Pandora (web or iPhone version) and the MP3 just shows up the front door of friendP3 for others to enjoy. Conversley, I've also generated a feed that is made up of solely my history across these services and dumped that into my lifestream at www.ambientsignal.com (as well as my FriendFeed and Strands streams). For that matter, you could just take the "podcast" feed and to subscribe to it in iTunes or Winamp. I listen to stuff, and your local library would just get filled up in the background. Now mind you, I'm not endorsing that people use this in lieu of buying music. But, I do think that all of the above are fabulous discovery tools - and I know that I have already bought a couple of albums that I have a heard a track from friendP3 since yesterday.

The first question my friends ask me when they see it is... "is it legal?". The answer I give... "no one really knows", because there is no blanket statement that can be applied. Some of the content was made freely available by their rights holders, all reside on other people's servers, search and "content discovery tools" are generally deemed to be protected under the Digital Millenium Copyright Act (although the Seeqpod/Warner Music case will test that), downloading (I've been told by some lawyers) is not a crime (it's the "making available" to others that is gray), and the endless number of other nuanced legal questions open to interpretation. The answers to all of which are/will have massive implications to the future of the web.

But wouldn't it be cool if there was a way to do this on a platform that plays nice with everyone? And compensates those that deserve compensation? And somehow can magically cover the costs associated with all of the above (hint: this is the kicker)? I sure think it would be. If anyone wants to build/fund that, drop me a line (jherskowitz at globallistic dot com)... I'm currently looking for something to do.

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Favorite Albums of 2008

It seems like every year I'm trying to figure out the best way to bookmark and display my favorite albums of the year. This year was no exception. To determine my favorites, I looked at a number of sources... first I created a smartlist in iTunes that just included music that was released in 2008 (and then another for 2007 to see what was "new to me" in '08 even if it was technically released last year). That information combined with some of my chart data from Last.fm and MyStrands.com helped me figure out what I listened to most. I then went and searched for each at AmazonMP3 (and eMusic for one import) and then bookmarked them using Delicious. Take the rss feed for those "bestof2008" tags and then feed them into an embeddable widget from YourMinis.

Yes, it shouldn't be this hard and I'm sure (or at least I hope) there is a much simplier way that I just happened to overlook. There were were things that *should* have worked much more easily but all seemed buggy and weren't producing the desired output. If there isn't then my resolution for 2009 will be to make sure something gets built. Anyway... enough soapboxing, here's the list. Enjoy them... I know I did.

UPDATE (1/08/2009): Here are a few of them for your listening pleasure... in their entirety.

Deja Vu - Physical Retailer (Best Buy) buys Digital Music Provider (Napster)

Image via Wikipedia What's old is new again, eh? News just broke that Best Buy purchased Napster for $121 Million. Congrats to Napster for finding an exit, but I'm not all that bullish on the prospects for Best Buy to be successful with this. This has been tried numerous times in the past by physical retailers, without one highlight coming to mind. The one I am most familiar with was Circuit City's purchase of MusicNow several years ago, only to see Circuit City (re)sell it to AOL (for cheap) after being unable to capitalize on it.

I've spent all of 10 minutes thinking about the implications of this, but I'll start with these knee-jerk reactions:

• Yet another subscription model disappears... do you want a subscription relationship with a retailer? I don't. I'm not sure why I find this so unappealing when I have subscription relationships with many (less trusted) companies than big box retailers, but it just doesn't *seem* right to me.
• Would Best Buy consider selling off the subscribers to Rhapsody and just focus on selling DRM-free MP3s? Perhaps... that's an easier sell to their current customers. Buy and iPod at Best Buy and get 10 free MP3s? That could actually be a pretty interesting conversion strategy.
  
• Most consumers have relationships with a digital goods provider right now (e.g. Apple) and I don't see an incentive for them to switch. Granted, Amazon has been successful in selling both physical and digital goods, but I think they are the exception not the rule. Although, I'm thinking that Best Buy sees the digital platform giving them the ability to more proactively push digital commerce affiliate relationships with "click to buy" MP3 links that are meant to compete with Amazon's and iTunes.

I'm sure my thoughts will continue to evolve on this over the next day or so, but what is for certain is that the digital music space continues to have more rehashed storylines and drama than your average daytime soap opera...

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iTunes.fm?

Image via CrunchBase, source unknown I just read a really good post from Read/WriteWeb with more speculation on what is coming with iTunes 8.0 software next month (click the link below to see the whole story):

The Case for an Apple iNetwork: Welcome to the Social - ReadWriteWeb: "While most of that is common knowledge, what most people overlook is the glaring lack of any community aspect to iTunes. There are millions of people, many of them with similar tastes, flocking to the same destination every day, yet they never interact with each other... because they can't. If Kevin Rose is to be believed, however, (as discussed on TWiT 157) that all is about to change with iTunes 8.0.

He says, '... the one thing I hear about iTunes 8.0 is that it's gonna do something along the lines of, um, looking at your music, and, uh, kind of recommendations based on certain things.' In other words, the next version of iTunes will monitor your media purchasing and consuming habits and correlate them with everyone else using the system to figure out which songs you will probably like but haven't bought/listened to. If you're a fan of collaborative filtering systems or internet radio (Pandora, Last.fm, etc), you're probably familiar with the idea already and that iTunes may be considering implementing this doesn't come as a surprise (I found myself wondering why this wasn't introduced 2-3 years ago)."

To make a real play at being a music network I think Apple needs to give iTunes a web presence (outside of the client application), but nonetheless the potential notion of Subscription + Cloud + iPhone + Taste Networking = pretty compelling proposition. Last.fm, iLike and iMeem have established the market for such experiences now. This is about the time when Jobs likes to walk in with an offering (while claiming they *invented* it).

I still think that they will come in with subscription at some point (if not now), but I'd put pretty good money that September announcements include MobileMe + enhanced taste networking/discovery features (with still an outside shot of full-blown subscription being announced too). Apple wouldn't be going through the headaches with MobileMe transition (aka "upgrade") if it wasn't key to their strategy moving forward - the next logical step for it is cloud storage (and playback) of your iTunes library with the additional kick of wireless (push) sync management of that media down to your iPhone/WiFiPod. Once your content is in the cloud and universally accessible, then limited sharing (streaming) to a small social network of your friends enhances discovery of new content, with easy "buy" links back to iTunes which can then push the newly purchased content to your device, computer and cloud all simultaneously.

Thoughts?

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iTunes Unlimited Coming Next Month?

Image via CrunchBase, source unknown We'll see if this actually plays out... but news is (re)surfacing that Apple's iTunes subscription plans are for real.

Rumors of iTunes music subscriptions fly again | The Industry Standard: "MacDailyNews says the service will be called 'iTunes Unlimited' and offer 50% of the songs currently on the traditional U.S. iTunes store through the program at launch. The subscription will be for one year and be available through iTunes or a retail box, similar to how MobileMe/DotMac is sold. iTunes Unlimited would launch, initially, on the U.S. store only. The subscription would cost $129.99 on its own, $179.99 with MobileMe or $99.99 for existing MobileMe subscribers. The site claims a late September announcement with late October rollout, just in time for the holiday season. TUAW received (almost certainly from the same source) a similar report."

But if it does, I won't hesitate to be the first to say "I told you so". :-)

Also check out some of my speculation on Apple's continued subscription world domination plan from January of this year.

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iPhone Music Apps

iPhone Music Apps - Page 1
Originally uploaded by jherskowitz

The iTunes Apps store has started to surface this morning (installiTunes 7.7 update and then click here.

Here is a screenshot of them, with the ones I find most interesting circled. (Not pictured: TapTheBeat, Tuner and TyroTuner.)

I assume that both Pandora and AOL Radio are only streaming over WiFi but at 64kbps AAC/MP4 it is certainly possible that streaming over 3G is possible too. The "Remote" app lets you use your iPhone and/or iPod Touch to control your iTunes - think about your laptop (or AppleTV?) hooked up to your stereo while you site on the couch or sit in the backyard controlling the tunes.

The rest don't look all that interesting to me, but I'm sure there are thousands more in the works as we speak.

Share on Strands:

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!".

Movie Rentals Coming to iTunes - What About Music?

As rumored for a while (and previously mentioned) Fox and Disney will both be offering movie rentals via iTunes (for between $2 - $5 for a 24 hour period). So, Apple's FairPlay DRM scheme - and complete hardware line - has now obviously evolved to support time-constrained subscription licenses.

As the music world continues to move to a DRMless ecosystem - with Warner now the 3rd of the 4 major labels to join - one must wonder if Apple is considering entering the subscription music market.

Why?! Well, in a DRM world iTunes became the dominant player partly because the only place you could buy major-label music that worked on an iPod was from iTunes. But now.... now I can unprotected MP3s from multiple sources that work with my iPod. Amazon being the most notable.

So, if Amazon all of a sudden started eating into iTunes sales.... would Apple flick the switch on subscription music to lock them (the consumers) back in? I don't know, but at this point one of the few people that could get people to "rent" their music is the same person that told people not to in the first place.

I still need to post my 2008 predictions... maybe this will be one of my long-shot picks.

Song of the Day: Manchester Orchestra - Where Have You Been?

I am a fan of Simplify Media, and their iTunes plug-in just got better by now also supporting Winamp. Now I can stream songs off my friends' machines regardless of which media player they use.

Today, I was trawling a friend's collection and saw an artist I had never heard before... Manchester Orchestra. So I just clicked and listened. It turns out that it was a great discovery, so I thought I'd share.

	The Manchester Orchestra - Where Have You Been?
	Found at skreemr.com

A nice side-effect of this use case is that all of my "scrobblers" track these so if I'm streaming off an friends machine and I missed what I had played, I can just go and check out my play history.

iTunes & Quicktime Updates

I've been regularly and manually hammering away on "check for software updates" on Leopard. Today came new builds of both iTunes and Quicktime - there are some minor feature additions, but what I'm really hopeful of is that the undisclosed "bug fixes" remedies some of the issues with this machine since I upgraded to Leopard. Specifically, Front Row (often times it won't render the video, only the audio) and iTunes (many broken plug-ins).

Let's hope....

Universal Music to Take the Reins - But Can they Reign?

BusinessWeek breaks more details on Universal's plans to try and wretch the power back from Apple. Basically, they want to build a consortium (comprised of the major labels) to launch a new tweaked model of music subscription service.

Universal Music Takes on iTunes: "While the details are in flux, insiders say Morris & Co. have an intriguing business model: get hardware makers or cell carriers to absorb the cost of a roughly $5-per-month subscription fee so consumers get a device with all-you-can-eat music that's essentially free. Music companies would collect the subscription fee, while hardware makers theoretically would move many more players."

This feels a bit like Microsoft telling all their device and subscription/DRM partners, "we're tired of waiting for you guys to make a market, get out of the way and we will do it ourselves". Now that frustration has moved further up the chain and the world's largest record label is saying, "I'm watching my business go down the drain and a guy in black mock turtleneck has got me over a barrel - get out of the way, we will do it ourselves".

Questions? Sure, I've got a few...

Q. What about the indies? How bad are they screwed in this scenario?

Q. DRM? I sure as hell hope not. If it doesn't play on iPods and iPhones, it doesn't play.

Q. How quickly does Napster and Rhapsody America bleed customers if this happens?

Q. Pressplay and MusicNet... anyone remember the fate of those major label subscription consortiums?

Q. Will they expose APIs so that they can syndicate this content everywhere, or are they going to drag everyone to a central "store"?

I'm sure I will have more thoughts on this over the coming days. What do you guys think?

AIM Tunes

A few months ago I told you guy about the Buddy Tunes plugin for AIM. This basically made people's iTunes libraries appear like they are on your local network - thereby enabling users to stream music from any of their friends' machines. Since then, Simplify Media has essentially launched a productized version of this (albeit not integrated into AIM). The other approach that was being worked on at AOL before I left is now public in the AIM 6.5 release. It is called "AIM Tunes" and it is a similar concept but ditches the deep iTunes integration for a more player-agnostic approach.

Basically, everyone on your Buddy List (that has the plug-in installed) appears on your AIM Tunes dashboard (in your browser). From there, you can browse their libraries and either stream them directly from your buddy's machines via an embedded flash player - or if you want - to "pop them out" and have your default media player handle them.


You can also create a playlist of songs from all across your network - although it is currently only a single/temporary playlist.

All-in-all, it is pretty slick. It still could benefit from deeper integration into the AIM client (see who is listening to my stuff and better facilitate communication about what's being shared), Mac support, an aggregated "buddy library" view (lets me search seamlessly across my entire network), multiple playlist support, publishing, etc. But, if you use AIM I recommend giving it a whirl. I may end up just running on a separate AIM instance on my home machine (under a separate screen name) and use it to stream to myself. Then again, there are a ton of other options there... Winamp Remote (also an AOL offering), Streampad (although Dan now works for AOL too), and many others.

I'd be interested to know what you guys think of it.

WiFiTunes & DRM (Correction)

So, I updated by iPhone with the latest firmware so I could get "WiFiTunes" support on it (you also get a newly skinned calculator for some unknown reason). The store looks pretty sweet at first glance, but what I didn't notice was anywhere I can buy the DRMless "iTunes Plus" tracks. Are they not offered?! And if not, I can only imagine that this was purely a business decision and not a technical one?

UPDATE:

Sorry, false alarm. I did indeed fine "plus" (DRMfree) content... it appears your preferences are synced over from your iTunes client.

Also, other new features of this update include (bold added by me for emphasis):

Listed new features in this 152.3MB update include:

* iTunes Wi-Fi music store
* Louder speakerphone and receiver volume
* Home button double-click shortcut to phone favorites or music controls
* Space bar double-tap shortcut to intelligently insert period and space
* Mail attachments are viewable in portrait and landscape
* Stocks and cities in Stocks and Weather can be re-ordered
* Apple Bluetooth Headset battery status in the Status Bar
* Support for TV Out
* Preference to turn off EDGE/GPRS when roaming internationally
* New passcode lock time intervals
* Adjustable alert volume

Undocumented features There are also few new features that Apple didn’t mention:

* There is now the ability to change your voicemail password directly from the iPhone. Tap “Settings,” then “Phone,” then “Change Voicemail Password.”
* You can now change the sound that is played when a new text message is received. Tap “Settings,” then “Sounds,” then “New Text Message.”
* There is now a “Debug console” for Safari, which shows HTML errors when rendering Web pages. Tap “Settings,” then “Safari,” then “Developer”
* There are new options for Video playback. You can start playing videos where they left off or from the beginning, and you can use closed captioning. Tap “Settings,” then “iPod.”

Review: iTunes Wifi Store - Rocketsurgeon's Music 2.0 Blog -

The WiFiTunes firmware update is now available for your iPhone (click "check for update" in your iTunes sync menu. I'm installing it now - hopefully it won't delete all the 3rd party apps that I put on there using AppTapp - but check out Jadam's (aka RocketSurgeon) review below...

Review: iTunes Wifi Store - Rocketsurgeon's Music 2.0 Blog -

UPDATE:

After a nerve-wracking several minute update (that appeared to have crashed at times) - I have found that if have used AppTapp to install 3rd party apps to your iPhone, this update will wipe those all out. Not sure if I can reinstall it yet or not...

Apple Tightens Shackles Between iPods & iTunes

I can't say it's a surprise, but it is unfortunate nonetheless...

ipodminusitunes: Apple cuts us off: "So, it's finally happened. Unhappy with other media players being better than iTunes, Apple have apparently decided to stop them from working with the new range of iPods."

This is bad news for Winamp, Songbird, ephpod and/or Linux users in general. This was already basically made a moot point by the iPhone since it uses iTunes to sync your contacts and calendar - but now the entire new line of iPods is literally and physically locked to iTunes too.

The Great Subscription Music Consolidation Continues

This one is not via acquisition, but attrition...

Heard on the Street - WSJ.com: "Its Yahoo Music service, which has about 250 to 300 staff, is among those expected to be trimmed and its fee-based subscription music offering overhauled or shuttered. Overall, the company plans to move staff around and freeze some positions, though significant layoffs aren't expected, people familiar with the matter say."

Since the Rhapsody/Urge merger a whopping couple of weeks ago, even more has happened. Sony Connect has been shut down and it appears that Napster is backing off of their freeplay strategy. This is of course good news for "Rhapsody America" (ugh) as the Yahoo Music Unlimited subscribers will now need to look for a new home.

Also, as of last week Apple announced that they will be rolling out WiFiTunes (my name, not there's) where users can buy any track and download over the air to their iPhone/iPod Touch and sync it back to their computer. Unlike the wireless carriers who thought that you would happily pay 2-3x for this convenience has now had that business chopped at the knees.

Now for my latest conspiracy theories around Apple...

1) iPod Touch has WiFi and Safari - how long until they introduce a VoIP client (Skype anyone) and turn it into a WiFi phone? It seems interesting in conjunction with the rumor that Apple may bid on some of the 700mhz spectrum that Google has been ogling.

2) Other news surfaced this week that iTunes has hidden error messages suggesting that a movie rental service is right around the corner. Of course... if you can do movie rentals, there is no reason you can't do a music subscription service. The fact that some of the earlier iPods didn't have a secure clock that would enable these models has be negated by the fact that Apple is rolling out an entire new *line* of iPods that I'm guessing have the secure clock that enables temporary license management.

What do you guys think?

Theatrical Release Movies on your iPhone

Not that I am endorsing this, but I can verify that it works (well)....

PirateBay + Azureus (or other BitTorrent client) + iSquint (video conversion software) + iTunes = new movies on your iPhone

DVD quality copies of DieHard 4, Knocked Up, Ocean's 13, Bourne Ultimatum and more in your pocket. Or you can go for handycam versions of newer movies like SuperBad.

The King Has No Clothes (and is Dead). Long Live the King.

I have been on both sides of the subscription music business. I led the product group at AOL that acquired/relaunched AOL Music Now (unfortunately dealt away to Napster) - and I have subscribed to virtually all the competitors. I have been a big fan of the value proposition that subscription music business brings - in spite of itself and all the hoops it makes consumers jump through. If you haven't already, you should read some of my (ever-evolving) thoughts about the state of the market in some of my older posts.

But, as a consumer I have recently sworn off DRM (and Microsoft products/technologies in general to a large degree, but that's a different story) - after years of trying to convince myself and others that DRM is "no big deal". Admitting you have a problem is the first step to recovery, right? The turning point for me was the realization that people (like my wife) would have a portable player full of content (that I had to put on there for her) that would never play because all of the licenses were expired. With her being only a part-time computer user, the job would then fall on my shoulders to continually manage her player, download the tracks she wanted and keep it all working. Major pain in the ass.

And yes... Apple obviously uses/has used DRM for a long time too - but to their credit, they simplified the model so that you would never run into the issue of "dead" content on an iPod (since they don't do subscription they don't have to worry about renewing the licenses on a monthly basis).

I still give Rhapsody my $15/month - although I'm not sure for how long considering I broke down and got an iPhone (more on that later). Their issues (and those of the new "Rhapsody America") are the same as they have always been... subscription content doesn't play on an iPod/iPhone. And who in the marketplace doesn't want/have an iPod or iPhone? It's like the kids 30 years ago who's parents bought him a "Magnavox Odyssey2" video game system when the rest of the planet had an Atari 2600 (unfortunately, that was me).

I truly believe that a marketplace with ubiquitous high-speed IP access and multi-function mobile phones solves all of theses issues - but realistically that is still a couple of years off (keep an eye on Sprint... uh, I mean "Xohm"... and their 4G/WiMax rollout) for early adopters and probably 5+ years for the mass market.

So, until then my new digital music M.O. is iPhone + eMusic + DRMless MP3 purchases (some from iTunes even they are actually AAC files, some from gBox, some from Amazon) + free-range MP3 streaming and "acquisition" (SkreemR, Hype Machine, Seeqpod, etc.) + library sharing (via Simplify Media) + personalized streaming services (more on that soon). What the market really needs is a destination that aggregates all these options into a single place - there are a couple that are starting to do this now - and I'm sure more will follow (will it be Google?).

The two year AT&T contract that I had to sign for my iPhone will expire just as it is time to move back to an all-you-can eat subscription model....

Rhapsody and Urge Merge

Big news. The subscription music consolidation continues with MTV rolling it's over-hyped under-delivering subscription service, Urge, in with Real's Rhapsody service - this follows Napster's acquisition last year of both Virgin Digital and AOL Music Now's subscribers.

Free Article - WSJ.com: "In a bid to create a stronger competitor to Apple Inc.'s market-dominating iTunes Store, Viacom Inc.'s MTV Networks is set to announce today that it is merging its online digital-music offerings into a joint venture with RealNetworks Inc., the company behind the Rhapsody subscription digital-music service, according to people familiar with the matter."

A couple of more moves are needed until Real has got a realistic shot a making a dent in Apple's marketshare.

1. First, the market needs Napster (or at least their customers) to be acquired by Rhapsody too. Then, the market confusion will start to clear a little (iTunes needs one strong competitor, not a bunch of tiny ones) - then they can easily position A vs. B in their marketing messaging.
2. Offer DRM-free a la carte tracks (which they are going to do) - word is that they will be really high bit-rate (upwards of 256kbps) MP3s. Sell them for $1 each.
   
3. Introduce an ad-supported streaming service - with an upsell tier to ad-free listening.
   
4. Partner with every "music 2.0" site out there and syndicate their free play web player - support *lots* of external communities, not just their own - cut affiliate relationships with them all.
   

Now they have a basic value proposition that the market can understand - "we are just like iTunes but instead of 30-second samples you can listen to the whole song". Songs you buy can be imported into iTunes and sync'd with an iPhone (iPod sync is supported by other players, but if you want to sync your contacts/calendar with your iPhone then currently can only do that with iTunes). You also have a great web-based streaming experience that doesn't require a fat media player client.

Over time they could move towards "package" download tiers (like eMusic where you can download x tracks/month). I would personally like that model, but I actually think they should refrain from offering that as it confuses the marketing message. Once people understand it is "just like iTunes only better", then they can move on and try some new models.

All that being said... there is nothing keeping Apple from doing all this themselves if/when the Rhapsody plan started getting some traction.