Originally Posted by taugust04
Melgross, you make a good point. Universal is already testing DRM-free music, but not with Apple. And you know what, I bet Apple doesn't care. Why? Because it's DRM free, so it plays on the iPod! It's a victory for Apple when ANY company decides to experiment with something thats DRM free. Even if it is in a format that doesn't natively play on the iPod (say WMV, or WMA), with it being DRM free, it can be converted (even in iTunes) and played on Apple hardware.
The problem for distribution companies is that the market is saturated with iPods at the moment. Now the iPhone is coming on the market as a product that also plays music and videos. No matter how much they try, they cannot just decide to stop distributing their content and ignoring an entire segment of the market. It would be like deciding to restrict broadcast their programming to only one brand of television. They already tried this with all that Windows Media DRM garbage. How successful was that? So much so that the Zune doesn't even use Microsoft's own Plays4Sure format that was licensed to other hardware manufacturers (and content stores) Here's what will happen over the next few years:
1.) Various networks and media companies will attempt to negotiate/re-negotiate with distribution rights for their content on the iTMS. Some will sign on, while others leave the store.
2.) Distribution companies that don't go with the iTMS will try to build their own "exclusive" stores with DRM will fail miserably. They will also setup free web streams, but receive complaints from consumers that they can't download their streams to their iPod.
3.) Distribution companies that stick with iTMS see a modest rise in downloads and revenue, but advertisers are upset with not being included in download purchases.
4.) Distribution companies finally see the light (YES FINALLY!) and decide just one method of digital distribution isn't the best way to make a profit and keep content creators, advertisers, and consumers happy. Content distributors begin to offer several ways to get their programming by posting DRM based versions with no advertising for purchase (iTMS/Windows Media/Rhapsody), DRM free based downloads that include advertising as either a reduced price or free download from their own website, and a free, lower quality stream from their website.
They WILL get it at some point. Just like they are starting to get the music sales right now, with the experimentation with DRM free content in various places (both iTMS and others). Maybe a company goes bankrupt, or gets bought out, or a couple of high powered executives get fired, but they WILL get it. Right now they are just trying to manipulate the market to its breaking point to see how much control they can actually have and still make money. Hopefully, they will get it sooner with the video content rather than later.
Remember, Apple is, and always will be, a hardware company. They play the content. The only reason the iTMS exists is because Apple had the vision to see that if they didn't provide the content in a format for the iPod, no one would. I'm sure Apple won't mind a hit in video or audio sales at the iTMS as long as iPod compatible content can be found elsewhere on the Internet.
I can pretty much agree with what you've said. But, to embellish a bit:
Apple set up iTunes to help sell iPods. I don't have any question that it certainly was, and is, a big reason why iPod sales have risen so far.
We can look to Japan for an example. Before iTunes, the iPod sold well, but sales as a percentage had declined in the face of other music stores.
After Apple opened iTunes in Japan, iPod sales quickly rose to over 50% of the market.
Thus, iTunes is a big part of Apple's strategy. That is why Apple wants to keep prices low. It's a two pronged effort.
As someone else said in a post, one reason why Apple wants to keep prices low is to make it difficult for other services to make a buck on it. That is the second prong. It's really a very predatory tactic. classic monopoly business, even though Apple had no marketshare when it began. That's a strange notion to be sure, but true.
so Apple has those two reasons to keep prices low. I guarantee that they are the real reasons, and not the one that people think it is, because Jobs loves music. It's just a matter of business.
The content companies see it the other way around. As they've so often stated, Apple doesn't care about making a profit on content, just on the sales of the hardware, while they MUST make profits on the sale of content.
The problem is whether they can sell enough content at those high prices to make any profits at all.