Apple's Mistake

It should have started a subscription streaming service sooner.

Once upon a time, Apple was the beacon in the consumer's eye. Not only did it possess a leader more charismatic than any rock star, it positively dominated complete swaths of consumer culture. It had the iPod, the iTunes Store, the iPhone and the iPad.

But those were the heady days of yesteryear. Before Android, Amazon, Samsung and the cratering of its stock.

Students of the game are familiar with Clayton Christensen's "Innovator's Dilemma," wherein the professor says you prepare for disruption by creating your competitor across the street, and when your new business reaches critical mass, you close the old and inflate the new. What starts out poor ultimately becomes good enough and the public embraces it while the cognoscenti pooh-pooh it and before long you're at the end of a revolution, with those entrenched in the old ways having missed the war.

We've seen this in terms of audio quality. Oldsters and artists and purveyors wondered who would want a lo-res file when you could acquire a pristine CD?

Everybody, it turned out.

As for the vinyl revolution... Have you noticed that it's been propped up by a dying print press, and that there are Civil War reenactors too? If your dander rises from reading this paragraph you're a hobbyist living in the past, have fun, but you're no longer a card-carrying member of the mainstream.

So in the early days of streaming the services, like Rhapsody, were clunky with a bad interface. Kind of like the mislabeled MP3s in the early days of Napster. Furthermore, few people had broadband connections, no one had a smartphone and wireless 3G was not prevalent, never mind 4G

But over time systems improved, and YouTube came to dominate, it became the world's number one music service. Ask anybody under the age of 21, they don't buy, they stream. Yes, while you were busy bitching about Spotify, YouTube won. And it won because the record labels were reluctant to authorize Spotify, especially in the U.S., and YouTube snuck in the window. And online, he who's first usually wins. Bing couldn't compete with Google and Beats probably cannot compete with Spotify.

Anyway, fearful of giving up MP3/AAC profits, Apple refused to enter the streaming sphere. And now they're competing with a Pandora-like service years later. Apple is so far behind the curve, you'd think it's a record company. Apple built its cachet and profits on leading and dominating, now it's doing neither.

Meanwhile, Spotify suffered from not having everything. But now the Eagles and Metallica are on the service and if you're bitching about what's not there, you're probably complaining you can't buy 100 octane gas for your '64 GTO.

And Spotify had streaming hiccups, caused by a lack of server power, now history as a result of a west coast farm.

And Spotify had horrible search, which is no longer a problem since the company jettisoned its service for the one Apple uses at iTunes.

In other words, Spotify got better. iTunes got worse. Hell, if you think iTunes 11 is good, you enjoyed reading Microsoft manuals, when they still existed! (As for their online help...it might as well be written in Chinese.)

In other words, if you stay where you are to maximize profits, you're a day away from losing your business.

This is what happened to Lady Gaga. She released a middling album, both in terms of sales and reviews/perception, and then she went on an endless cleanup tour, raking in the momentary dough. Meanwhile, Katy Perry stole her thunder. Katy's new track is killing Gaga's. Odds are Gaga's past her peak, because she didn't realize the eighties are history, that you can't spend years between releases, cleaning up in every market, you've got to play and risk and reinvent constantly.

But not Apple. Back when the iPhone ruled smartphones, if Apple had introduced a streaming service they could have ensured the iPhone's dominance. It would be a reason to stick with Apple. But now Spotify's available everywhere and even Amazon sells a healthy percentage of MP3s, while testing the streaming waters with its Prime service.

In tech, if you don't dominate, if you don't have almost all of the market share, you're on your way to marginalization. Which is why Apple is faltering and YouTube is dominating in music. If I've got YouTube, why do I need Spotify?

That's what the Swedish company has to convince people. That they need to pay for the service.

As for the musicians complaining about payouts, ignore them completely, they're wasting their breath, the battle has been fought and the war is over, streaming already won.

Ain't that typical. Ignorant old school purveyors bitching about something they know nothing about. To rail against streaming services on any level is to complain that you can't buy a car without a catalytic converter, to insist that Tesla must not exist because it hurts Chevron and Exxon. Change happens, your best bet is to see the future and to glom on, not to try and jet everyone back to the past.

The public has voted. It prefers streaming.

And we learned during the Napster crisis that denying the public's preference is a recipe for death.

But we did not expect Apple to become a victim of this same hollowing out disease. We expected Apple to lead, to creatively destroy its core in order to win in the future. The company that eradicated the floppy drive and tossed over ADB for USB and put wi-fi in laptops before most people knew what it was became inured to profits, and ensured its musical death.

Don't let this happen to you.


--
Visit the archive: http://lefsetz.com/wordpress/
--
http://www.twitter.com/lefsetz
--
If you would like to subscribe to the LefsetzLetter,
http://www.lefsetz.com/lists/?p=subscribe&id=1

If you do not want to receive any more LefsetzLetters, http://lefsetz.com/lists?p=unsubscribe&uid=0eecea7b60b461717065cbde887c8e25

To change your email address http://lefsetz.com/lists?p=preferences&uid=0eecea7b60b461717065cbde887c8e25




--
Powered by PHPlist, www.phplist.com --