Tag Archives: iTunes

A Million Unlocked iPhones Being Shown Off All Around the World – That’s a Tragedy?

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Even if the numbers of a million iPhones being unlocked are correct, that’s a MILLION iPhones walking around all over the world as FREE marketing and advertising for Apple – the most effective advertising of all – because it gives those users the cachet of doing something “not quite legal.” That they are “above the law,” and of course, eager to show off they know how to break the rules of normal society … (in reality, they just bought a phone but shhh, don’t tell them that 😉 )

Has Apple sold them a phone subsidized like nearly every phone on Earth at a 75-100% discount? No. Apple got full list price – even if someone marked it up, Apple made at least $399 or £299.

As for the revenue they are giving up that is recorded as future revenue in monthly chunks? Sure, but when you have to service cash, there are costs associated with servicing that cash …

Conversely, they also give up a lot of costs associated with it and saves them a lot of money. They don’t have to offer any tech support or service for these 1-million phones. How much accounting reserve is set aside normally for phone tech support that are locked to a service?

But it’s all just a gray number because how many tech-gadget companies would turn down an opportunity to seed a product in dozens of countries to build awareness & word of mouth? How much money would they have to spend to demo this product in dozens of countries – and less efficient than a “worldly” fan using word-of-mouth and a live demo to his/her friends? What could be better chachet than spending full price to own an “illegal” phone? AND then when the phone is available legally in that country? Won’t they be likely the first to convert anyway to get all the feature sets?

Isn’t all this worth the $10 dollars in revenue per month Apple “loses” (per person) if the phone were locked to its native carrier? Might this not be the CHEAPEST advertising possible AND Apple gets all the revenue upfront without having to share with anyone?

And of course, an “unlocked” phone is still entitled to the full range of services that the iTunes store sells. Of course, that varies from country to country but the most convenient choice is still the iTunes store. So it really a tragedy if Apple trades $10 from AT&T or Orange and instead sells a few iTunes movies, music tracks or videos?

It’s like anything else. When you sell something, you hope to garner a revenue stream down the line – as a car dealer hopes you always bring it back to them for service but at the end of the day, if you sold it at full price, then the rest is gravy.

Sure, you can view the future revenue stream as a 100% loss in accounting terms but if you look at the broader implications, it’s simply a tradeoff in overhead, advertising, marketing and a shift in revenues and expenses.

NY Times readers chime in on doing their part in advertising the iPhone everywhere around the world.

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Amazon Mp3 Will Affect Amazon Revenue More Than Apple’s iPod or iTunes

It’s pretty amazing the number of journalists who don’t look at a situation before just plowing ahead and writing words and “a conclusion.” They either choose to ignore the real world or they simply don’t understand it. Either way, it’s appalling.

Yes, Amazon’s entry into the “unlocked” DRM free Mp3 market will affect Apple & the iPod but its *affect* is DIFFERENT than you think.

If the iPod did NOT play the mp3 format, it would clearly have a major affect – just as when Sony’s players did not play Mp3’s directly (it would convert to ATRA mp3), when the iPod entered the market, people quickly choose the iPod over the Sony for the simple reason it played mp3’s very easily and transparently. Yes, the iPod looked nice and it was easy to use but if it did not play Mp3’s – there might be a few million out there versus 150 million.

There is no discussion. Mp3 is the preferred format for LEGAL and ILLEGAL downloads. Yes, there are others that hold some interest: mp4, FLAC, APE and even WMA but I don’t think anyone is going to argue that the preferred format OVERWHELMINGLY is not mp3 … sure, audiophiles can argue there are better formats but that’s not the issue.

It’s mp3.

You can do the math. 150 million iPods sold, 5 billion music tracks. That works out to about 34 tracks per iPod. Of course, it’s not 100% accurate as the bulk of iTunes sales are only in a few countries but even presuming double the number in the US per iPod user … and if iTunes music sales drops to ZERO for some reason?

How much is Apple losing in iTunes music store purchases per every iPod if that were true?

@$13.60

Apple is presumed to make $.20 per iTunes music track – not counting the cost of running the iTunes store and credit card fees … so actual profit is maybe $.07 a track but that’s presuming iTunes stores sales drops to zero which is unlikely … if Apple were to lose $7 per iPod in lost sales, I think there are dozens of ways Apple could make up that revenue including shaving $7 in costs from the iPod itself … but the bottom line is that the iTunes music sales are NOT the main reason people buy iPods.

Clearly, even people with iPod Shuffles have more than 34 or 68 tracks on their iPod. Whether it’s 100% legal converted from their own CD collection or LEGAL tracks downloaded from musician sites or other sites like iLike.com or ILLEGAL tracks, people know how to load tracks (1,000+ tracks) on a Nano (or up to 20,000+ tracks) on the Classic iPods. The iTunes store is a small part of the reason they buy an iPod.

So, what does that mean for Apple?

How about this ad from Amazon.com?

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That’s right. It might even help Apple sell MORE iPods, NOT less.

Because for all the people who hated the iTunes store for its DRM, now they have a reason to buy an iPod. Sure, it might help sell a few more SanDisks and Zunes but it’s clear that 7 out of every 10 mp3/DAP buyers are iPod buyers AND now that mp3 player sales overall are slowing, it’s rapidly becoming inefficient to stay in the marketplace if you’re 10th or even 5th in marketshare … leaving consumers with fewer choices down the line and we know what’s still the first choice with or without iTunes store purchases.

AMAZON?

If anything, this territory might be scary for Amazon than Apple.

Why?

Amazon sells about 6% of the 500 million CD’s sold in the U.S. or about 30 million CD’s. If we presume the average selling price is around $13 – that’s about $400 million in revenue for Amazon. Now, if you have the choice to buy 4 tracks of a CD for $.99 a piece (some tracks are less on Amazon, some more but let’s say an average of $.99) as an mp3 download or the full CD for $13, what’s your choice? That’s hard to say, of course but that’s precisely what Amazon has to deal with. Is that previous $13 purchase staying the same in revenue? Are you going to buy 13 tracks from 3 artists or are you going to stop at 4? In other words, is Amazon trading a $13 CD for $13 in downloads or are they trading $13 in revenue for $4 in revenue?

It’s impossible to say but the bottom line is that is the choice consumers have to make – sure, maybe instead of buying a $13 CD, that consumer can buy $25 in downloads … but what was holding back consumers before?

DRM?

If we know the average iPod user was spending @$34 at the iTunes music store, what held them back from spending more?

DRM? Really?

Are you that convinced it’s all about the DRM – that without DRM, sales would be up 50%, 100? 1000 percent?

Digital sales are increasing 50% a year anyway but for people WILLING to buy LEGAL tracks online were not doing so because they said DRM was the major hinderance?

I’m not saying the Amazon store won’t sell a lot of tracks but is Amazon trading CD sales for fewer downloads? What is the age breakdown of CD buyers? Is the music industry losing the bottom end of 12-24’s who are downloading free LEGAL tracks from their favorite bands from the musician’s MySpace page/iLike page and of course, clearly, they know how to download illegal tracks to fill their iPods?

Are these the same people who know how to convert tracks to a CD-R?

Sure, there’s a lot of blog talk about hatin’ DRM (and I certainly am NOT for it) but it’s sort like arguing against burning down the Amazon rain forrest, right? Who outside of 300 Brazilians arsonists are for it? But what are people really doing about it?

BOTTOM LINE

My prediction is that sure, Amazon will grab some market share from iTunes music store but as Amazon’s ads say – BUY an IPOD to add Amazon tracks … Apple merely shifts revenue from iTunes to iPods – not exactly a tragedy and if Apple convinces you to buy a few tracks, rent some movies, buy a music video – there are pretty much back to $34 in iTunes revenue AND they’ve sold you another iPod.

The people who really hate Apple and think they should hate the iPod are not going to swayed by this anyway. They are buying SanDisks and Creatives as it is now – this won’t change anything.

The 75% who own iPods might switch and buy some tracks from Amazon but for less savvy users who like being able to preview, buy and sync with one click don’t care about DRM – nothing will change.

And in 6 months or a year, the record labels will be forced to sell DRM free on iTunes … a) because they can’t ignore the place where 70% of the digital music online market is and b) they’ll be sued for restraint of trade by not selling the same thing to everyone – will the iPod marketshare drop to some small percentage? No. Will there as good of a user tie-in as iTunes to the iPod as SanDisk’s, Creative’s or even MS for their software to their hardware? Unlikely.

Now that Apple has added movie rentals and more movie choices, the only real scenario is that the iPod will maintain its market share or more likely, grow slightly. Apple is still the leader in every aspect except the bottom end. There is no small player with the screen, movie rentals & audiobooks to match the Nano, for those who want 160GB, there is no competitor at the same price and of course, the iPod Touch trumps them all and has the highest margins/pricetag – so another 6 months of clear sailing for Apple and the iPod.

Sure, the iTunes store might drop a few percentage in market share to the Amazon mp3 store but the Amazon store has no movie rentals or TV shows (the Unbox has both but no portable player).

The Amazon mp3 store affects Apple just as if you were to open a Best Buy across the street from an Apple store. The revenues would shift around a little but at the end of the day, Apple actually comes out ahead because all you’ve done is given the consumer another reason to buy an iPod.

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NBC Direct.com: iTunes Replacement in 11 Steps + Ads!

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NBC decided to dump iTunes because they wanted to go down their own path.

Why offer consumers, viewers and customer convenience when consumers will do ‘whatever we at NBC say?’

NBC – we’re so good – people should jump through flaming hoops to watch us!

iTunes was oh so simple and boring.

Sure, ONE CLICK could buy, download, sync and load onto an iPod but who wants portable downloading TV as convenient as normal watching TV?

We at NBC can add so many more steps!

Okay, ready to watch NBC Direct on your computer?

Here’s all you need to buy first:

A Windows PC

Then you will you will need to download and install a few things:

Internet Explorer
The .NET Framework
Windows Media Player
Windows Media Player Security Update

Five restarts later … and a quick prayer your DLL file is not messed up …

NOW, we’re cooking!

Oh wait, the lawyers do want you to know a few more things:

US residents only!
TV shows will be available for 7 days!
Whatever you download dies after 48 HOURS!
We’ve added the commercials you love best (no fast forwarding)!
& of course NO downloads to iPods and no not even Zunes or SanDisks.

NBC’s motto?
“We want to make it so inconvenient you just throw up your arms and watch at home like it’s 1975 … (ah, pre VCR, the good old days …).”

ITUNES – ISH, ISH

The resemblence to iTunes is uncanny … well, for the 3 GE execs who sat down for Zucker’s presentation – they didn’t have to spend 4 hours downloading, re-downloading, scrubbing and patching their PC to get this working. All they had to do was walk into the conference room and see THE OFFICE up & running and sign off on this $15 million project to buy more servers and license the other white meat DRM.

I don’t know what this project actually costs but I presume it’s probably exactly the same amount of iTunes revenue NBC is giving up – just corporate karma.

So, in other words – no iTunes, no iPods, 48 hours to watch, short shelf life, lots of Windows downloading to get it to work and commercials …

This could only be dumber if they hired the Dog Bounty Hunter & Britney Spears to be the spokespersons … but not by much.

GE sure thinks Jeff Zucker is a genius … I am so selling my GE stock.

So, what’s my other choice … what is this TORRENT, TORRENT, TORRENT, TORRENT, TORRENT & TORRENT thing you speak of? How will I ever find a TV show that just aired in HD to load onto my iPod … if only there was an internet solution, if only it weren’t 1975 and I was in some peachy future of 2007 where I was connected to millions of others on some vast network … oh, if only …

Via MASHABLE.

And our thoughts on Zucker.

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NBC-U Jeff Zucker, His iTunes Numbers Don’t Add Up

NBC-U Jeff Zucker is now mad people consider him and his Hulu venture idiotic so he is trying to talk as if he actually understands digital and the television business going forward.

He now claims that $15 million from NBC iTunes sales is not enough for him.

Nevermind that is 7.5 million impressions of NBC shows … or that 7.5 million people were willing to pay for it instead of downloading it for free … instead, Zucker’s very confused.

The bottom line is he wanted to raise prices and Apple did not – no biggie, that’s a business decision, right or wrong – that is his right as the guy NBC/GE’s board decided to hand the major decision making to – they have appointed him as the brains of the operation.

But instead, he tries to open other areas of discussion that he is clearly not qualified to discuss.

He babbles about Apple controllling distribution. At no point has anyone ever raised the issue about exclusive content – so how exactly is Apple controlling distribution when previous and going forward, NBC can sell their shows in every format including on their own website. The only distribution point Apple controls is iPod distribution … network TV, DVD retail, other internet venues, VOD, etc, etc … all NBC – what exactly is the problem with another distribution point? Most companies consider a NEW distribution a good thing (see, Zucker, how this works, if another store can sell your thing, you make more money).

He also talks about wanting to get iPod revenue because clearly we’re buying iPods to watch NBC shows … uh, sure – even if that were remotely true … shouldn’t then the auto makers pay Goodyear because cars without tires aren’t much fun? Or hey, is NBC paying us to use OUR airwaves? What is Zucker’s position on that issue?

So, he’s mad that Apple is not willing to raise prices and has only added $15 million to NBC-U coffers … so he picks a fight with Apple that he clearly doesn’t understand. What is the alternative to $15 million from Apple?

ZERO.

At what cost to sell at Apple iTunes? Practically nothing – how much is to digitize a show to load onto a jukebox that you NEVER have to reload – that requires no real maintance on your part? Apple handles EVERYTHING else?

If you sell a series on DVD, you have to project how many you can reasonable sell and that retailers will order – convert the series to DVD format, create a menu, design jewel case artwork and box, get it manufacturered, shipped and have provisions for returns and damaged discs.

Which is simpler?

So, instead of having yet another format for consumers … another $15 million (even presuming that iTunes sales do not grow) from a different non-exclusive source, he choose to walk away from that …

But that’s not enough for him – instead he thinks he can launch another YouTube.

So, it’s not just good enough to subtract $15 million from revenue but let’s spend how many hundreds of millions to launch a YouTube 1.1?

They already have 100 employees for a site months away from launch … it takes most startups years to pass 100 employees.

I don’t know YOUTUBE’s headcount now but I’m sure before the Google buyout, they were under 100 …

Zucker seems confused about how a startup works.

Of course, GE doesn’t seem to mind he still doesn’t understand anything – GE & Zucker a few years ago paid $600 million for iVillage.com, launched a TV show to promote it and have thrown in hundreds of millions of free promotional spots in order to grow the page views … so far, no real growth at iVillage with some reports that the other massive women’s site has surpassed them. The TV show flopped.

Again, it’s fine to launch new business ventures – no real problem with that but why roil the waters by trying to annoy Apple? Why give up $15 million dollars in revenue for no apparent reason? Did Apple say NBC couldn’t launch streaming on nbc.com or hulu?

No.

Zucker seems to think it’s an either or proposition?

He can’t conceive that some people might prefer to get a show commercial free? AND willing to pay for it? (nevermind the promotional value of people who actually want to watch a show?)

He can’t do a new business unless he walks away from something?

Can he multi-task?

What’s next? Because Zucker doesn’t control DVD pricing at WM or Best Buy – only sell DVD’s at NBC.com?

The bottom line is instead of a steady stream of revenue, he’d rather hire hundreds and spend hundreds of millions to launch Hulu … spending billions to make millions? That doesn’t sound like GE, sounds more like a certain company in Redmond …

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