Wednesday, April 08, 2009

Missing a golden opportunity

As you may have heard, Apple implemented its tiered pricing structure for music in iTunes: 69 cents for stuff nobody buys, the traditional 99 cents for good stuff and $1.29 for new stuff (that's my assessment of it anyway).

Apple is the worlds largest music retailer. They are the 700 pound gorilla. They are the Microsoft of the music distribution industry. The ones to beat. The king of the hill. (I was going to put additional increasingly ridiculous examples here but I decided against it.)

Amazon and Walmart are the ones competing with Apple in the download music business. And they both just blew a golden opportunity.

With the lack of DRM on all music nowadays (thank goodness) Amazon and Walmart lost their only point of differentiation with iTunes. Now that DRM is gone, why would anyone buy from Walmart's crappy online store when you can get the EXACT same product from Apple and have it automatically work in the beautiful ecosystem they've established?

Then Apple handed them a key differentiator: price.

When Apple was forced to do a tiered price structure Amazon and Walmart had free reign to steal one of the things that made Apple so successful in the first place: any song you want for 99 cents. The simplicity of knowing exactly what you're going to be paying is huge. iTunes used to be the one-stop-shop. Now I can get the songs I actually want cheaper somewhere else - Amazon or Walmart.

But instead of holding onto that point of differentiation and standing on their own, today Amazon and Walmart followed right along and also introduced their own tiered models.

If the tiered model was so great, why didn't they do it before?

Maybe the labels forced them into it like they forced Apple into it, although I find it doubtful since they were making concessions for Amazon and others on DRM.

If the music industry was worried about Apple's dominance and power in the market before they should be losing a lot more sleep about it now.

Thoughts? Did I miss something? Leave word in the comments.

Image courtesy of here.