

Why Apple is more expensive than Amazon - baha_man
http://weblog.raganwald.com/2008/05/why-apple-is-more-expensive-than-amazon.html

======
abstractbill
In my last job I worked in closer proximity to the music industry than I'd
ever want to again.

My understanding, from talking with some label people was that they hate
iTunes store because it has a fixed price per track. The reason for them not
liking this was pretty shocking to me at the time: a price that can be varied
allows labels to threaten artists with price signaling. In essence, "do what
we tell you, or we'll reduce the price of your tracks far enough that
consumers will assume they're crap".

From what these guys said, they couldn't care less about DRM. If iTMS would
just allow them to vary the cost per track, they'd love it.

I am _so_ glad I no longer work in that industry.

~~~
alaskamiller
Madonna or some other popstar wrote about this in an essay about how much the
record labels suck.

Variable pricing also sends signals to consumers. A $1.99 single can be
positioned to be better than a $1.50 single which can be better than a $0.99
single.

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Tichy
Yeah I get it, Steve Jobs is our savior. If only he would get his way, we
would all get free iPods AND free music.

I think Apple probably had to introduce DRM to be able to make a deal with the
music industry. At least I remember Steve Jobs proclaiming that DRM is bad
later on - he could simply have changed his opinion in alignment with customer
wishes, though. But to think that they would love to give us the music for
free goes a bit too far.

Also, afaik the "DRM-free" music on iTunes still has DRM: it is signed with
your name. So you can copy it freely on your own devices, but you can not sell
it on ebay. The ebay factor is something I still don't see factored into the
prices for online music (it should be cheaper than CDs, because I can sell a
CD once I get tired of it).

~~~
raganwald
> to think that they would love to give us the music for free goes a bit too
> far

Did I write that? I don't remember, and I can't find it int he essay. I wrote
that they would love to be able to compete with Amazon on price and that if
they could get it from the labels on the same terms as Amazon, they woul
doffer it at the same or lower price.

As for free iPods, I don't remember writing that either. That being said, lots
of companies work very hard at making their products less expensive in order
to occupy mor eof the market. Last time I checked, Apple has offered a variety
of iPods over a very broad spread of prices, from shuffle to iPod touch 32GB.
Cheap iPods = no oxygen for competitors at the low end.

That's a perfectly normal business strategy, isn't it?

"you can copy it freely on your own devices, but you can not sell it on ebay.
The ebay factor is something I still don't see factored into the prices for
online music (it should be cheaper than CDs, because I can sell a CD once I
get tired of it)."

That is a novel and interesting point. Thank you.

~~~
Tichy
I learn from your response that my comment was written in a too inflammatory
way. Sorry for that.

It just seemed to me that it was too much biased in favor of Apple. Unless you
have insider information, I am not convinced that your theory is right. It is
a possible explanation, but on the other hand, Apple has a nice lock in with
iPods and iTunes. Do they care about DRM? Maybe: they might be happy that you
bought an iPod. But the thing is, once you consider upgrading to a newer,
fancier MP3 Player, you better make it another iPod, or you lose your music.
So Apple does benefit from DRM. Not saying that is what they want, but it is
an alternative theory.

Possibly they simply charge higher rates because they can (yay for fanboys).
Most consumers by now might associate digital music with iTunes and not even
check Amazon for prices.

I think Amazon also has the DRM that signs the MP3s with the buyers names, but
I am not sure (haven't actually bought any music online yet).

~~~
raganwald
It's certainly fair to have different opinions. For one thing, Apple
themselves probably have different opinions: they probably have debates like
this where one manager screams at another that there is One True Way to manage
iPod/iTMS and the other throws a stapler at her head.

For example, I wrote that essay as if there is one, coördinated strategy with
iPod and iTMS. In reality, there may be iTMS managers who are trying to
maximize profits for their division while the iPod managers are trying to
undermine iTMS and commoditize it for the benefit of their division, just as
if they we in coöpitition as independant companies.

So... the truth is probably way more complex than we imagine, or even could
imagine.

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mishmax
It seems like I'm a little slow today, because I don't get it. I can buy DRM-
free music from Amazon and play it on my iPod, so what's the problem? How is
the music industry stopping people from buying iPods and forcing them to buy
devices with DRM?

~~~
bouncingsoul
That part of the article is wrong or at least extraneous: the music industry
doesn't care what you play music on.

The actual issue is that the music industry realizes how powerful the iTunes
Store has become and they feel threatened, so they'll give anyone a deal who
says they'll compete with Apple.

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soundsop
The title is misleading. I thought this article was going to be about the
relative market capitalizations of the two companies. It's actually about the
relative price of music. Although, perhaps the author intended the title to
have a double meaning.

~~~
bbgm
I thought it had something to do with the stock price. Keeping with the double
meaning vein, the author is either really naive or really clever.

------
yef
It's not that I disagree with the Apple fanboys. I own stock, and many of
their products, and in general their products are very good. And I love that
the fanboys are selling, nonstop, with all their heart.

It's that the Apple fanboys are _boring_. It's like hearing the same song,
over and over. And it's not a good song, it's like hearing "Who Let the Dogs
Out" or something.

If the fanboys could admit that Apple stuff isn't totally perfect, and there
actually are better alternatives depending on people's needs, that would lend
a lot of credibility to their argument.

I was one of the first people to get an iPod and hop onto the ITMS bandwagon.
Now I'm happily jumping off to Amazon's store, simply, because they have a
better store.

------
damon
Short version : "Price fixing is how."

~~~
xlnt
but not by Apple

~~~
Herring
I never thought i'd find myself appreciating Apple’s dominance of the music
player business.

------
tlrobinson
_Think about this: If you buy a 32 GB Apple iPod touch from Amazon for
$472.54, do you think Steve Jobs stays awake all night worrying about whether
you will buy tracks from Apple or from Amazon?_

Perhaps, but the iTunes Store helps sell more iPods, and vice versa, as long
as iTunes songs can only be played on iPods, and iPods can only play DRM'd
music from iTunes (and of course DRM free pirated/ripped/purchased music)

~~~
raganwald
That's the Microsoft strategy, and it works quite well in many markets. But
it's not the only winning strategy. for example, GM profited handsomely from
the Interstate Highway System, even though the roads worked for Ford as well.
Levi Strauss profited handsomely from blue jeans becoming a fashion statement,
even though they did not have a monopoly on wearing denim.

When you are the market leader, when you have the biggest piece of the pie,
you have the most to gain from the entire pie growing exponentially. Right
now, Apple has the most to gain from music players growing as a market. I
suggest that DRM-free music makes the market for music players grow
exponentially, and locked-in music holds the market back.

Remember, the vast majority of the music on iPods today is DRM-free MP3s.
Apple profits from consumers ripping their CDs to MP3s. The more DRM-free
music is out there, the more iPods people will buy, even though they also play
on other machines.

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flipbrad
lotta speculation, very little fact in that post. what if amazon is running at
minimal margins or even using this as a loss leader to crush iTMS before it
dominates all digital media? Occam's Razor. Remember they need Amzn Unbox to
succeed to justify the digital outlay to their shareholders; crushing iTunes
on price is their best hope of doing just that, short of a loctite-strength
alliance with hollywood and/or TV. Which explains iTunes retliatory move:
[http://www.alleyinsider.com/2008/5/steve_jobs_movie_deal_a_l...](http://www.alleyinsider.com/2008/5/steve_jobs_movie_deal_a_loss_leader_for_apple)

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mixmax
Raganwald I know you're reading this - I'm your fanboy. Very insightful.

------
ROFISH
Then why doesn't Apple start a revolt? The music industry (not to be confused
with individual bands) are one of the most hated businesses among young
people.

~~~
pmjordan
I think you overestimate the number of people who care (or even know) about
this kind of stuff. I suspect that most of the people who buy the multiple-
platinum-selling crap would just buy their music elsewhere if Apple stopped
selling it. Initially, it would hurt Apple (due to reduction in revenue) and
then it would hurt everyone because the music industry would probably get to
bully everyone around even more.

------
raganwald
<http://news.ycombinator.com/item?id=184507>

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edw519
I'd comment on your argument, but I can't hear it over Bach's composition and
Gould's performance. +1 for that. Thank you.

------
bluelu
So how does he know? Did he sign off both deals?

~~~
Tichy
Simple logic: Steve Jobs is god, therefore Apple can't be evil. Hence the
fault must lie with the other guys.

------
mynameishere
_Let’s say you would like to listen to one of the most amazing performances
ever made, Glenn Gould’s 1981 recording of Bach’s Goldberg Variations_

Let's say you want to listen to the grunting and humming of an overrated
maniac,

[http://www.amazon.com/Bach-Goldberg-Variations-Recording-
Exp...](http://www.amazon.com/Bach-Goldberg-Variations-Recording-
Expanded/dp/B0013G2QZ2/)

Listen to track 6, for instance.

