Tuesday, October 16, 2007

iTunes and Amazon: Competition FTW!

Once again, from "Information Security Economics - and Beyond" by Ross Anderson and Tyler Moore:

In January 2005, Varian presented a surprising result [55]: that stronger
DRM would help system vendors more than the music industry, because the
computer industry is more concentrated (with only three serious suppliers of
DRM platforms – Microsoft, Sony, and the dominant firm, Apple). The content
industry scoffed, but by the end of that year music publishers were protesting
that Apple was getting too large a share of the cash from online music sales. As
power in the supply chain moved from the music majors to the platform vendors,
so power in the music industry appears to be shifting from the majors to the
independents, just as airline deregulation favoured aircraft makers and low-cost
airlines. This is a striking demonstration of the predictive power of economic
analysis. By fighting a non-existent threat, the record industry had helped the
computer industry forge a weapon that may be its undoing.

So now what's happening? Well, Amazon released 256-bit DRM free MP3's for $0.89 - and now Apple is about to get their Independent labels in at $0.99, DRM-free tracks.

I think the music industry "gets it" - that offering DRM free will let them break the power of Apple. By now, it's probably too late - Madonna, Nine Inch Nails, and others aren't using labels anymore, just concert promoter agencies. They're selling their own music directly, and pocketing more of the cash.

Still, if you're Apple, I guess you have to worry a little bit that someone else could dethrone you. (Looks at the Zune.) Maybe not.

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