Tuesday, April 20, 2010

Apple & The Balkanization of Content

Andrew Seybold wrote a great piece on FierceMobileContent this morning bemoaning how Apple has taken us back to the future by creating their own version of the walled garden from the bad ol' days (not that long ago) when the only way to get content for mobile devices was through a carrier deck. The smartphone revolution was supposed to liberate us all from those proprietary, AOL-esque environments, and give us access to a universe of content available across devices... right? Well Apple apparently didn't get that memo and/or think that was a good idea, at all... and instead took the opportunity to Think Different.

The crux of the matter, and content owners and creators need to understand this, is that (big headline) Apple is not in the content business... at least not the way most folks think they are. As I'm very fond of saying (eyes roll collectively) Apple is in the reverse razorblade business. Despite having a huge ecosystem of 185k Apps, thousands of movies & TV shows and millions of songs, they run iTunes, as Peter Kafka recently pointed out, as a pretty much a break even business. Content is a means to an end for Apple. Their interest is in creating a hyper-competitive market featuring proprietary, low-priced Apps and other entertainment content, that makes consumers excited about buying every form-factor of their high margin devices... and upgrading them regularly. You know all your friends who are crazy-passionate about Apple products? They've bought into this hook, line and sinker and now that they've spent a significant chunk of their disposable income on music, movies and Apps for their iPhones and iPads, (guess what?) they're never gonna switch to an Android device or a BlackBerry... but in the next year they'll probably spend what's left in their wallets on a new a sexy new razor to show off all those blades.

Content owners and creators who are hoping Apple will winnow the field of Apps or move prices higher in the market, so they may realize better margins, are deluding themselves. The model is all about you fighting for your very life, against hundreds of others, so Apple customers get the best content at the lowest price (why not free). They definitely don't want any one provider getting too much pricing power within their ecosystem. Oh yeah, and remember you're playing in Apple's sandbox... so that tech innovation leveraging their platform, that's giving you some competitive advantage... Apple might just decide one day to roll that out to tout le monde.

For some small companies this highly manipulated, low-price, high-volume market provides a real opportunity. Moreover, the sheer scale of it, the shopping experience and the elegant billing mechanism makes it an important place to play for all content providers. But iTunes is a very dangerous market in which to place all your bets. In terms of closed markets, content owners should ultimately be favoring those in which the owner's interests are more closely aligned with their own. More importantly, if we hope to see a healthier mobile content ecosystem, content owners and creators need to support, and advocate for, more open standards and markets.


  1. Isn't Safari about as off deck as it can get?

    And who cares if apps and iPhones are proprietary, this is business not a socialist hippy love fest. May the best product win.

  2. APPLE will soon lower the revenue share for content owners. APPLE will be the next MS just be patient. The only company that can hurt APPLE is APPLE. They dont have to fear Nokia, they dont have to fear MS, and for sure not any others like HTC, Samsung, LG, whatever or sorry Motorola, Google/Nexus, etc

    APPLE is APPLE so lets see when some out there are waking up and realizing the ecosystem in the moment will not work for a long term!

    APPLE is dictating and they dont care about content owners making money or not as long they sell their devices. Similar to Nintendo and the DS.

  3. @Anonymous #1 - the proprietary app ecosystem is clearly a great (even genius) business model for Apple, as today's earnings call demonstrates. I also think they create great consumer devices and experiences. My point here is that their business model isn't aligned with those of content owners & creators... who need to recognize this and be appropriately diversified