Why Apple is more expensive than Amazon

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

by baha_man • 18 years ago

57 27 18 years ago

weblog.raganwald.com

damon• 18 years ago

Short version : "Price fixing is how."

xlnt• 18 years ago

but not by Apple

Herring2• 18 years ago

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

edw519• 18 years ago

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.

ROFISH• 18 years ago

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• 18 years ago

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.

tlrobinson• 18 years ago

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)

raganwald4• 18 years ago

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.

soundsop• 18 years ago

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.

pchristensen• 18 years ago

Ambiguous headlines are a classic technique to get people to read your work.

bbgm• 18 years ago

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.

abstractbill• 18 years ago

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• 18 years ago

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.

mishmax• 18 years ago

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• 18 years ago

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.

Herring2• 18 years ago

"I can buy DRM-free music from Amazon and play it on my iPod, so what's the problem?"

Amazon can't sell DRM'ed mp3s with any degree of success because they won't play on ipods. Apparently they figure if they can break the ITMS stranglehold they'll be able to offer music only in their DRM & hopefully further restrict or shut out the ipod. Classic content owner's mistake of overvaluing the content, and undervaluing the platform.

mixmax• 18 years ago

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

bluelu• 18 years ago

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

Tichy3• 18 years ago

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

mynameishere• 18 years ago

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...

Listen to track 6, for instance.

Tichy3• 18 years ago

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).

raganwald4• 18 years ago

> 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.

Tichy3• 18 years ago

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).

flipbrad• 18 years ago

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...

yef• 18 years ago

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.

raganwald4• 18 years ago

http://news.ycombinator.com/item?id=184507

Why Apple is more expensive than Amazon

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