Monday, February 1, 2010

The iTunes Store: just a detour on the way to a world without intellectual property

Tim Lee has an interesting analysis of the shortcomings of Apple's iPad, but at the end he makes what I believe is a very prescient, more general point about the future of intellectual property and digital media:

This is of a piece with the rest of Apple’s media strategy. Apple seems determined to replicate the 20th century business model of paying for copies of content in an age where those copies have a marginal cost of zero. Analysts often point to the strategy as a success, but I think this is a misreading of the last decade. The parts of the iTunes store that have had the most success—music and apps—are tied to devices that are strong products in their own right. Recall that the iPod was introduced 18 months before the iTunes Store, and that the iPhone had no app store for its first year. In contrast, the Apple TV, which is basically limited to only playing content purchased from the iTunes Store, has been a conspicuous failure. People don’t buy iPods and iPhones in order to use the iTunes store. They buy from the iTunes store because it’s an easy way to get stuff onto their iPods and iPhones.

Apple is fighting against powerful and fundamental economic forces. In the short term, Apple’s technological and industrial design prowess can help to prop up dying business models. But before too long, the force of economic gravity will push the price of content down to its marginal cost of zero. And when it does, the walls of Apple’s garden will feel a lot more confining. If “tablets” are the future, which is far from clear, I’d rather wait for a device that gives me full freedom to run the applications and display the content of my choice.

Even though Apple's managed to stave off some amount of piracy with the iTunes Store, I think this is likely to be temporary as it becomes easier and easier to pirate media. (Streaming music – legally through YouTube and MySpace pages – and movies – through illegal content hosted on sites like – have already been essentially freed, and as soon as the internets' pipes become thick enough that you can download quickly without resorting to BitTorrent, I think it's over for online movie/TV sales.)

This same analysis could be applied to the Wall Street Journal – it has a niche now, but it may not in the future, and I doubt any company (including the New York Times) will be able to emulate its online strategy.

My advice to content providers in it for the long haul would be: make it all free, find a good behavioral advertising firm, team up with a company like Facebook or Amazon which already has a lot of mineable data stored in already-established profiles, and, most importantly, hire a damn good lawyer, lobbyist, and PR firm.

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