Apple iPod Announcements Commentary

Watching the streaming video of the Apple event brings out some subtle points that weren't stated explicitly. Notice that Steve Jobs didn't bring out an iPod Video, he brought out an iPod that also happens to play videos. Along with playing videos they are now offering music videos for sale on iTunes. This is more significant than one might think at first. The music industry doesn't make much money on music videos. They give them away to MTV and put them on CD's for free when you buy an album. By selling music videos for $1.99 they are basically resetting consumer expectation that music videos have a price. Also they are providing revenue for the music industry where previously they had none. The pricing of these videos was probably the cause of the tension between Apple and the music industry in the last few weeks. They probably wanted a higher price on music videos and Apple refused.

On top of pricing music videos instead of giving them away for free, Apple also makes it more difficult to raise prices on individual songs. Why by a song for $1.49 when you can buy the music video with the song in it for $1.99? Slick. On top of that this also makes its more difficult for the wireless industry to sell songs for $3 a pop over the air using a cell phone. The case for purchasing a song using a cell phone is bad enough as it is, as you will have DRM issues preventing you from doing much with the song except on your phone. But on top of that you have to choose between paying $3 and getting the song now or paying $2 and getting the video on your computer.

Apple is going to provide the music industry with revenue where previously there was very little. They are also doing the same by offering TV shows. By offering old shows and new shows the day after they are broadcast they are actually moving into competition with two different markets. The first are DVDs and the second is Tivo. They are doing for TV series DVDs what they did for music albums. Why pay $30 for a season of Seinfeld vs just buying one show for $1.99? By offering the show to download the next day they are resetting the Tivo market price (i.e. free) as well. At first glance this might cut into later DVD sales, but most likely it will not. The person who will probably buy the show the day after it is probably a big fan who will probably buy the DVD (at some point there will be show collections on iTunes as well) later as well. This won't affect syndication of popular shows (at least not until a majority of people watch TV this way which is a long way off). So now the TV industry can make a show and sell it with ads and make money, and now they can sell the show digitally as well (i.e. no manufacturing cost after the show is digitized) and in the process get people used to paying for TV programs.