Blinded by the Shine on Apple
Fast Company wrote an article this week on how competitive it’s become for Apple. It's an interesting look at their business, strengths and weaknesses, and what they'll need to do to maintain momentum over the next few years.
As pointed out in the Fast Company article, Apple's superiority is in industrial and interactive design. This is undeniable. Through design it creates an experience few companies can duplicate. No technology company creates a "feeling" like Apple. But, as also pointed out in the article, beyond the fashion its questionable how strong their platform and services really are.
Companies are seeing the success of Apple and for fear of losing market share are going after them from many angles. Others can, and are, copying the design principles. In some cases blatantly ripping off the Apple look, while others are taking those principles and adding to them (if anyone has seen the new Verizon touchscreen phone with slide-out keyboard you'll know what I mean). But in the rush to go after Apple’s business, some are copying other aspects of the business that are far less sound.
Apple, through I-Pod and I-Tunes, created a closed distribution system that enables a per-transaction business that other technology companies desperately seek. If you go all the way back to 1995 this is what Microsoft’s original plans were with MSN. But Apple succeeded where others failed and the industry is now looking to replicate their secret formula, most interestingly... Microsoft...again.
We (as an employee, being self-critical) have recently talked about plans to consolidate and expand our music and video marketplaces that back-end Zune and X-Box. In an article in the NY Times, J Allard suggested that Microsoft will be creating one large distribution platform that all of the devices can plug into.
“The most significant thing he talked about was the way the company is building an online service that will be the back end for all sorts of communication and entertainment” - Saul Hansell, NY Times.
As both the article in the NY Times and Fast Company point out this is antiquated thinking and a duplication of Apple’s business model that is not wise. Although Apple may have been successful with I-Tunes, the industry is starting to revolt. It will not allow another company to dictate and control distribution of electronic content in the way that Apple has up to this point.
“But if iTunes is the driver for iPod sales (which, in turn, boost Mac sales), then Jobs's chair sits on a floor he doesn't own. The content that launched the iPod isn't his. And now the music industry is striking back.” - Alex Ostroy, Fast Company
As I mentioned in previous posts, no content company or artist will allow an intermediary to dictate the price of their product. They will look to leverage the forces of the market to price their product accordingly. As the content and products move further away from I-Tunes and toward a decentralized distribution model, what value is there in an aggregator of friction free content?
This was the lesson learned in the first wave of the web and is reinforced by the NY Times in their article on J Allard, specifically when referring to our first attempts with MSN.
“This strategy was misguided for so many reasons. Most notably, the open standard of the Internet allowed publishers to reach out directly to users, without MSN or AOL as the tollbooth.” - Saul Hansell, NY Times
We continue to duplicate instead of innovate. Our success, X-Box notwithstanding, is in creating software and platform products. Our move to provide a consumer experience through devices should be an extension of that and not an abandonment of our core business principles.
Microsoft (We) needs to provide a better experience that adds value to both the consumer and the content owners. We have an opportunity to do this with X-Box, Zune and other products but (as it appears) we are building out a platform on principles that are showing fatigue for others.
There are other ways in which Microsoft can provide value in the distribution chain by aggregating and applying its services as part of the transaction. In creating a Service Delivery Framework we can become an integral part of the value chain of each transaction while not limiting the consumer’s choice or the content providers' market.
Working with the service provider community we can create expansive ecosystems that provide features that “over the top distribution” models like I-Tunes can’t , namely quality of service and location based systems. We can also be completely innovative and create systems and build out technology to enable new types of market systems altogether that trade on the value of the artist.
There are a lot of ways in which the world’s largest software company can be part of the new digital distribution system for media and entertainment. It just doesn’t seem right to go down the path that will prove to be a dead-end for us and others.
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