The Unholy Trinity: iPod, iTunes, and unFairPlay

Marketing the Unholy Trinity

It is true that Apple is an innovative company. But its genius usually lies in the way it markets its products, not the revolutionary aspects of the products themselves. More often than not Apple manages to completely miss some critical aspects and focuses merely on what they managed to do right, not giving the public answers it desires, rather leading the public towards a very Apple-esque direction. In fact, Apple is marked with hyperboles, half-truths, and some not so respectable business practices.

I myself bought a PowerBook last year, so I cannot be consider a Microsoft drone. A year later, the initial high is finally wearing off and I can see all the shortcomings of Apple. We are all familiar with Microsoft being stigmatized as the evil empire and Apple being a beacon of hope, but perhaps that is an indication of Apple�s marketing prowess more than anything else. The aspect of Apple that this article deals with is their unholy Trinity: iTunes, iPod, and FairPlay. This trio and a dash of monopolistic business malpractices has allowed Apple to dominate the digital media player and online music store markets.

Apple is No Monopoly!

When faced with the prospects of Apple being labeled as a monopoly, the average joe’s gut reaction is to state figures showing Apple’s miniscule market share. Let’s go over what a monopoly is: it is any situation in which a company commands most of the market share for a given product of service. It is true that Apple’s computer business is far from a monopoly, but with 70% share of the online music store business and 78% share of the digital media player market, Apple’s digital music business is indeed a monopoly. Monopolies usually come to existence when there are barriers or regulations that prevent entry into an industry by more than one player and allow one company to operate without competition. But every monopoly isn’t necessarily doing something illegal. Apple, insofar as it is a monopoly is not doing anything wrong. However, when it uses its monopoly power to force people to use all-or-none of its products (iPod AND iTunes, or neither) and to further strengthen its position in the market, that is when things start to go awry. Just like Microsoft wasn’t doing anything illegal with Windows until it started bundling Internet Explorer with the OS to muscle out Netscape.

As of this February, the courts gave the Antitrust case against Apple the green light.

UnFairPlay

Apple’s FairPlay is a misnomer indeed. A headline I read a while back serves as a good headway into understanding Apple’s DRM. On January 5, 2005, MacWorld reported that an iTunes user had filed a class-action lawsuit against Apple for “…violating federal antitrust laws and California’s unfair competition law by requiring users who buy music from the iTunes Music Store to use an iPod if they plan to take their music on the road with them.” True as this is, it is a rather ignored aspect of Apple’s oft-praised DRM. Songs bought from Apple’s iTunes music store (protected by Apple’s un-FairPlay DRM), can be played on 5 Macs or PC, can be burnt to as many CDs as you want, and can be downloaded to as many number of “iPods” connected to the ‘authorized’ computer.

The Dynamic Duo

Furthermore, although many disillusioned Apple-ites either laud what Apple is doing or deem it necessary, those who bother to research the matter more often realize that Apple is indulging in an “unlawful bundling arrangement” of the iPod and iTunes Music Store and is violating federal and state laws “by suppressing competition, denying consumer choice…� Apple is using FairPlay to restrict all purchases from the iTMS to the iPod. To those who recall 1998, this is shockingly similar to the US government’s claim that Microsoft illegally tied, or bundled, its Internet Explorer Web browser with the Windows 95 and 98 operating systems in order to extend its monopoly into the browser market. The results that Apple has achieved too are identical to the results Microsoft achieved with Internet Explorer. In fact iTunes holds over 70% of the market share for online music sales, and the iPod holds over 78% of the market from Digital Audio Players, a fact that has for years now allowed Apple to extract exorbitant profits.

Although many people consider Apple to be a good company and hence feel that an Apple monopoly is like a benign dictatorship, not really worth the trouble dismantling, one should keep in mind that no monopoly is ever maximizing in social welfare. If the consumer was allowed to choose between players and music stores, not only would this competition cause innovation, but it would also decrease prices.

What’s the Answer?

The Coral Group’s partial answer to the problem is to create a universal DRM that eliminates the incompatibility caused by different companies developing their own rights management system. An interesting twist is that Sony, who was until recently one of the major proponents of proprietary media formats with their ATRAC music format, is a member of this consortium, however Apple is conspicuously absent. The Coral Group in a press conference has said that �to Maximize Consumer Choice in Digital Entertainment: [Coral] Promotes devices, content and technologies that play well together.�

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4. Why I Would Rather Have An iPod Than A Girlfriend
5. MTV Urge may Challenge Napster, Apple and Others

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