Apple Sued Again

Posted on Wednesday 8 February 2006

Apparently, the powers that be are angry with Apple for succeeding where the other technology companies could not….or for that matter the music labels failed too. Thomas Slattery has been given the green light for his monopolization claim under the federal Sherman Anti-Trust act according to the articles at eHomeUpgrade and Tera Patricks’ blog.

I don’t see iTunes and the iPod as a monopoly. There is nothing preventing you from using music from other on-line music stores on your iPod. Granted, it isn’t simple to do so, but there is nothing preventing you from doing it. There is nothing that forces you to use the iTunes Music Store (ITMS) to buy your music. There is nothing that prevents you from using music you already own on an iPod, as many of my friends do…having spent the time and energy to “rip” their CD collections to the iPod.

This is not the same as the other computer monopoly situation, with Microsoft Windows. Apple doesn’t prevent you from using competing sources of music when you buy an iPod. Apple doesn’t force you to use ITMS to purchase your music. Apple doesn’t even prevent you from using ITMS music on a non-iPod mp3 player. Granted, again, Apple makes it a bit more complicated to use ITMS music on a non-Apple mp3 player, but that’s their right to do so.

Microsoft prevented many computer manufacturers from offering alternatives, or offering bare systems, without an operating system. There was an inherent Microsoft tax on almost every new system you bought—you paid for an operating system, even if you weren’t going to use it. They also forced most computer manufacturers to leave off alternative web browsers, after incorporating their web browser into the operating system. Microsoft also used their control of the computer’s operating system to bring their products to market dominance.

In the beginning, Apple didn’t have the ability to force their products to market dominance, as they didn’t have the market share to do so. The iPod and ITMS have become the dominant players in the mp3 player and online music store markets due to being the best product. In terms of ease of use, simplicity, user interface, the Apple iPod and iTunes have simply excelled, compared to the other products out there. Yes, the rise of the iPod, as the dominant music player, and the rise of the iTunes Music Store are closely linked, but that didn’t necessarily have to be the case. I know many iPod owners who have never even looked at the ITMS, providing the music for their iPods from their extensive CD collections*.

The Hardware

The hardware, and how it is designed is the first part of Apple’s success. Let’s first look at the iPod, and how it became the dominant mp3 player. The user interface of the iPod is simple and elegant. It doesn’t much matter whether it is an iPod, a click-wheel iPod, an iPod photo, a video iPod, an iPod mini, an iPod nano, or the iPod shuffle. It simply has the most intuitive user interface. This is the hardware part of the mp3 player system.

There were other mp3 players that got to the market before the iPod, and there have been far less expensive units than the iPod—yet the iPod is the one that caused a revolution in the way we listen to music. In fact, the iPod has spawned an industry of its own—supporting the iPod with accessories, replacement drives and batteries.

The first iPods were very expensive and hard-disk based. Apple didn’t even have a flash-memory-based unit until January 2005. Yet, in less than a year’s time, the Apple iPod shuffle was able to take over 80 percent of the flash-based mp3 player market, and is now the dominant player in both the flash-based and hard-disk-based mp3 player markets. Why is that? Ease of use, quality and simplicity are the reasons.

The Software

The second part of the equation is the software.

The iPods originally shipped with MusicMatch for their Windows-based users, and iTunes for the Mac-based users. MusicMatch was widely used by several mp3 player brands as the software for Windows. As far as I know, none of the other mp3 players have ever supported the Mac to any degree. So, the iPod and the other mp3 players really did start out pretty evenly matched.

Apple then ported iTunes to the Windows platform, and started shipping it as the default software, and later as the only software for iPod users. The iTunes software interface made it far simpler to rip music from CDs; far easier to organize your music; far easier to create play lists for your iPod; and far easier to load the music on to the iPod. Now, converting a large collection of music from CD-format to digital format for your iPod was very simple. It also allowed people to use any mp3s** they had collected on their iPod.

Competing mp3 players had serious, often near-fatal, software issues, which made getting music onto their players very difficult or impossible. An mp3 player without any music on it is not very useful. A good example of this occurred a few years back, when a friend of mine bought an mp3 player for his daughter.

The hardware was cute, simple and fairly well-designed overall. However, installing the software was extremely difficult, and the software was badly written, unstable. It made moving music from a CD to the mp3 player very complicated. Setting a playlist was a nightmare.

Finally, he asked me what to do… I said, “With mp3 players, the hardware is only part of the package, the software is pretty important too. After all if you can’t get the music on the mp3 player—it doesn’t really matter how good the mp3 player is, does it.” Then, I told him to go buy his daughter an iPod mini.

Installing iTunes and getting the first CD ripped and loaded onto the iPod took less than 20 minutes… He had spent more time than that just trying to install the first mp3 player’s software.

The Music Store

ITMS is the last part of Apple’s success in the online music industry.

By integrating ITMS into iTunes, Apple made accessing the iTunes Music Store very simple and intuitive. It also made moving the music you bought from ITMS to your computer and your iPod very simple. While using iTunes as the interface for the ITMS didn’t guarantee any customers—it made it far more likely that people would at least take a look at what ITMS could offer them. The fixed pricing and ease of use kept customers coming back.

Digital rights management software was part of what was required by the music labels to agree to sell their product online. Apple’s DRM software, Fairplay, is very generous in its terms, especially compared to many of the competing online music stores. The terms of the DRM and the ease of buying and listening to the music, and now videos, is what made ITMS such a success.

Points to Consider

ITMS is tied to Apple’s iPod, is this fair? No, it really isn’t fair, but Apple is in this game to sell hardware, and ITMS is just part of what makes the iPod hardware so attractive.

The iPod is tied to ITMS, is this fair? No, but it is one of the major selling points of the iPod.

Can you use ITMS-purchased music with a non-iPod mp3 player? Yes, but it isn’t simple to do, and you might a hit on the quality of the music.

Do you have to buy music for you iPod from ITMS? No, there is no requirement to buy music or video from Apple’s ITMS for your iPod. While, it is easier and more convenient to use ITMS—you can still “rip” music from your own CD collection and listen to that on your iPod. Nothing forces you to use the ITMS.

Can you use non-ITMS music on an iPod? Yes, but it may not be simple to do, and you may take a hit on the quality of the music. Most of the difficulties of using non-ITMS music on an iPod aren’t Apple’s fault. The other music services could support either the aac or mp3 file formats, but have chosen not too. The DRM software is also an issue, but that too is not Apple’s fault—except in that Apple is not willing to license Fairplay.

Should Apple license Fairplay? They could, but it really isn’t in their interest to do so at the moment. In the near future, it probably will be, but for now, as long as the cycle of ITMS and the iPod continues—there is no real imperative or advantage for them to do so.

Why hasn’t someone else come up with an iPod killer? Because, no one else has come up with a combination of hardware and software that is comparable to the iPod and iTunes, in terms of ease of use and simplicity. No one else seems to understand that it is the combination of hardware and software that has brought the iPod to dominance. ITMS is merely frosting on the cake for Apple.

Is it a monopoly situation, similar to Microsoft’s hold on the computer operating system market? No, Apple hasn’t forced any of its customers into using either iPods or the iTunes Music Store. Apple hasn’t forced anyone to use iTunes. Apple has made it much easier and simpler to do so, but it hasn’t forced anyone to do anything.

Conclusions

Yes, iPod users are likely to use iTunes—as not using iTunes makes using an iPod much more complicated, but there is nothing forcing them to use the ITMS. Likewise, ITMS users are welcome to use other mp3 players, but getting their ITMS music onto a non-iPod music player is going to be much more complicated than using an iPod. But Apple isn’t a music monopoly, as iPod users aren’t required to use ITMS, and can buy their music on CD, or from other online music sources***. And even though, ITMS users aren’t restricted to use of iPods—the use of any other mp3 player is vastly more complicated and will result is a loss of quality.

* Ripping CDs are an option for most mp3 players.
** Large mp3 collections were a result of the Napster revolution.
*** The online music services that use the mp3 or aac formats will allow the use of their music without any loss of quality, if the music service uses DRM, then there will likely be a degradation in music quality.


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