dallas moore

The Universal Theory: Taking a Bite Out of Apple Hurts Consumers

In an earlier post, I state that Universal is afraid of Apple. Maybe afraid is a bit harsh, but I just get this gut feeling that they’re not best friends as companies go. Maybe it was when NBC Universal pulled their shows off of iTunes. Maybe it was them backing HD-DVD instead of Apple backed Blu-Ray, even when the writing was on the wall, to the bitter end. Okay, that could be grasping at a few straws, but it’s a gut feeling of mine that there was a bullet point argument against Blu-Ray by some Universal executive along the lines of “Apple supports it”. That aside, it’s obviously crystal clear with Universal working with Amazon selling down-loadable music.

At the moment, Apple is number one with music sales. That’s big. It’s literally bigger than Wal-mart … uh … big. But does it make sense that Universal isn’t playing well with Apple? Take at a couple of examples:

Example 1:

Here’s a screen capture from iTunes. NBC Universal has no apparent offerings of their aired shows on iTunes. Yes, “Chuck”, but you have to hunt for “Chuck”.

Now look at Amazon. NBC Universal has a clear presence on Amazon Unbox and a whole catalog of their shows.

Browsing around, I also noticed Amazon’s prices are $1.99 per episode … same price point that iTunes used to have. Is Amazon giving them a bigger cut of the profits? Or did Universal take the ball home and choose not to play? Wasn’t Universal wanting to bundle stuff for a higher price? And yet here’s Amazon offering unbundled shows at the same old price.

Example 2:

Universal Music still has a presence on iTunes, but it is utilizes Digital Rights Management (DRM). That’s a bitter pill for many a techie to swallow. But when you compare that to Amazon’s being able to sell non-DRM’d MP3 offerings of Universal’s catalog… for 10 cents cheaper … you have to wonder what Universal is thinking. I think it is clear. Universal may not be afraid of Apple, but they definitely have something against them.

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My theory is this, Universal sees a possible future variant of Apple. A future where Apple all but eliminates the middle men between the creators of those wonderful intellectual properties and us the consumers. Musical artists could sign directly with Apple to be their distributor. If, as some people think, high definition format discs are a blip on the radar and people solely rely on online movie distribution, Apple could end up as the big player. So Universal wants to keep Apple from getting that powerful. They don’t want to be at a negotiating table and Apple being the only possible go to place to sell digital products. And that’s where Amazon comes in as Universal tries to hit the brakes on that future.

Amazon is also big. While Apple is number one, Amazon is number four in music sales. Yes, 19 percent to six percent, but number four is still number four. I cannot see them going away as they’re also trusted to an extent by consumers. So Universal has decided to use Amazon as a tool to compete with Apple. Frankly, it’s their prerogative. I really don’t care as long as it doesn’t hurt consumers.

DRM is a pain. “Duh,” you may say. Personally, I’m informed about what stuff is laced with DRM and I avoid it when it would affect me negatively (most often a case of avoidance). Universal’s choice of backing Amazon has their purpose, but I feel for the average consumer. My work has me interacting with a lot of people that are still trying to learn how to operate a computer. I just picture these people trying to figure out something I’d find simple:

“How do I get that MP3 I just purchased from Amazon on my iPod?”

In a perfect world, they would download a MP3 and it would immediately become available in iTunes to transfer to their iPod. That’s how it works with a purchase via iTunes. Okay, yeah even if there’s no DRM … it isn’t a MP3 but an ACC; quit being picky, it can be converted. But those simple steps of having to download it, import it into iTunes*, and then transfer it to an iPod can cause headaches for the neophyte. Speaking of headaches, try explaining why they can’t watch that video they downloaded from Amazon on their spiffy new iPod nano. By not offering consumers the choice of buying through iTunes, they’re actually hurting some of their sales to Apple centric customers. They should be offering things at as many places as possible. They’re missing out on a piece of the pie.

Universal is cherry picking what gets offered and where so that they can continue leveraging their control. They’re not taking the ball home, but they’ll play “keep away” from Apple with some things … TV shows and non-DRM’d music. Why? To keep Apple down … even if it affects a large swatch of consumers negatively. Again, it’s their prerogative. They can always change their mind.

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* - I know there are non-iTunes choices for loading an iPod out there, but if someone knows how to do that, they probably know how to do such a transfer. iTunes works just fine for the newbie, don’t complicate their lives by convincing them to go elsewhere. Well, convince them only if you give them your phone number and are willing to help them step by step each and every time they have a problem with it. Which will be every freaking time…

(Cited: New York Times, Tech Spot, EngadgetHD, Electronista, Reuters, Arstechnica)