What’s good for Apple…
might not be good for General Motors. But it is likely good for Steve Jobs.
By the way is your iPod nearly full?
Today’s most popular iPod holds 1000 songs, and research tells us that the average iPod is nearly full. This means that only 22 out of 1000 songs, or under 3% of the music on the average iPod, is purchased from the iTunes store and protected with a DRM. The remaining 97% of the music is unprotected and playable on any player that can play the open formats. Its hard to believe that just 3% of the music on the average iPod is enough to lock users into buying only iPods in the future. And since 97% of the music on the average iPod was not purchased from the iTunes store, iPod users are clearly not locked into the iTunes store to acquire their music. Steve Jobs
Apple (AAPL-NASDAQ) is in business to sell iPods, not music on iTunes. iPods account for about a third of Apple’s top line and carry gross margins around 30%, while iTunes revenue clocks in at perhaps 5% with gross margins most likely in the high single-digits...this ain’t no cash cow.
Wall Street pundits are weighing in...most don’t think the probabilities are high that music industry will license their product without Digital Media Rights (DRM).
Apple pundits are weighing in as well
Apple gains great leverage off the iTMS and has never made a secret of the fact that it is a vehicle to sell iPods. Steve and Apple clearly believe that discontinuing DRMs would not reduce iPod sales, and you might suspect they even think it could be good for iPod sales. It would also clearly be good for music sales; however, Apple has always stated that it makes nix off music sold on iTMS.
Steve’s article also demonstrates the power Apple now wields. He is obviously confident that, although it might upset a few record company execs, at the end of the day he has got them singing his iTunes—except on the DRM issue.
This is a significant move by Apple and one aimed squarely at the European countries who have been laying the blame for DRM on Apple. Fresh from winning the battle with another European giant of the music industry, Apple Corp, hopefully Apple will also win this battle and we will be able to buy all our music DRM free. AppleMatters
We will be parsing through all of this but one thing is for sure.
Nobody will be discussing Steve’s option grants today.
Smart guy
-----------------------------------------------------------------------------------------------------------------------------------------
The content contained in this blog represents the opinions of underthecounter. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. Underthecounter has no positions in securities mentioned above.
Comments:
Next entry: Very Vogue
Previous entry: Blackjack Institute
